Reserves hope after changes to North Sea tax

TAX changes introduced in the past 18 months will have a material impact on the UK North Sea and have already encouraged firms to plan additional investments whi c h could unlock hundreds of millions of barrels of reserves.

Oil & Gas UK said the series of changes introduced by the UK Government after the outcry over the tax hike in the 2011 Budget have provided a big boost to the appeal of the North Sea for firms from around the world. The trade body predicts the changes will lead to a big rise in activity across the exploration and production cycle which could last for years, providing a boost to jobs and to the Treasury’s revenues.

“Constructive engagement with HM Treasury over the past 18 months since the 2011 Budget has resulted in the introduction of a range of tax measures which have allowed global i nvestors to consider projects on the UK continental shelf in a new light,” said Oil & Gas UK’s economics director, Mike Tholen.

In a report on the UK fiscal regime, Oil & Gas UK said it has identified five fields more likely to go ahead after the introduction of the Small Field Allowance in the 2012 Budget. It said the allowance gives “vital support” for exploration activity, which slumped last year.

It said the introduction of allowances for large projects in deepwater west of Shetland and for new shallow water gas developments had encouraged firms to advance plans to develop fields containing 340 million barrels oil and gas.

Oil & Gas UK also identified seven more projects likely to go ahead in the short term following the introduction of the Brown Field Allowance for existing fields this month. These contain 160 million barrels oil equivalent.

Mr Tholen added: “Securing certainty on the amount of tax relief available on decommissioning costs … will reduce one of the risk factors for companies.”