LONDON – Britain’s Government has agreed to provide tax relief for mature North Sea fields, following petitions from the UK offshore sector.
The new Brown Field Allowance will shield up to £250 million ($399 million) of income in qualifying brown (older) field projects, or £500 million ($798 million) for projects in fields paying Petroleum Revenue Tax, from the current 32% Supplementary Charge. The aim is to stimulate investment in Britain’s older oil and gas fields.
Oil and Gas UK’s economics and commercial director Mike Tholen, said: “Oil & Gas UK is encouraged by the support announced for oil and gas ‘brown-fields’ in the UK which typically have high running costs and are subject to up to 81% tax on production.
“This initiative will have an immediate impact in that it will help to promote investment and sustain production from many mature fields, enabling more oil and gas to be recovered from them and postponing decommissioning by a number of years.
“The measure builds on recent constructive interventions by the Treasury and we believe in the near term it should rapidly lead to a number of new investments amounting to £2 billion… increase oil and gas recovery by 150 MMboe, and have a further long term impact.”
This is another in a series of changes made by the UK governmentin the tax regulations. An earlier move provided tax relief for shallow water field development. The changes came after meetings between operators and government following an unexpected tax hike in early 2011.