The UK government has delivered on promises made late last year to ease the tax burden on the struggling offshore oil and gas industry.
In its budget for 2015-16, the government enacted tax changes announced in its autumn statement and in a subsequent meeting with industry leaders (OGJ Online, Dec. 4, 2014).
Oil & Gas UK Chief Executive Malcolm Webb said the budget announcement “lays the foundation for the regeneration of the UK North Sea.”
The trade group estimated the measures will encourage additional investment of £4 billion and development of 500 million boe of oil and natural gas “in the near-term alone.”
The key rate changes are cuts in the supplementary charge, paid atop a 30% corporate tax on production begun after 1993, to 20% from 30% and in the petroleum revenue tax on older production to 35% from 50%. The supplementary rate cut is larger than announced earlier.
The budget also provides for a new investment allowance, replacing a complex system of allowances now in place.
According to the government, these and other moves will raise UK production by a cumulative 120 million boe over the next 5 years, boosting output in 2019 by 15%.
