Budget 2016: Chancellor George Osborne delivers tax relief to the UK North Sea oil and gas industry
Chancellor George Osborne today bowed to pressure from the UK's embattled North Sea oil and gas industry, delivering tax relief to help its companies weather the downturn.
Scottish politicians, industry body Oil & Gas UK and North Sea oil baron Algy Cluff had all called on the chancellor to address the industry's urgent predicament in the run up to today's Budget.
Osborne halved the supplementary charge on oil and gas companies to 10 from 20 per cent, backdated to 1 January.
He added that the petroleum revenue tax, which had taxed profits for older oil and gas fields, would be "effectively abolished".
"In my budget a year ago I made major reductions to their taxes, but the oil price has continued to fall so we need to act now for the long term," he said.
Oil prices have fallen from over $100 per barrel in the middle of 2014, and are languishing at around $39 per barrel today.
This has forced North Sea oil companies to cut costs, halt or abandon projects and axe tens of thousands of jobs amid tumbling oil prices.
The tax changes are expected to save the industry around £1bn in the five financial years from 2016/2017 to 2020/2021.
Investors cheered with the FTSE 350 index of oil and gas producers rising as much as 3.2 per cent to 6,187.56 points on the news.
However, lawyers warned today's measures will have a minimal impact on the stricken industry.
Bob Ruddiman, head of energy at law firm Pinsent Masons said: "These might seem warm words, except that very few operators are actually paying those taxes."
"Both were designed for the good times – PRT in particular is targeted at ‘super profits’ from exploitation of fields. Anyone familiar with North Sea oil and gas will know there hasn’t been much by way of super profits recently.