08 Mar 2017
Future prospects for the hard-pressed UK offshore industry got a boost today from Chancellor Philip Hammond.
In his Budget address, the Chancellor said he had heard the calls by North Sea oil and gas producers and the Scottish Government to provide further support for the transfer of late-life assets.
Mr Hammond added: "As UK oil and gas production declines, it is essential that we maximise exploitation of remaining reserves and so we will publish a formal discussion paper in due course."
The current tax regime for decommissioning in the North Sea makes it harder for companies which own offshore production assets to sell them on to other operators.
The Chancellor's comments received a mixed response.
Scottish Finance Secretary Derek Mackay said: "We have repeatedly called on the UK Government to take action to support the oil and gas sector. While welcome, today’s announcement on a ‘discussion paper’ is long overdue and is not the urgent action that the industry needs."
However, the Budget statement met with much more enthusiasm from industry body Oil & Gas UK.
Chief executive Deirdre Michie said: “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 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."
Ms Michie said the tax regime had presented some significant barriers to asset trading, which Oil & Gas UK had been working on with Treasury for a number of years.
"These must be addressed as a matter of urgency," she added.
The chief executive explained the current tax treatment of decommissioning made it harder for existing owners to sell mature assets and led to lengthy, complicated deals which slowed down activity in the basin.
"Recent deals highlight the opportunities in the basin, but more transactions could be achieved if this issue is resolved."
Ms Michie said close collaboration with UK Government and industry on fiscal matters sent a clear message to investors that the UK North Sea is a great place to do business.
"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," she added.
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