PDF《Fossil fuel exploration》

United Kingdom? 1?? Argentina Australia Brazil Canada China France Germany India Indonesia Italy Japan Republic of Korea Mexico Russia Saudi Arabia South Africa Turkey United Kingdom United States For the purpose of this report, exploration subsidies include: national subsidies (direct spending and tax expenditures), investment by state-owned enterprise and public finance.

The full report provides a detailed discussion of technical and transparency issues in identifying exploration subsidies, and outlines the methodology used in this desk-based study. The authors would welcome feedback on the full report and on this country study, to improve the accuracy and transparency of information on G20 government support to fossil-fuel exploration. This country study is a background paper to the report The fossil fuel bailout: G20 subsidies for oil, gas and coal by Oil Change International (OCI) and the Overseas Development Institute (ODI). Fossil fuel exploration subsidies: United Kingdom Shakuntala Makhijani November

2014 Country Study priceofoil.org odi.org Background Coal production in the UK has declined significantly in recent decades and has almost halved since

2000 (U.S. EIA, 2013). Although conventional oil and gas reserves are also declining and public and private oil and gas exploration expenditure is variable, the UK Government has implemented massive subsidies to promote exploration and development of risky and unconventional oil and gas in recent year, including deep-water offshore resources and shale gas (Figure 1) (Rystad Energy, 2014). The expansion of deep-water offshore oil and gas drilling in the North Sea is a priority for the UK Government, with a newly-created regulator, the Oil and Gas Authority, tasked with supporting the extraction of three to four billion barrels of oil and gas from the North Sea over the next

20 years. Subsidies are central to this plan, and in July

2014 the UK government began consultations '

on how the country'

s tax regime can continue to attract investment in the North Sea'

(Argus Media, 2014). Oil &

Gas UK (OGUK), the country'

s offshore industry association, further emphasised the role of government support to the industry following the referendum on Scottish independence, stating, '

[t]his vote does not and will not diminish the pivotal role played by the Scottish Government in supporting the offshore oil and gas industry and Oil &

Gas UK looks for this to continue'

(OGUK, 2014). OGUK'

s Economics Director, Michael Tholen, reiterated the importance of government support, given rising operating costs in the North Sea, calling for '

a lighter tax burden, a simpler and more predictable system of field allowances and fiscal support for exploration'

(Bertini, 2014). National subsidies The UK stands out as a major industrialised economy that, despite the G20 pledge, has expanded the scope of its national subsidies for oil and gas exploration dramatically, in particular for shale gas and offshore resources. Annual national subsidies in the UK total up to $1.2 billion on average (Table 1). The ring-fence expenditure supplement was introduced in

2006 and allows oil and gas companies to increase the value of unclaimed tax deductions for exploration expenses by 10% per year for up to six years (Blyth, 2013). An estimate for the full value of the subsidy is not available, but the cost of increasing the deduction from 6% to 10% as of January

2012 is estimated at $8 million to $81 million annually (depending on the year) (UK Parliament, 2014). Oil and gas companies in UK are subject to a higher corporate tax rate than most other companies C 30% as opposed to 21%. Oil and gas companies pay an additional 32% supplementary charge on their income, for a total tax rate of 62%. Introduced in the