The announcements in Budget 2015 will be very welcome to the Oil and Gas sector in the UK. Since the fall in oil prices began last Summer, the long term viability of the sector operating in the UK continental shelf has been questioned. The government has taken on board the concerns about the need for an economic return for operators as well as investment in the north sea (both for the sake of protecting the 380,000 jobs in the sector and UK energy security). The mild fiscal encouragement of the sector which started in the Autumn Statement in December intensifies with the weightier measures announced by the Chancellor in the Budget.
These measures include the reduction of petroleum revenue tax (PRT) from 50% to 35%. This tax only applies to fields which were consented prior to the end of March 1993, but there are still a number of fields operating with this tax. By their nature, these would be the more mature/end of life fields where further investment may lead to enhanced late-life production. This " stewardship" issue is one of the key concerns expressed by Sir Ian Wood in his Review of last year. A very welcome measure is the reduction of the supplementary charge from 30% to 20%, this follows the trend from the 2% reduction at the Autumn Statement, and is in line with industry hopes and expectations. In addition, £20 million will be made available for a programme of seismic surveys over areas of the UK continental shelf which have been under explored. As a direct government investment in the offshore business, this sets an important trend.
Altogether, the announcements today are expected to give rise to an investment stimulus of £4 billion and an increase of 120 million barrels of oil equivalent over the next 5 years. It also shows the commitment of the government to address the concerns of the sector which has been building up for some time and will enable the UK to use its maturing resource in a competitive way for this very international sector.