‘Complex and unstable’ UK tax regime for oil and gas is deterring investors

Dr Carole Nakhle, CEO of Crystol Energy, is quoted in this article by Davide Ghilotti from Upstream Online commenting on the United Kingdom (UK)’s upstream oil and gas fiscal regime.

Dr. Carole Nakhle commenting on the UK's upstream oil and gas fiscal regime during the opening session of the 2023 SPE Offshore Europe Conference in Aberdeen

According to Dr. Nakhle, the UK tax regime for oil and gas is complex and unstable,  and therefore, deters investment. Countries’ tax systems can be built to capture windfall profits without jeopardising the stability of the system.

Oil price and UK government fiscal actions

Data source: EIA       Note: “SCT” stands for the Supplementary Charge Tax

Dr. Nakhle added that the windfall tax was the government response to a combination of “economic and political pressure”. The main weaknesses of the UK tax regime are its instability and complexity due to regular tinkering and an attempt to chase volatile oil prices.

According to Dr. Nakhle, jurisdictions that offer a stable taxation regime can impose a higher government take. A well-designed tax regime should be able to adapt automatically to capture the windfall when there are higher than usual profits. For example, Norway, the UK’s North Sea neighbour, did not need to introduce a windfall tax, as the UK did, because it had it embedded in its original system and places significant importance to the stability of the regime.

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