The UK government announced Friday a new tax measure aimed at supporting billions of dollars of new investment in older oil and gas fields in the North Sea.
The country's Chancellor of the Exchequer said that a tax allowance for certain mature fields – known as "brown fields" – will shield a portion of income coming from those fields from tax, so encouraging companies to invest in getting more out of existing fields and infrastructure on the UK Continental Shelf.
"Today's tax allowance is more good news for the North Sea, good news for jobs and good news for the broader economy," Chancellor George Osborne said in a statement. "It will give companies the incentive to get the most out of older fields, creating jobs and delivering more revenue for taxpayers."
Trade body Oil & Gas UK welcomed the announcement, pointing out that the Brown Field Allowance will shield up to $400 million (GBP 250 million) of income in qualifying brown field projects, or $800 million (GBP 500 million) for projects in fields that pay Petroleum Revenue Tax.
"This is a strong signal of the government's commitment to make the most of the UK's oil and gas resources to the benefit of our energy security, the public purse and jobs," the organization's economics and commercial director Mike Tholen said in a statement.
Derek Leith, head of oil and gas taxation at accountants Ernst & Young, commented:
"Today's announcement is another positive step towards restoring fiscal stability in the UK Continental Shelf and marks a return to the days when tax policy makers and the oil and gas industry appeared to have established a common ground."
Talisman Energy (UK) issued a statement saying that it also welcomed the new brown field allowance, pointing out that a project it is working on will directly benefit from the measure and will boost Scottish employment.
"This announcement represents a major step forward in sanctioning the $2.6 billion (GBP 1.6 billion) Montrose Area Redevelopment project," the statement quoted Geoff Holmes, Talisman's UK senior vice president, as saying.
"The project is expected to create or support over 2,000 UK jobs within the fabrication, construction, installation, subsea engineering and drilling sectors. This is excellent news not only for the oil and gas industry but for the UK as a whole," added Holmes.
The Brown Field Allowance measure is just the latest good news to emerge from the UK government this week as far as the country's oil and gas sector is concerned. Monday's reshuffle of government ministers has brought clean energy skeptics and shale gas proponents into key positions within the government departments in charge of energy and the environment.
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