UK Chancellor of the Exchequer George Osborne announced a series of tax measures to encourage investment in the North Sea’s oil and gas sector.
Starting January 1, 2015, supplementary charge rate for the North Sea will drop from 32% to 30% with the intention of further lowering it in the future “in an affordable way” to encourage investment in the UK Continental Shelf.
The Chancellor also said that he will extend the ring fence expenditure supplement to 10 years from 6 years for offshore oil and gas activities, supporting investment by companies that have higher expenditure than production income.
The measures, which brings offshore in line with onshore oil and gas production, could help attract new entrants into the basin and is just one measure from a range fresh measures needed to help improve the investment outlook.
The announcement was an important first step in demonstrating commitment to tens and thousands of jobs being created, as well as substantial benefits to the UK supply chain.
With the current crisis in exploration, the measures are expected to incentivise extra investment and lead to additional production on top of the approximately 9 billion barrels of oil equivalent the UK currently expects to produce in 2015, as well as sustaining oil and gas tax receipts for the long term.