Tax rates on North Sea oil and gas production have been dramatically reduced in an effort to combat the dangers posed by depressed oil prices and encourage further exploration in the struggling sector.
According to the BBC, Chancellor George Osborne said in his Budget statement that Petroleum Revenue Tax (PRT) would be "effectively abolished", having cut it last year from 50% to 35%.
Furthermore, the existing supplementary charge for oil companies will also be reduced from 20% to 10%, backdated to 1 January which will allow operators to return to projects which were previously deemed uneconomic.
Osborne has said the measures are worth £1.3 billion over five years and that these generous new tax allowances would encourage much needed investment in the North Sea and could boost oil production in the region 15% by the end of the decade.
Oil and gas spokespeople have indicated that these measures will provide a welcome relief for companies who have been most affected by the downturn.
Permasense spokesperson, Dr Jake Davies said:“These measures will help UK operators continue producing at near-record levels, whilst affording the minimal investment needed in novel technologies, to ensure asset availability and safety are maximised and integrity-related incidents are minimised.”
The reduction in the Petroleum Revenue Tax is a triumph for the industry, as Richard Cockburn, Energy Partner at Bond Dickinson said: “The effective abolition of Petroleum Revenue Tax has long been called for by the industry and will be welcomed widely.”
However, opinions seem divided over the efficacy of Osborne’s new measures and whether they have come too late.According to the BBC, the SNP’s deputy leader Stewart Hosie said that Osborne should not have introduced the supplementary tax in 2011 and he should have acted "much sooner" to intervene. Meanwhile Scottish Labour Leader Kezia Dugdale told the BBC that support for the oil and gas industry did not "go nearly far enough" and voiced her concern that there had been no strategy announced to ensure that infrastructure such as platforms and pipelines are not decommissioned early.
It remains to be seen whether the measures will be enough to encourage further exploration in the North Sea, however the tax breaks provide welcome relief for an offshore industry which has been hit hard by plunging oil prices.
Edited from various sources by Louise Mulhall
Read the article online at: https://www.oilfieldtechnology.com/offshore-and-subsea/16032016/north-sea-tax-cuts-welcomed-by-oil-and-gas-industry-figures/