Oil & Gas UK has proposed tax reforms in the country’s oil and gas sector in the forthcoming national budget in a bid to maximise industry competitiveness in the UK Continental Shelf (UKCS).
The proposal launched by the trade body follows its recent publication of new forecasts, which show that more than one billion barrels of oil and gas are no longer considered economically viable to extract in the existing price and business environment.
Oil & Gas UK economics director Mike Tholen said: "In such a mature basin like the UKCS where special attention and expenditure must be directed at maintaining the integrity of oil and gas infrastructure, we know that strong and sustained investment does translate into higher production.
"With investment approvals likely to fall to less than £1bn this year from a typical £8bn annually over the last five years, there is a real risk that fields due to cease production in the next five years will simply not be replaced by new projects."
The UK oil and gas sector expects to have improved efficiency and its average unit operating cost by over 40%.
At present, the industry is paying 50% tax on production profits and the trade body is urging for permanent cut of 20% points and removal of petroleum revenue tax.
The permanent removal of special taxes from discoveries made over the next five years is expected to encourage oil and gas exploration, which currently sits at an all-time low.
Tholen added: "To bridge the gap between the 6.3 billion barrels of oil and gas on the UKCS in which investment is already approved and the 20 billion that we estimate are out there, we must fight fiercely to attract global capital."
Oil & Gas UK’s report published in February 2016 on the activities of exploration and production companies operating in the UKCS, revealed that the industry’s drive to improve efficiency and reduce operating costs had marked success, but exploration remains at an all-time low with no sign of improvement.