George Osborne, the UK Chancellor of Exchequer, has delivered his sixth and final annual Budget statement to Parliament today, March 18, 2015.
Previously, in his Autumn Statement delivered in December 2014, the Chancellor promised the Government will set out major reforms to the oil and gas fiscal regime, to make sure that the UK Continental Shelf continues to attract investments.
To encourage further investment in the North Sea, the government will introduce a new Investment Allowance and reduce the supplementary tax charge on oil and gas companies further, from 30% to 20%, from January 1, 2015.
The rate of Petroleum Revenue Tax paid on older oil and gas fields will also be reduced from 50% to 35%.
These changes are expected to increase oil production by around 15% by 2019, and drive £4 billion of new investment over the next five years.
In his statement, the Chancellor George Osborne, said today:
“While the falling oil price is good news for families across the country, it brings with it challenges for hundreds of thousands whose jobs depend on the North Sea. Thanks to the field allowances we’ve introduced we saw a record £15 billion of capital investment last year in the North Sea.
“But it’s clear to me that the fall in the oil price poses a pressing danger to the future of our North Sea industry – unless we take bold and immediate action. I take that action today.
“First, I am introducing from the start of next month a single, simple and generous tax allowance to stimulate investment at all stages of the industry.
“Second, the government will invest in new seismic surveys in under-explored areas of the UK Continental Shelf.
“Third, from next year, the Petroleum Revenue Tax will be cut from 50% to 35% to support continued production in older fields.
“Fourth, I am with immediate effect cutting the Supplementary Charge from 30% to 20%, and backdating it to the beginning of January.
“It amounts to £1.3 billion of support for the industry,” Osborne emphasized.
“And the OBR (Office for Budget Responsibility) assesses that it will boost expected North Sea oil production by 15% by the end of the decade.
“Mr Deputy Speaker, it goes without saying that an independent Scotland would never have been able to afford such a package of support. But it is one of the great strengths of our three-hundred year old union that just as we pool our resources, so too we share our challenges and find solutions together.”