TAX breaks will be introduced for the North Sea oil and gas industry from November 2018 in a bid to spur more investment.
The Chancellor announced introducing transferable tax breaks on old oil and gas fields sold to new owners, who are often put off buying the assets due to the high cost of decommissioning them when they run dry.
Oil and gas companies are able to claim tax relief on the costs of plugging and abandoning wells and removing infrastructure when fields stop producing. But under the current rules the tax history of a field cannot be transferred when it is sold. Industry leaders say this has put off new investors and that more must be done to support the industry which has seen massive job losses since the global slump in the oil price since 2015.
Hammond said the changes would encourage new entrants and help unlock some of the 20bn barrels of oil and gas that it is estimated could still be recovered.
EY’s head of oil and gas tax Derek Leith said the move was an “unprecedented” change to UK oil and gas tax law. “The proposed changes, the details of which will be worked through in 2018, have the potential to revitalise the UK oil and gas industry,” he said.
But Dr Sam Gardner, acting head of policy at WWF Scotland said: “It seems strikingly contradictory that only days after attending the UN climate conference in Bonn, the UK Government has announced a new way to encourage the exploration of more fossil fuels from the North Sea.
“While it’s true the oil and gas industry will continue to be a major contributor to our economy for some time, now is the time to be setting out a clear plan to sensibly transition away from dirty fossil fuels.
“We need to see a just transition enables us to harness the engineering skills currently deployed in the North Sea and apply them to supporting cleaner forms of energy production...the vast majority of fossil fuel reserves need to be left in the ground.”
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