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Government spin - Exploration and Production sector comms teams should fight back, says Fifth Ring director

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By The Drum Team, Editorial

March 24, 2011 | 5 min read

Following yesterday's budget announcement of a tax levy for the E&P sector, Ian Ord discusses 'the spin' that the sector faces and how its communications teams should combat it.

Ian Ord, business development director for Fifth Ring made the call while explaining that brands across the E&P sector in the North East of Scotland are surprised by yesterday’s budget introducing a $2 billion tax levy, rising from 20% to 30%, targeting North Sea oil businesses.

Ord said of the public perception of the sector: “The price of a litre of petrol is not that far removed from the price of a litre of water – but the negative press surrounding fuel and the oil industry as a whole far exceeds any attention given to the latter. The challenge as I see it is for communications teams at the E&P firms to highlight the reality of the cost involved in getting crude oil to the pump as useable fuel. Maybe it is because the processes are generally invisible to the average consumer – they are less aware of the complexity, cost and risk involved.”

He said that the concern surrounding the budget announcement will impact upon the reputations of brands in the sector, as well as affect investment in it across the UK, Scotland and the North East in particular.

“With that in mind, I can only applaud the Government’s ability to spin this situation and put the onus on the oil companies. Labour’s treasury spokeswoman Angela Eagle suggested that E&P companies would just get the money back by putting prices up at the pump, but this is impossible because the price of oil is internationally set; the individual E&P companies are not able to set a higher price and pass this on to the consumer.” he added.

“What never fails to amaze me is that while the cost of a litre of fuel at the pump is around £1.30, the producer, retailer and supply chain only get about 50p of this. The UK Government meanwhile, walks away with around 80p. Yet it is the oil companies that get a kicking from the general public for profiteering,” commented Ord, who works with firms such as Tata Steel and Offshore Solutions and Offshore solution in Scotland.

“Once again, E&P companies appear to be the target of an Administration with a stunted memory. After all, it was only nine months ago that we were promised some semblance of fiscal stability in order to allow recovery, aimed to aid the government’s desire to promote growth, new jobs and exports. In the budget last year, the chancellor said that the UK was “open for business”, but the mere fact the Government can turn round and renege their tax pledge less than a year later is extremely short-sighted.”

Ord continued to describe the oil and gas sector as ‘Britain’s most successful industry’ but claimed that it was only now beginning to recover from ‘a depressed market’ due to a low commodity price and local recession, amidst the UK economy’s overall backward leap.

“The revival has been slow but we have been encouraged by new investment, new drilling and more opportunities of late. If you look at the current instability in the Middle East and compare it to the stable regime we have in this country, we should be grasping the opportunities in the North Sea and encouraging long-term investment, not the opposite.”

Ord says that the Government failed to offer E&P companies a tax rebate when the price of a barrel of oil was low, but has been quite to increase the levy when prices are high. “If the Government really wanted to do something about prices at the pump, they could reduce the percentage cut they take from the pump price – but is that ever likely to happen?,” he asks.

“E&P companies are working hard to win the hearts and minds of British consumers. So instead of criticising them, we should be supporting them in their long-term ambitions – they are making massive investments into our economy and all they are looking for is a reasonable return on this.”

Ord concluded by stating that the blame for the lack of understanding on the processes of E&P sector and the costs involved had to be apportioned ‘appropriately. “So with regard to the Government’s spin teams I would say it’s a case of oil companies, zero; Government, one.” Following his surprise tax levy announcement, today Osbourne has promised to 'watch' petrol companies to ensure that the cost of the tax levy is not passed onto petrol consumers in the forecourts.

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