UK government 'not backing away' from sector

The UK government is committed to long-term fiscal support and predictability for the country’s oil and gas industry, North Sea business leaders heard on Tuesday.

Exchequer Secretary to HM Treasury Andrew Jones told the SPE Offshore Europe 2017 conference on Tuesday that the government is "not backing away from support" for the sector, and that fiscal support was now "very significant and competitive".

"The last couple of years have seen significant support for the sector and we intend to continue with that,” Jones told reporters following a speech to delegates in Aberdeen.

“The key message I have tried to bring to the conference today … has been that we recognise the extremely challenging circumstances they have been facing as an industry for the last few years

"Investment decisions that were made when the oil price was $100 a barrel are extremely challenging when it can go down as low as $30 and now up to about $52.

"We have had to respond to that and have responded to that. The feedback I have had industry leaders has been extremely positive. What they want now is predictability and an indication from government of long-term support. That’s why I am here - to provide just that support."

Industry has reacted well to a series of changes in recent years to the UK’s offshore fiscal regime — including the effective abolition of Petroleum Revenue Tax, paid on older fields, and a halving of the Supplementary Charge on production from 20% to 10% — that has eased the tax burden on explorers.

An expert panel was appointed earlier this year to further review North Sea tax rules.

Jones said the group has met four times over the summer and is expected to report back at the autumn Budget.

One area the group has been considering is the transferable tax history of assets, which would potentially clear blockages in the trading of older assets.

Asset owners can currently claim tax relief on the future costs of decommissioning, but rules preventing tax histories being transferred between buyers and sellers — and as a result preventing tax relief from also being transferred — have put a brake on deals, according to industry lobby group Oil & Gas UK.

"We will be reporting back in a few months’ time," Jones said.