Oil and gas industries in the North Sea are set to benefit from increased investment after the Government unveiled plans to alter taxes affecting the sector in the Budget.
Delivering the Budget last week, Chancellor George Osborne said that oil firms should be given certainty on the amount of tax relief when decommissioning projects and be given new tax breaks for developing ventures.
This included introducing a £3 billion ‘new field allowance’ for deep sea areas that are harder to develop, such as those to the west of the Shetland Islands.
George Osborne said he wanted to ‘extract the greatest possible amount of oil and gas from our reserves in the North Sea.’
He continued: “We are today introducing a major package of tax changes to achieve this. We will end the uncertainty over decommissioning tax relief that has hung over the industry for years by entering into a contractual approach.”
The Government had previously prompted concern after it said it planned to limit tax breaks around the industry in its 2011 Budget.
Welcoming the measures, Malcom Webb, chief executive of trade association Oil and Gas UK, said that it would encourage tens of billions pounds of additional investment.
“The introduction of legislation to enable the Government to give the industry certainty on tax relief on decommissioning costs is a very significant step forward. The measure should delay decommissioning of oil and gas infrastructure, give rise over time to up to £40 billion of extra investment and result in the recovery of an additional 1.7 billion barrels of oil and gas. The Exchequer could receive an extra billion pounds of tax revenues in the first five years alone.”
He added: “The investment that will surely follow today’s announcements will drive growth in the economy, securing highly-skilled jobs, promoting advances in offshore technology, boosting tax revenues and reducing oil and gas imports.”
The Budget also included tax measures to support the video gaming industry – in which Dundee is one of the leaders – and enhanced capital allowances for enterprise zones including Irvine, Nigg and Dundee.
Scotland’s finance secretary John Swinney, however, said more could be done to aid businesses in Scotland.
“At the Prime Minister’s request we gave the UK Government a list of shovel ready projects in Scotland worth 300 million pounds which could start in the next financial year. There was no green light [in the Budget] and efforts to build economic recovery have not been given the boost we called for.”
