North Sea oil fields face closure if Chancellor George Osborne does not cut taxation of oil producers, the chief executive of Centrica has said. Iain Conn, the boss of the Windsor-based utility company, urged the chancellor to offer relief to troubled oil companies following the loss of 65,000 jobs in the UK because of the oil price collapse.
The Times revealed on 1 February that the oil veteran has written a letter to Osborne in an effort to get help for the oil industry. "I have only seen a fall in oil prices like this once before," Conn told the newspaper. "The North Sea is really hurting. The government needs to be agile here. It needs to encourage companies to keep their fields going and keep their people."
The majority of the 65,000 jobs cut in the UK oil industry in 2015 fell in the North Sea operations. In October 2015, the chief executives of independent oil companies EnQuest and Premier Oil both predicted that a further 10,000 jobs could be cut in the North Sea oil sector, the FT reported.
Oil benchmark Brent Crude has fallen more than a third in value since February 2014. In January 2015, oil even traded below $30 a barrel – a fall of almost 75% in just two years.
On top of that, the North Sea productions are relatively high cost, causing the companies operating there to look for alternatives to cut costs.
"The government has to be really thoughtful about taxation in the North Sea," Conn argued. "They can always put it up again — indeed, they have quite a good record of doing that. But right now there is a case to be made that corporation tax in the North Sea should just be corporation tax and that petroleum revenue tax should probably disappear for a while."
Conn, an oil veteran who has worked at BP for 29 years, also argued that the oil companies operating in the North Sea are not making a profit at the moment. "So the government wouldn't lose a lot because most people aren't making any money," he said. "This is a very unusual time for the North Sea."
Centrica, the company that owns British Gas, cut 6,000 jobs in July following two rounds of slight price cuts. The utility giant managed to hike its profits but axed positions in an effort to increase margins.