Budget 2013: North Sea companies welcome tax relief

NORTH Sea oil and gas companies welcomed the Chancellor’s pledge to introduce tax relief on decommissioning costs, in a move which is expected to unlock billions of pounds of investment in existing and new fields.

The government is to enter into contracts known as decommissioning relief deeds with oil firms to provide certainty on the relief they will receive when decommissioning North Sea assets. And the first contracts with the industry are expected to be signed later in the year.

Malcolm Webb, chief executive of Oil and Gas UK, said yesterday: “Recent collaboration between government and industry on tax allowances that promote investment in UK oil and gas is now bearing fruit.

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“With record investment forecast this year, new jobs are being created across Britain and an upturn in production and tax revenues should follow. It is critical that we sustain this trend.”

He added: “The measures announced today will for the first time ever give companies the certainty they need over the tax treatment of decommissioning.

“At no cost to the Government, it will speed up asset sales and free up capital for companies to use for investment, extending the productive life of the UK continental shelf.”

Peter Thomas, the chief financial officer of TAQA Bratani, one of Britain’s biggest oil companies, said: “Long term investment decisions, in particular to take on the challenge of maximising recovery from late-life fields, need a stable fiscal environment. The measures will free up capital for investment.”

Brian Nixon, the chief executive of Decom North Sea, forecast the Budget changes would lead to new jobs and investment in new technology with annual decommissioning spending in the North Sea expected to top £1 billion within the next three years.

He said: “The whole industry, from operators to supply chain companies will benefit enormously from the clarity on future market activity and timing of decommissioning projects that will result from the change.”