Tax regime and eurozone crisis dampen UK oil drilling

Drilling on the UK Continental Shelf (UKCS) in 2011 is significantly down on last year’s levels. Deloitte’s latest quarterly review suggests the UK’s new tax regime coupled with the eurozone […]

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By Vicky Ellis

Drilling on the UK Continental Shelf (UKCS) in 2011 is significantly down on last year’s levels. Deloitte’s latest quarterly review suggests the UK’s new tax regime coupled with the eurozone crisis has dampened oil drilling activity.

Petroleum specialists at the global consultancy suggest that this trend is unexpected given that recent oil prices have on average been more than $100 per barrel. In other parts of North West Europe, the report says, “this buoyant oil price has driven high levels of drilling activity.”

The UKCS is being affected by the announcement of tax increases for the North Sea in the 2011 Budget and general market instability because of fears about the eurozone crisis, adds the report.

It adds that changes in the UK market over the last ten years may have diverted investment by some of the larger exploration and production firms away from the UKCS, while smaller, UK-focused companies may have also found it difficult to get financial backing.