PROFITABILITY AND TAXATION IN THE UKCS OIL AND GAS-INDUSTRY - ANALYZING THE DISTRIBUTION OF REWARDS BETWEEN COMPANY AND COUNTRY

Against the background of record levels of UK hydrocarbon production a nd a government review of the UKCS tax regime, this paper provides evi dence that the government's share of UKCS profits is very low by histo rical and international standards and demonstrates that the current ta x regime is extremely weak. The justification for the latter is then c hallenged by assessing the relative profitability of UKCS companies, u sing data from UK national accounts and from Form 10-K and Form 20-F c ompany reports and analysing both accounting profits and forecast disc ounted cash how. This shows that companies operating on the UKCS enjoy substantially higher profitability relative to both other UK companie s and other oil and gas provinces elsewhere in the world, Further evid ence of the weakness of the UK regime is provided by a comparison with the Norwegian oil and gas tax regime. The paper therefore makes a str ong case for the reform of the UKCS tax regime. (C) 1998 Elsevier Scie nce Ltd. All rights reserved.