Tax breaks aim to breathe new life into older North Sea oil and gas fields

● Move will encourage new owners to take on mature sites ● But Greenpeace argues cash should be spent on renewables

long time to negotiate. 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 revenuestotheexchequerand securing highly-skilled jobs.”

Ewan Mackinnon, investment director at Glasgowbased Maven Capital Partners, said the move was particularly welcome given that the cost of decommissioning older fields is becoming “increasingly troublesome”.

“It is essential that the right assets are controlled by the appropriate owners to allow forongoinginvestment,which could raise up to £40bn in the UK. It has been proven time and again companies that specialise in late life assets can be highly successful in buying maturing North Sea fields,” he said.

“For example, Apache’s Forties field is still going strong 15 years after it was acquired from BP. The improvements outlined should attract further investment in the North Sea and prolong the life of the sector for years to come.”

Fiona Legate, a senior analyst with Wood Mackenzie’s North Sea upstream team, said: “The UK is the first country to bring in such a measure and it’s likely other countries with mature hydrocarbon plays will be watching this legislation and its success closely.”

But Ian Mclelland, an analyst at Edison Investment Research, said the industry will have to wait to see the detail of the change to establish whether it will make a significant difference.

“In reality, many deals were already structured to allow for the transfer of historic tax loss pools and we will have to see the detail to understand if this really will make things substantially easier.

“The last year has already seen a substantial amount of deal flow in the region, in particular from private equity capital. This move is likely to further support transactions, especially with oil prices currently above $60 a barrel.”

However, environmentalists condemned the Chancellor’s announcement.

Hannah Martin of Greenpeace said: “Old North Sea oil and gas rigs have passed their sell-by date and need to be decommissioned. Tax breaks for decommissioning might sound like a solution, but in reality a huge amount of taxpayers’ money is at stake to extend the life of these rigs, possibly for only a few years.”

She added that renewable energy developers were clamouring for small tax changes that would open up more investment.

“Instead of desperately trying to chase the old, Britain should be looking to a new energy system.”

0 The changes should attract investment to the North Sea, and prolong the life of the sector