UK EITI Report reveals a third consecutive year of loss in the sector.
The UK is the world’s 21st largest producer of oil and gas. 2015 saw a dramatic fall in the global oil price from USD 99 in 2014 to USD 52 a barrel. This meant that it was a tough year for the industry globally with investment in the sector in the UK significantly reduced.
The 2015 government revenue figure from the sector (including a small amount of mining activity) was less than a billion UK pounds compared to £2.3bn in 2014. These figures are broken down in the UK EITI report by different types of taxes, license fees and other payments; by license and oil field where applicable; and amongst the individual oil, gas, mining and quarrying companies.
The fall looks more dramatic than the underlying trend because almost half a billion pounds was refunded by the government against tax paid in previous years. The refund reflects a third consecutive year of negative cash flow, i.e. the companies’ post-tax income was less than their expenditure. In fact, production at 1.5m barrels in 2015 was actually a small increase from the previous year.
A shrinking industry
The overall long term picture is, despite some new small discoveries, one of a shrinking sector. Production is only about a third of the 1999 peak and there is a long term trend of falling production. Alongside the falling oil price, profitability in 2015 was at a historic low since records began in 1997. Compared to 2011, the total value of the sector has halved and government revenue stands at less than a tenth. In the mid-80s, the sector used to bring the government in almost £30bn a year in revenue in today’s prices.
Oil and Gas Authority established
Before 1 April 2015 petroleum licences were awarded by the Department of Energy and Climate Change (DECC). Since then a newly established independent regulator, the Oil and Gas Authority (OGA), has been the licensing authority in all areas to her than onshore Northern Ireland, where the Northern Ireland Executive has retained responsibility. The OGA was established to provide enhanced stewardship and coordination of the sector and reduce the inefficiencies of having multiple agencies working in the field.
Beneficial ownership register established
In line with the Small Business, Enterprise and Employment Act 2015, since 30 June 2016, companies incorporated in the UK are required to submit information to Companies House on people with significant control (PSC) along with a statement of confirmation. Under the UK EITI, companies that have filed this information at Companies House were permitted to confirm their filing and provide the link to the relevant page at Companies House as a way of disclosing beneficial ownership.
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