Budget 2017: Tax relief to spur investment in North Sea

Lawrence Kim
November 23, 2017

TAX breaks will be introduced for the North Sea oil and gas industry from November 2018 in a bid to spur more investment.

Derek Leith, EY's head of oil and gas tax, said the change has the potential to "revitalise" the industry, saying it was a "clear demonstration" that the government wants to make the most of the UK's remaining oil reserves. They will also act as catalysts for fresh investment, reinvigorating activity in both new and existing portfolios and generating orders for companies in the UK's world-class oil and gas supply chain.

Decommissioning remains a sticking point in many North Sea negotiations because the original operator is ultimately responsible dismantling the fields with buyers unwilling to take on the costs without the tax breaks.

North Sea firms have welcomed United Kingdom government plans to introduce a new tax break for the sector.

"This tax measure should help complete deals more quickly and in a more efficient way".

"Prolonging the life of mature assets better allows the industry to deploy its skills and technology to maximise extraction of the UK's oil and gas, increasing production tax revenues to the Exchequer and securing highly-skilled jobs".

"We note the measure is meant to be effective by November 2018 and are committed to work closely with Treasury to ensure the change delivers the intended outcome".

Under plans unveiled in the budget, owners of mature producing fields will be able to pass on their tax history to buyers when they sell their assets.

This will allow the buyer to benefit from larger tax relief when fields run dry and require dismantling - known in the industry as decommissioning.

Under the proposed Autumn Budget, the United Kingdom will introduce a transferable tax history mechanism for United Kingdom oil producers for deals that complete on or after November 1, 2018.

Philip Hammond revealed the plan during his Autumn Budget and also said the government would launch a technical consultation on allowing a petrol revenue tax deduction for decommissioning costs incurred by a previous licence holder of an asset. The trade body will work closely with its members and Treasury to ensure that these measures will help maximise economic recovery from the basin.

Other reports by Click Lancashire

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