Exploring the rationales for relaxations in the UK petroleum fiscal regime 1980-2000

The UK is considered a new oil province compared with other oil producing countries, such as Saudi Arabia. The UK petroleum fiscal regime was established since 1975 and tightened up with a number of different new taxes till 1981. The objective of the tight fiscal terms was to secure more rent from the UK oil resources for the nation. However, the period 1983-2000 had witnessed three petroleum tax relaxations. These took place in 1983, 1987-88, and 1993. These relaxations presented a clear change in the type of the LJK governance of its petroleum resources from a proprietorial to a non-proprietorial regime. This new type of governance petroleum resources continued to be accommodated under a unique type of mineral ownership in the UK, which was called in ternis of the UK oil industry "the North Sea Model". This unique type of minerals ownership grants the concessionaire a mining and economic right but not a mineral right. Therefore, it accommodates private interests under public control. This thesis explores and tests the historical rationales for the three UK petroleum tax relaxations. The investigation of these rationales is based on three viewpoints: the Government, the UK oil industry, and academics. The tests of the rationales showed that the 1983 petroleum tax relaxation was not successful in achieving its proposed aims, which were expressed in the rationales. The 1987-88 petroleum tax relaxation was successful in stimulating extra investments in new areas, and in increasing the cash flow of the UK oil industry. This increase in investments and cash flow were at the expense of the Government who paid E216 million in 1992 because of PRT allowances and relief. However, the 1993 petroleum tax relaxation left the Government with a very small economic rent from new oil fields, which was based only on the ordinary corporation tax. The results of this thesis show that the UK Government was always the revenue loser as a consequence of these tax relaxations. These were the key drivers of changing the UK governance of its petroleum resources from proprietorial to non- proprietorial regime. This might be because of depending on wrong judgment to any potential petroleum resources in situ, and a wrong following to the Ricardian rent theory.