Friday 2 July 1999

UKOOA Welcomes Government Announcement of Capital Gains Tax Rollover Relief for Offshore Industry

UKOOA, the representative organisation for the UK offshore oil and gas Industry, welcomes the Governments announcement that it is to reinstate Capital Gains Tax (CGT) rollover relief for the transfer and sale of offshore licensed interests.

James May, UKOOAs Director General, said: The measure is a welcome signal of the Governments intention to address the issues associated with the increasing maturity of the North Sea and confirms its commitment to secure the long-term future of the UKs offshore industry and the 380,000 jobs it supports.

Exploration and production companies will now have an incentive to rationalise their investment portfolios, leading to opportunities to reduce production costs and enhance the Industrys competitiveness in the global market.

The measure will also help to prolong exploration and production activity in the North Sea by encouraging operators to trade small pockets of oil and gas that might otherwise have been considered uneconomic.

UKOOA believes that the tax change will stimulate investment in other areas of the North Sea, yielding further revenue for the Treasury.

This is a win-win situation for both the Government and the Industry, said James May.

Despite the recent rise in the oil price many industry decisions are currently being tested against a scenario where the lifting costs for a barrel of oil is still $10. The needs to reduce costs, remove duplication of activities and maximise asset recovery are priorities for the Industry. The reinstatement of CGT rollover relief will help companies address these issues.

Finally, the granting of CGT rollover relief to the offshore industry will bring it into line with other industries.

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