Seismic reflections: Budgeting for a North Sea revitalisation

A recent report from industry body Oil & Gas UK (OGUK) has highlighted a stark decline in activity in the North Sea during 2011. Levels of exploration drilling are some of the lowest recorded since the mid 1960s, raising the question of whether the much publicised tax hike levied on the industry in the 2011 budget has backfired on the UK Treasury. With production down 18% over 2010, the Treasury has been forced to reduce its 2011 forecast tax take from £13.4bn to £11.1bn, despite anticipating a £2bn windfall from its 2011 tax hike. With the impending 2012 budget just around the corner, the industry will no doubt be hoping for fiscal changes to help reinvigorate investment. However, balancing this both politically and economically could be decidedly tricky for the Treasury in these times of austerity.

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