THE GOVERNMENT has tried to make up for last year’s oil and gas tax raid by promising to help out explorers in parts of the North Sea and clear up tax rules on decommissioning.
Shares in North Sea explorers spiked yesterday lunchtime as George Osborne unveiled a £3bn subsidy for drilling in the West of Shetland area, which is thought to contain lots of oil but is largely unexplored.
He also promised laws to support investment in brownfield sites that have been closed by big firms such as BP but still have some fuel left.
Companies will also have more certainty about the costs of shutting old sites, after Osborne said tax relief will be set on a contractual basis by 2013.
These new proposals will cost £45m this year, but the Treasury is expecting the measures to actually generate £385m in 2014 as companies return to the region, having been scared off investing because of the uncertain tax regime.
Industry group Oil & Gas UK estimates that an extra 1.7bn barrels of oil will be recovered from the North Sea thanks to the clearer tax rules.
“They have listened quite carefully to the industry about the areas for investment that need some encouragement,” Alan McCrae, head of energy tax at PwC, told City A.M.