North Sea Oil

HC Deb 03 December 1980 vol 995 cc113-4W

Mr. Skeet

asked the Chancellor of the Exchequer how he proposes to treat marginal producers in the North Sea under the new tax regime.

Mr. Peter Rees

The Inland Revenue will be discussing the proposed changes with the industry. The treatment of marginal fields will be one of the subjects for discussion.

Mr. Skeet

asked the Chancellor of the Exchequer, under current rates of taxation, how the value of one barrel of North Sea oil splits between Government and producers.

Mr. Peter Rees

Because the characteristics of North Sea fields vary so widely, it would not be meaningful to give an average split of the value of a barrel of North Sea Oil between producers' costs, producers' profits and Government take.

Mr. Skeet

asked the Chancellor of the Exchequer whether the projected supplementary tax on oil will extend to the British National Oil Corporation and the British Gas Corporation; and whether natural gas is included.

Mr. Peter Rees

The proposed supplementary tax, as with PRT, will apply to the British National Oil Corporation and the British Gas Corporation as it would to any other company. The new tax will cover the production of both oil and natural gas; the precise treatment of gas is for decision in the light of discussions between the Inland Revenue and the industry.

Mr. Skeet

asked the Chancellor of the Exchequer whether he intends that the projected supplementary tax on oil will be related to increases in real prices or prices expressed in money terms.

Mr. Peter Rees

It is intended that the supplementary tax will be charged at a fixed rate on the total value of oil and gas produced by each field, less an allowance. All relevant considerations will be taken into account in proposing the rate.

Mr. Skeet

asked the Chancellor of the Exchequer, assuming continuance of petroleum revenue tax, corporation tax and royalties at current rates and existing allowances, what he expects will be the average rate of return of companies operating in the North Sea following the introduction of the projected supplementary oil tax at 10 per cent., 15 per cent. and 20 per cent.

Mr. Peter Rees

Because the profitability of North Sea fields varies so widely, it would not be meaningful to attempt to provide this information. The effect of the new tax on rates of return will depend not only on the rate of the tax but on the allowance given against gross revenues.

Mr. Skeet

asked the Chancellor of the Exchequer why the yield and the relevance of the projected supplementary tax on oil were decided before there was any consultation with the industry.

Mr. Peter Rees

Information about costs and returns in the North Sea was available and taken into account in preparing the proposals. There will be consultation between the Inland Revenue and representatives of the industry about the details.