A closer look at what the UK's 2017 autumn budget means for oil & gas and the impact of the explosion at a natural gas hub in Austria.
Explosion at natural gas hub in Austria
The recent accident at a natural gas hub in Austria has underscored the importance of securing reliable supply of hydrocarbons to Europe. Despite discussions on the future of oil-and-gas the current rebalancing of the market due to OPEC-Russia cuts, along with the weather and supply interruptions make the current and mid-term outlook for hydrocarbon demand stable. This confirms the long-standing Russian belief that no one but Russia can provide to the European Union with an uninterrupted supply of hydrocarbons at an acceptable price. Recent improved hydrocarbon price forecasts add additional comfort over potential for short to medium term recovery of hydrocarbon prices.
– Anton Oussov, Global Head of Oil & Gas and Head of Oil & Gas in Russia and the CIS, KPMG in Russia
2017 UK autumn budget: What it means for oil and gas
The UK Government announced in November that they will introduce the ability to transfer tax history with the sale of an UK oil field. The inability to access tax relief has been seen as a barrier to new entrants to the UK and thus the UK Government is aiming to encourage further investment, especially in late life assets. Under current rules, tax relief for decommissioning expenditure is based on the tax history of the company incurring the expenditure, which has been seen a deterrent to new entrants.
It will be effective for transfers of oil fields which receive Oil and Gas Authority approval after 1 November 2018. Mark Andrews, UK Head of oil and gas at KPMG says “Recent transactions in the sector have seen the transfer of late life assets to those owners with the agility and specialist experience to best exploit the remaining reserves, and it is hoped today's announcement will help drive more of this activity once this change takes effect in 2018.” Claire Angell, UK Head of Tax for energy at KPMG adds “There has been a long-held concern that the current tax treatment of decommissioning costs were adversely impacting the goal of Maximising Economic Recovery (MER) in the North Sea Basin. The innovative approach announced today should encourage new investment and new entrants which, it is hoped, will increase production from late life fields.”
– Claire Angell, Tax Partner, Energy and Natural Resources, KPMG in the UK