Osborne unveils oil field tax breaks

Chancellor George Osborne will offer new tax breaks for oil and gas fields in the North Sea, in a bid to encourage investment in older fields.

The allowance is thought to shield up to £250m of income from some mature oil field sites, or up to £500m for projects in fields that pay petroleum revenue tax, Osborne said today.

The level of relief will depend on the project, and on its size and unit costs.

Sanjeev Bahl, analyst at Numis Securities, said today that the main beneficiary of the tax break could be oil firm EnQuest, which has exploration operations in the North Sea.

He added: “Other beneficiaries will be mature North Sea producers such as Premier Oil, Valiant and to a very small extent Tullow Oil.

“Companies with less mature North Sea assets should see a small benefit towards the end of field life as they pursue field life extension upgrades/tie-backs.”

In March 2011, the government raised a tax on oil and gas output to 32 per cent from 20 per cent, a move greeted with dire predictions by the industry.