COMMENT

Investment in the North Sea oil and gas sector is set to be boosted by tax breaks to encourage new owners to give a new lease of life for older fields.

The introduction of transferable tax allowances on oil and gas fields is aimed at attracting new owners who are often deterred from buying assets due to the prospect of facing high decommissioning costs in the future.

The tax breaks – the detail of which are still to be finalised ahead of introduction next November – were described by EY’S oil and gas tax head Derek Leith as an “unprecedented change” aimed at maximising the value of the UK’S remaining reserves.

Currently, existing owners of oil and gas fields are unable to pass their tax history on to a buyer. This means the buyer perceives the field to be less attractive commercially, partly because they are unlikely to be able to access the same level of tax relief than the current owner when decommissioning.

The Chancellor called it an “innovative” tax policy for the basin, which still holds an estimated 20 billion barrels of oil.

Deirdre Michie, chief executive of industry body Oil & Gas UK, described it a “vital step” which will increase recovery from existing fields and lead to fresh investment.

She said: “While there have been a number of deal announcements in the basin over the last year, these have mostly been for less mature assets, have been extremely complicated and taken a very

“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.”

DEIRDRE MICHIE