George Osborne pulled a fast tax trick during the last budget when he unexpectedly smacked an extra 12% tax on North Sea oil and gas operations.
But the law of unintended consequences appears to have kicked in. Centrica, which owns British Gas, has said that it may shut down one of its major gas fields in Morecombe BayÂ permanently as it is no longer financially viable to keep it open.
The Morecombe Bay fields provide 6% of the UK's annual gas demand, which can be up to 12% of the residential requirements. The field is a declining basin and the gas has mainly been taken from it during winter when prices in the UK are highest.
The new tax is projected to raise an extra Â£1.8 billion, if the North Sea operations continue at their current rate of course. But the supplementary tax has been raised from 20% to 32%, which means that the more mature fields will be taxed at a effective rate of up to 81%.
The industry trade association, Oil & Gas UK, said last month that this tax could cost the industry Â£50 billion over the next ten years.
Alex Salmond, the SNP leader, has promised to 'batter' at the Chancellor's door and demand a U-Turn on the North Sea tax.
Centrica has closed Morecombe Bay North and Rivers gas fields for four weeks planned maintenance. But it is the South Morecombe field that has been shut for an unspecified period of work that may never be re-opened.
The company said in a statement "Following the increase in the Budget, UK oil and gas producing fields are subject to some of the highest levels of tax in the world – our South Morecambe field is now taxed at 81 per cent. At these higher rates, Morecambe's profitability can be marginal. Accordingly, we may choose to buy gas for our customers in the wholesale markets in preference to restarting the field."
The UK became a net importer of gas in 2004 and this may make gas more expensive in the UK as well as further reducing our energy security. There are also fears that other fields may now be shut down prematurely as the profits and shut down costs make it uncommercial to keep them going.
Centrica signed a deal last month with a Liquid Natural Gas deal with Qatar, which will supply the UK with some 10% of its gas over the next three years.