Could High UK Taxes Ruin North Sea Oil Boom?
The Sleipner gas platform, some 250 kms off Norway's coast in the North Sea. (ANIEL SANNUM-LAUTEN/AFP/Getty Images)
March 2, 2012
| Energy
| Europe
A discovery of large new reserves of oil in the North Sea last year by Norwegian oil company Statoil (NYSE:STO) has put the United Kingdom and Norway in a promising energy position for 2012. But there is concern on the part of BP (NYSE:BP), Royal Dutch Shell (NYSE:RDS.A), and Total SA (NYSE:TOT) that new British tax and environmental policies could undermine and even ruin a possible new oil boom for the UK.

Although oil and gas production declined by 18 percent last year, capital investment is expected to increase by a record 35 percent to $18.3 billion in 2012. In addition, exploratory drilling is expected to rebound from a low of 15 wells to at least 25. A surprise UK tax increase passed last year raised the rate on oil and gas producers from 20 to 32 percent, which prompted a major outcry from the oil industry. In addition, the oil industry fears that the scheduled decommissioning of oil infrastructure first installed in the 1970s will complicate oil production because the UK is likely to impose tougher environmental regulations on new infrastructure and equipment.

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