"The UK offshore oil and gas industry welcomes the Chancellor's announcement today that from 1 January 2004, Petroleum Revenue Tax will be removed from "new tariff business" under contracts made on or after today.
"Abolishing PRT on new tariff business could, by encouraging lower tariffs, potentially unlock a further 500 million to 700 million barrels of oil equivalent from the development of currently uneconomic North Sea discoveries, representing new capital investment in the region of $3billion to $4 billion."
Infrastructure taxation emerged as one of the key issues in the UK-Norwegian discussions regarding greater Industry cross-border co-operation between the two countries to maximize recovery of remaining North Sea reserves.
Tariffs earned by UK offshore infrastructure are taxed at different rates, principally depending on the age of the system. Removing PRT will help to eliminate tax distortions which currently put much UKCS infrastructure at a competitive disadvantage. On average, tariffs can account for over 60% of operational expenditure on new developments.
Steve Harris said: "The move will lead to lower tariffs through increased competition, boosting the use of existing infrastructure and deferring its abandonment.
"This is important because existing infrastructure needs to be preserved for the future to develop reserves that are currently uneconomic and to encourage new exploration.
"It will also improve the prospects of securing Norwegian gas exports to the UK through existing UK gas infrastructure."
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