Budget sees investment in North Sea

21 March 2012
By Rachael Fergusson
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George Osborne

UK Chancellor George Osborne with his Budget case

UK Chancellor George Osborne has announced £3 billion in support for new drilling in the North Sea.

Announced as part of the Budget today, Osborne said he wanted to ensure “we extract the greatest possible amount of oil and gas from our reserves in the North Sea”.

“We are today introducing a major package of tax changes to achieve this.

“We will end the uncertainty over decommissioning tax relief that has hung over the industry for years by entering into a contractual approach.

“We are also introducing new allowances including a £3 billion new field allowance for large and deep fields to open up West of Shetland, the last area of the basin left to be developed,” Osborne said.

Osborne gave strong backing to gas, which he said was cheap and cleaner than coal, and would remain the UK's single biggest source of energy for decades.

In terms of renewables, he described them as a “crucial part of the UK’s energy mix”, but said he would be alert to the costs they added to families’ fuel bills.

"Environmentally sustainable has to be fiscally sustainable too," he said.

Exploiting the West of Shetland is opposed by environmentalists not only because would it lead to the extraction of more fossil fuels, but they fear the deep water and rough sea conditions would make a potential spill extremely hard to clean up.

Charlie Kronick, senior energy advisor for Greenpeace, said: "George Osborne has opened the flood gates to a new Klondike in the deep waters off Shetland without learning any of the lessons of the dangers this poses after the disaster in the Gulf of Mexico just over a year ago.

"Any oil spill in the west of Scotland would wreak untold devastation on some of the UK's most fragile habitat and the local economy."

Greenpeace also said the scant support for clean-tech industries in the Budget, alongside a U-turn on airport expansion in the South East and the backing for the oil industry, spelled out a polluters' charter that was bad for the environment.

Also in the Budget was a pledge to make administrative savings in the carbon reduction commitment scheme which aims to drive energy efficiency in businesses, and to replace it with an alternative environmental tax if sufficient savings could not be made.

And the Chancellor announced that combined heat and power plants would be exempt from the carbon price floor, which puts a minimum price on the permits major polluters have to pay to cover their emissions.

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