The study warned that there would be cuts in investment and production of North Sea oil The UK government’s Budget tax hike on North Sea oil will lead to substantial cuts in investment and production in the industry, a new report has said.
Economists at Aberdeen University made the claim after studying figures based on a range of projected oil prices over the next 30 years.
Chancellor George Osborne raised the supplementary tax on North Sea oil production from 20% to 32%.
The move, in his budget last month, was designed to fund a cut in fuel duty.
The Aberdeen study, carried out by Professor Alex Kemp and Linda Stephen, considered a range of oil prices over the next 30 year, from $50 (£30) a barrel to $90 (£54).
They said the rise would inhibit maximum returns from production and reduce incentives to pursue exploration prospects in the North Sea.
Professor Kemp said the root of the problem lay within the tax structure.
He said its flat rate meant marginal projects could readily become uneconomic.
Prof Kemp suggested a more flexible structure.
Industry leaders met Chancellor George Osborne to discuss the tax rise on Tuesday.
Oil and Gas UK chief executive Malcolm Webb said, “disappointingly”, Mr Osborne had taken a different view of the impact the tax rise would have on the industry.
However, he said the Treasury had requested further discussion of the issue.
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