Written by Calum Ross -
The UK Government is expected to move a step closer today towards delivering a “profound” boost to the North Sea oil and gas industry.
Ministers are ready to publish plans to offer offshore firms legally guaranteed assurances over the future rate of tax relief they will get for decommissioning fields and assets.
The move, announced by Chancellor George Osborne in the Budget in March, is predicted to pave the way for tens of billions of pounds in new investment.
Industry leaders said last night it could postpone the decommissioning of North Sea assets by up to seven years and unlock a further 1.7billion barrels of oil and gas over time.
Britain is facing a bill of more than £35billion to wind up offshore platforms over the coming years, and uncertainty over the bill for the liabilities has been blamed for stifling business between key players in the sector.
The Treasury is expected to announce today that companies which have to decommission assets which were bought from another firm will be guaranteed 50% tax relief on those costs. The move is to be detailed in a draft deed which individual companies will enter into with the UK Government.
Mike Tholen, economics director of Oil and Gas UK, said: “Securing a level of certainty that can be reliably factored into investment decisions and commercial decommissioning security arrangements will have a profound positive impact on industry activity.
“Together with the brown-field allowance recently announced, it will promote near-term investment in many mature assets and in the longer term postpone decommissioning by five to seven years on average and unlock a further 1.7billion barrels of oil and gas over time.”
Mr Osborne announced the move on decommissioning in March, a year after he plunged the sector into chaos with a surprise £10billion raid on oil and gas producers. The Budget measure is already believed to have contributed to a wave of new investment.