There was an expectation the Chancellor would heed the multitude of warnings and pleas from the oil and gas industry to cut it some slack and I am pleased to see he has taken these not unrealistic demands on board.
Cynics might claim that, with $50 oil and flattened tax receipts, Mr Osborne was not being over-generous. But a more balanced view from investors would be that the Treasury now has a better understanding of the delicate state of this strategically important industry.
He will win praise from many operators for having recognised that, without reducing Supplementary Charge (down from 30 per cent to 20 per cent), some fields that require investment would be closed permanently and production lost forever. A 15 per cent reduction in Petroleum Revenue Tax adds weight to that message and a simplified Investment Allowance is to be welcomed, although we will have to wait for the Finance Bill on Tuesday to discover the finer detail.
There is significant work to be done by industry and the newly established Oil & Gas Authority (OGA) to boost efficiency and manage costs, and it is incumbent on all stakeholders to work together to implement the Wood Review if we are to maximise oil and gas recoveries.
A £20 million pot from Mr Osborne to be spent on seismic surveys in unexplored areas of the North Sea gives the OGA a chance to make a welcome contribution.
This government has shown itself to be supportive of other strategically important industries (banks and automotive) that have faced tough times, and it was reasonable to expect the Chancellor to ensure the oil and gas industry – which paid its fair share in the good times – is properly supported now. The ad-hoc system of taxation which has been at the centre of the North Sea fiscal regime, combined with oil price volatility, has proven to be crippling for many key players.
l Bob Ruddiman is Head of Energy & Natural Resources at legal firm Pinsent Masons