The UK government will enact incentives for oil and gas development beyond what Chancellor George Osborne announced in a fiscal speech to Parliament on Dec. 3 (OGJ Online, Dec. 3, 2014).
In a follow-up meeting with industry representatives in Aberdeen, Chief Sec. to the Treasury Danny Alexander and Exchequer Sec. to the Treasury Priti Patel described further measures to boost investment in the UK’s mature oil and gas industry.
The headline reform announced by Osborne in his Dec. 3 Autumn Statement was a trimming of the supplementary charge—paid on income from post-1993 oil production in addition to the 30% ring-fenced corporate tax—to 30% from 32%.
Osborne also announced an extension to 10 years from 6 years of the period during which operators can carry forward losses from specific fields and a new “cluster allowance” to encourage development of high-pressure, high-temperature fields.
In Aberdeen, Alexander and Patel said reforms also will include:
• A single, basin-wide investment allowance “to reduce the effective tax rate further for those companies investing in the future of the [UK Continental Shelf (UKCS)],” a “consultation” for which will be published early in 2015.
• Development of options to improve access to decommissioning tax relief and consideration by the new Oil and Gas Authority (OGA) of the fiscal treatment of infrastructure.
• Addition of £6 million in funding for the OGA, which will be based in Aberdeen.
• Financial support for seismic surveys for under-explored areas of the UKCS, which will be based on shared funding and specified in next year’s national budget.
• Further work on “options for supporting exploration through the tax system, such as a tax credit or similar mechanism, in a way that is carefully targeted and affordable.”
