Budget: North Sea oil and gas
Help for North Sea should help exploration
New measures in the form of a statutory instrument are expected to encourage further investment on the UK Continental Shelf.
Deirdre Michie, chief executive of Oil & Gas UK, responded to today’s Budget saying: “We welcome the Chancellor’s response to our call to resolve the tax issues slowing down asset transfers and his recognition of the need to maximise recovery of remaining UK oil and gas reserves.
“The publication of the statutory instrument giving further details of how the existing Investment Allowance will be extended to operating expenditure is also good news and we look forward to reading the detail.
“The UK Continental Shelf continues to offer an attractive range of opportunities and it is vital that we draw in a diversity of investors to ensure these are realised. Enabling assets to transfer when appropriate to new owners is key to this strategy.
“As the Chancellor has indicated, the tax regime has presented some significant barriers to asset trading, which we have been working on with Treasury for a number of years. These must be addressed as a matter of urgency.
“The current tax treatment of decommissioning makes it harder for existing owners to sell mature assets and leads to lengthy, complicated deals which slow down activity in the basin. Recent deals highlight the opportunities in the basin but more transactions could be achieved if this issue is resolved.
“We look forward to the formal discussion paper due on 20th of March on the case for allowing transfer of tax history between buyer and seller. We are also ready to play our part on the new expert panel that will consider the issues. We are confident that this will identify the shortcomings of the tax regime and enable a swift solution that will unblock asset deals and support maximising economic recovery.
“Close collaboration with Government and industry on fiscal matters sends a clear message to investors that the UKCS is a great place to do business. Confidence in the fiscal regime through Treasury’s “Driving Investment plan” underpins our competitiveness.
“Industry is committed to ensure that the UKCS provides a globally competitive business environment in which our highly skilled supply chain can thrive. The industry is slowly emerging from a very challenging period and it is crucial that the North Sea is successful in attracting investment in the near-term to sustain production and stimulate new activity.”