The UK expects its tax revenues from the oil and gas industry to slip by more than a third in the current tax year as declining North Sea production levels, lower than expected oil prices and upstream tax breaks crimp its receipts, the UK's finance ministry said Wednesday.
Tax receipts from North Sea corporation tax and petroleum revenue tax are seen totaling GBP7.4 million ($11.9 billion) in the 2012-13 tax year, down 34% from GBP11.2 billion collected in the 2011-12 tax year, according to UK Treasury's pre-2013 budget statement.
In March, the government's 2012 budget predicted North Sea tax revenues of GBP9.6 billion in the fiscal year running from April 1, 2012, to March 30, 2013.
But average oil prices have remained below the treasury's initial expectations of $118/b over the tax year, and government now sees oil prices averaging $112/b in its latest budget estimates.
Declining production rates from the North oil have been exacerbated this year due maintenance on the large Buzzard oil field and a gas processing terminal.
A recent raft of tax breaks to promote smaller, less attractive oil and gas field developments has also trimmed the UK's short-term oil revenue expectations.
Further ahead, the treasury expects North Sea tax receipts will continue to slide, falling to GBP6 billion in the 2014-15 fiscal year and hitting GBP4.1 billion in 2017-18.
Oil prices are expected to average $106/b in the coming tax year, falling further to average $92/b in the 2017-18 period, the ministry said without saying if the estimate is based on Brent or WTI crude futures.
UK oil production has fallen steadily since reaching a peak of 2.8 million b/d in 1999 and the country became a net importer of oil in 2006 and of gas in 2004.
Last month, UK government figures showed that oil production slumped to a new low of 617,800 b/d in September as the country became a net importer of oil products for the first time since 2010.
The falls followed a record 18% slump in UK oil and gas production in 2011 and, over the previous five years, the UK's mature North Sea fields had seen decline rates average 6%.
The UK will likely see its net oil imports rise to 43% of its oil demand by 2020, from around 30% currently, as output from the country's ageing North Sea fields continues to decline, according to recent government estimates.
According to the pre-budget statement, oil production is seen averaging 45.1 million mt in the 2013-14 fiscal year, slipping to 43.8 million mt in the 2017-18 period.
