The head of oil and gas for professional services firm EY said the Chancellor’s announcement could prove to be a “turning point” for exploration and production in the North Sea.
In an interview with Energy Voice, Derek Leith said the initial steps taken may receive a mixed review from the industry.
Further announcements are expected tomorrow, in Aberdeen, by the Chief Secretary to the Treasury, Danny Alexander.
Derek Leith, office managing partner at EY Aberdeen and the firm’s UK head of oil and gas taxation, said:“While modest, the reduction in the supplementary charge may prove to be a turning point for oil and gas exploration and production in the North Sea. It’s a clear indication that the government has listened to representations made by industry and is willing to lessen the burden on companies operating in the basin.
“It’s a welcome step, as positive changes are required to encourage new investment in both exploration and extraction. But, following three successive increases in taxation, it falls short of the bold reforms we called for prior to the Autumn Statement and can be considered to be of greater political significance than economic benefit.
“The Chief Secretary to the Treasury may herald further changes in the tax treatment of exploration and decommissioning when he unveils the findings of HM Treasury’s review of the oil and gas fiscal regime in Aberdeen tomorrow. However, it’s suspected that he’s more likely to announce a further programme of information gathering and discussion.
“Crucially, we would hope to get more of a sense of the steps the government is prepared to take to create a simpler, more transparent and more sustainable fiscal regime in the UK Continental Shelf.”