Industry body Subsea UK has welcomed the measured in the UK Government’s budget to help support the North Sea oil and gas industry.
George Osborne said there would be the introduction of a “single, simple and generous” tax allowance for the industry from next month, with the Government also investing in new seismic surveys in under explored areas of the UKCS (UK Continental Shelf).
The OBR (Office for Budget Responsibility) has assessed that it will boost North Sea production by 15% by the end of the decade.
As previously hoped, the supplementary tax has been reduced from 30% to 20% – which the Chancellor said will be backdated to January of this year.
He said the challenges which face the industry currently posed a “pressing danger” to the industry which required “bold and immediate” action.
The Petroleum Revenue Tax is also set to be reduced from 50% to 35% to support continued production in older fields.
Bill Egdar, chairman of Subsea UK, said: “All the measures combined are welcome, particularly the reduction in petroleum revenue tax. A temporary suspension of the supplementary charge for a period of at least two years is what was really needed to get things moving again in the low oil price era.
“However the reduction in supplementary charge combined with the investment allowances should stimulate new field developments where subsea engineering will play a vital role.
“Lower PRT should see increased investment in brownfield activity to maximise production and this is good news for the subsea inspection, repair and maintenance sector which has been feeling the pain in recent months.
“The seismic programme proposals will provide valuable information on areas of untapped potential which will largely be unlocked by subsea technology and expertise.
“It is now down to the industry to play its part within this context by working co-operatively, collaboratively and innovatively to get the cost base under control while maintaining reasonable margins so that jobs and investment in the supply chain are protected.
“I am confident our highly imaginative and pioneering subsea sector will step up to the plate.”
Industry body Oil & Gas UK said the measures lay “strong foundations for regeneration of the UK North Sea”.
Meanwhile the chief executive of the OGA (Oil and Gas Authority) said the sharp decline in oil prices had “magnified the very real challenges facing our industry”.
Politicians from across all parties had urged the Chancellor to use his pre-election budget to bring in a package of measure to help the North Sea oil and gas industry.
The North Sea has been hit by the plunging price of oil, with hundreds of job cuts announced in recent months and fears a drop in investment could lead to the accelerated decommissioning of oil fields.
Danny Alexander, Chief Secretary to the Treasury, said: “The major package of investment in our oil and gas sector, including a new investment allowance, a 10% cut in the supplementary charge and a 15% cut in petroleum revenue tax, shows that the UK Government is determined to safeguard the future of this vital national asset and keep our economy on the road to recovery.”
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