This Commons Library briefing paper provides a summary of the state of the UK offshore oil and gas industries and outlines the industry, the regulatory framework and key challenges for the industry.Jump to full report >>
The UK offshore oil and gas industry is important to the economy. The industry contributed some 0.8% of GDP in second quarter 2015, down from a high of 2.5% in second quarter 2008. It supported around 370,000 jobs in 2015 falling to 330,000 in 2016.
However, production levels of oil and gas from the UK Continental Shelf (UKCS) are in decline, though there was a modest increase in 2015.
Oil prices rose from $28 per barrel (bbl) in 2000 to highs of $111/bbl in 2011-12 before falling slightly in 2014 and then rapidly to just over $50/bbl in 2015.
Against declining oil and gas production, rising prices over most of the period meant industry income in the period remained at between £25 billion and £30 billion a year between 2000 and 2013 but declined to just under £20 billion in 2015.
Tax revenue made an average annual contribution over the 10 years 2004/05 to 2013/14 of £7.4 billion, it declined rapidly to just over £2 billion in 2014/15 and to almost zero in 2015/16.
The Government’s Energy Act 2016 of 12 May 2016 responded to the need to maximise the economic recovery of oil and gas in the UK Continental Shelf (UKCS), the Act:
The principal challenges facing the industry include:
In Budget 2016, on 16 March 2016, the Chancellor of the Exchequer announced reductions in taxation for North Sea oil and gas fields, he said the Government will:
In Spring Budget 2017, on 8 March 2017, the Treasury announced the fiscal regime needs to ensure support for the transfer of late-life assets as part of the objective of maximising economic recovery of oil and gas from the UKCS. To determine the best approach, the Government has published a formal discussion paper on the case for allowing transfers of tax history between buyers and sellers. The Government is establishing a new advisory panel of industry experts to ensure appropriate scrutiny of the options arising from the discussion paper. The review will report at Autumn Budget 2017 
 HM Treasury Tax issues for late-life oil and gas assets: discussion paper 14 March 2017
Commons Briefing papers CBP-7268
Author: David Hough