THE government is offering tax breaks worth hundreds of millions of pounds to offshore oil and gas companies willing to drill in deep waters west of Shetland.
The move was welcomed by the industry body, Oil and Gas UK.
Malcolm Webb, its chief executive, said it could result in early investment of over £2bn and another £12bn over the next eight years, ultimately bringing almost two billion barrels of oil and gas into production.
Tax allowances worth up to £160m per field are being offered to open up Britain’s last offshore oil and gas frontier in a remote region off the northwest coast of Scotland.
“The area to the west of the Shetland Islands is the last major area in the UK continental shelf to be developed and infrastructure is critical to fully unlocking the gas potential of the region,” chancellor Alistair Darling said in a statement to parliament.
“It is estimated that the area contains around 20 per cent of the UK’s remaining oil and gas reserves.”
Total of France, which has proposed a project for two gas fields, could be the first to benefit from the tax incentive.
The news came as energy minister Lord Hunt announced a new round of offshore oil and gas licensing. He offered blocks in all of Britain’s waters for the first time in 12 years, including a number that were won in the past but then left fallow.
Webb said: “It is extremely encouraging to see the broad range of licences on offer in this round as well as the extension of the validity of thefrontier licence to nine years in the west of Scotland area. “
The government thinks there could still be more than 20 billion barrels of oil, or its equivalent, in UK waters.
In the past Britain was a net oil and gas exporter but now depends increasingly on imports.
The chancellor added: “The government recognises the importance of the UK oil and gas industry to our economy and the dependable foundation it provides for the UK’s energy security.”