The North Sea oil fields have long been a major resource for the UK. But just how much money does the UK itself make from these natural reservoirs? And what does the future of the industry hold for the UK as a whole? These are questions Viaro Energy will attempt to answer here but, as you might imagine, things are a little complicated.
According to the Office for Budget Responsibility, UK oil and gas revenues consist of offshore corporation tax and petroleum revenue tax, which apply to the profits of the companies involved in the production of oil and gas in UK waters. In 2019-20, this was thought to be around £1.1 billion for the North Sea reserves – consisting of the ‘ring fence’ corporation tax, the supplementary charge and the petroleum revenue tax.
Even though this amount represents 0.13% of all UK tax revenue, it is a number that has been falling over the last decade. In 2008-09, revenues from the North Sea reserves were around £10.6 billion, which constituted around 0.7% of UK GDP. It is believed this fall has been caused by a drop-off in production and an increase in tax-deductible expenses; the latter has caused some degree of controversy in the UK media.
Predictions for the coming few years show that more revenue may be available from this source, which is good news for the UK economy. Of course, it is not just direct taxation that benefits the country. The industry provides a huge amount of skilled jobs as well as creating work in a wide range of subsidiary industries.
The money paid in salaries and contracts to both individuals and UK businesses all helps to improve the impact of the North Sea oil and gas fields.
However, the issue is even more complicated still. In order to maintain these industries as competitive and efficient, they are the beneficiaries of financial and tax assistance from the UK government. According to The Guardian newspaper, in 2016 the North Sea oil and gas industry actually cost the taxpayer around £396 million. This was due to a slump in global oil prices – something which is also happening now.
The North Sea still has years of profitability ahead of it. It’s all about improving the systems and infrastructure for delivering these products. Being more flexible and spotting opportunities within the industry as they arise is all part of making the industry more efficient and more profitable. And that is exactly what we are doing here at Viaro Energy. As an upstream energy company, we are always looking for new or underused oil and gas sites, and we work in the North Sea as well as other sites around the planet to make that happen.