UK announces 10% increase in tax on North Sea profits

London (Platts)--5Dec2005

The UK said Monday it will raise tax on North Sea oil and gas profits,
becoming the latest oil-producing country to grab a larger slice of income
from crude prices that hit a record this year.

     "In order to strike the right balance between producers and consumers, I
will raise the supplementary North Sea charge from 10% to 20%," the UK's
finance minister, Gordon Brown, said in his pre-budget report, an address to
lawmakers before the full budget.

     The move comes after crude prices have surged this year, hitting a record
$70.85/bbl in August and leading to record profit for Royal Dutch Shell and
other oil companies. Brown needs to raise revenue to help plug a GBP10-bil
($17.4-bil) gap in public finances, economists said before the announcement.

     Other countries such as Venezuela have raised tax on oil companies in
2005. Even after a surprise increase in 2002 to 40%, tax on North Sea oil and
gas was lower than in many countries and almost half the rate of up to 78%
Norway levies on its production.

     Brown also said the tax hike would come with new incentives for companies
to develop "the most difficult fields" by "extending the exploration
expenditure supplement to all their ringfenced activity."

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