Oil Taxation (Hansard, 16 April 1993)

§ Mr. Salmond
To ask the Chancellor of the Exchequer what assessment the Treasury has made of the possible impact on exploration and appraisal activity in the United Kingdom continental shelf of the Budget oil taxation changes; and if he will express the impact in terms of numbers of drilling wells in each of the next five years.

§ Mr. Dorrell
Exploration and appraisal activity has proved highly volatile and difficult to forecast, irrespective of tax changes. The Government do not publish five-year forecasts of this or other components of North sea activity.
The increasing use of 3D seismic surveys means that the level of drilling activity is becoming a less effective measure of total exploration and appraisal activity. One of the aims of the Budget proposals is to encourage companies to improve their international competitiveness by giving them greater rewards for innovation and for more effective working methods.

§ Mr. Salmond
To ask the Chancellor of the Exchequer if he will publish details of the Treasury's impact assessment of the Budget oil taxation changes on the forecast number of exploration and appraisal drilling wells, in the United Kingdom continental shelf, in each of the next five years; and if he will make a comparison with those forecasts made prior to the Budget changes.

§ Mr. Dorrell
The Budget proposals shift the emphasis away from adding to oil and gas discoveries and towards developing existing finds. That is likely to influence how companies allocate their funds between exploration, appraisal, development and enhanced recovery.
The Budget tax changes are one, and only one, factor affecting future exploration and appraisal levels. A significant number of wells are drilled by companies which do not expect to get early PRT relief for the expenditure. There is no reason to suppose such activity would be affected. To the extent that companies with discoveries made more attractive by PRT abolition wanted to get them into production earlier, there should be some increased appraisal activity. However, to the extent that companies have planned their E and A programmes essentially to obtain PRT tax relief at 75 per cent. rather than on pre-tax economics, some decline in future E and A activity is to be expected.