Tax breaks for oil and gas industry
George Osborne announces tax breaks for oil and gas industry.
More tax breaks designed to bolster investment in North Sea oil and gas were unveiled by UK Chancellor George Osborne today.
The Chancellor said income from older fields will be spared from paying full duty to ensure they are fully exploited.
It is the latest in a series of reliefs introduced for the industry, after the coalition government was criticised for hiking the supplementary charge on North Sea producers from 20 per cent to 32 per cent last year.
The new Brown Field Allowance will shield up to £500m of income from the charge when firms are boosting production from established oil or gas fields – potentially cutting their tax bill by £160m.
The move is expected to cost the Exchequer £100m per year initially – but officials insist long-term tax revenues will be significantly higher.
Osborne said: "Today's tax allowance is more good news for the North Sea, good news for jobs and good news for the broader economy.
"It will give companies the incentive to get the most out of older fields, creating jobs and delivering more revenue for taxpayers.
"This government has signalled its absolute determination to get more investment in the North Sea, a huge national asset.
"Just last week, I saw the benefits at a supply chain factory creating many hundreds of jobs in the North East thanks to government support for North Sea gas which made a major project possible."
Today's announcement could attract at least £2bn of investment in the short-term and is a step towards a potential 50 years of further activity in the North Sea, according to industry body Oil and Gas UK.
Economics director Mike Tholen told BBC Radio Scotland's Good Morning Scotland programme: "It's certainly a very good step in the right direction.
"I think the Chancellor is right to recognise that many of the older fields in the UK struggle to attract new investment, and this is a bit of a shot in the arm for them.
"I'm very well aware that in the short-term there are some very substantial projects waiting for this announcement, and I'm very confident that there will be some big investments announced in the very short term.
"We think investments over the next year or so could be at least £2bn better because of the news today."
He said such announcements "help to attract new investment to keep these old fields going which is crucial for everyone in Scotland".
He added: "If we get this right we're looking at another 50 years activity still in this basin."
Scottish First Minister Alex Salmond said: "After imposing the draconian supplementary tax on Scotland's North Sea industry, threatening thousands of jobs and billions of pounds in investment, it seems that the Chancellor is finally recognising the vital importance of the oil and gas sector.
"This is just one of the measures I have been calling for over the last year; for the Chancellor to move to plan B for the North Sea. He needs now to move to a plan MacB for the rest of the economy.
"Oil and gas production now contributes £32bn to the UK's balance of payments, with the supply chain adding a further £5-6bn – more than halving the UK's trade deficit. The industry supports almost 200,000 jobs in Scotland and has generated almost £300bn, at today's prices, in taxation revenues.
"More than half of the value of the North Sea's oil and gas reserves have yet to be extracted. That's 24 billion barrels with a wholesale value of £1.5tr."
Alan McCrae, head of UK energy tax at accountants PwC, said: "This is a very helpful step in the right direction and should be warmly welcomed by the industry and taxpayers alike.
"The UK's current rate of tax for North Sea production is extremely high at 62 per cent for newer fields and 81 per cent for those subject to Petroleum Revenue Tax, and these rates are making some investment unviable.
"By reducing those rates for future production from investment in existing fields, more investment will be stimulated. As well as creating jobs now, this should help future North Sea production and future tax revenues.
"This measure recognises that investment in existing fields is every bit as important as new exploration in the fight to produce as much from the North Sea as possible."
Greenpeace policy director Doug Parr said: "It doesn't look like Osborne cares one little bit about a true British growth sector, or about our planet.
"Our clean energy sector accounted for a third of all growth in the last year. Yet this massive handout to his polluting mates is yet another obstacle thrown in the path of Britain's green industries.
"The Arctic sea ice is melting to record levels, and he shoves millions of pounds into the pockets of those responsible. There's no way he should be doing that.
"Instead, he should be channelling Treasury support to the new, clean 21st Century industries, like renewable energy, instead of throwing our money at a declining industry in the North Sea in an attempt to get every last drop of oil."
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