Tax relief for UK gas fields

London – Industry has welcomed the Chancellor’s announcement of a new tax relief to encourage more offshore drilling for gas in the UK – Centrica, for one, announcing that it will start developing new gas fields in the North Sea, with the creation of 4,000 jobs.

According to Malcolm Webb, chief executive of industry body Oil & Gas UK, the tax support is particularly important for new shallow-water gas fields, which have particularly high capital costs and are subject to 62% tax on production.

“We believe that the measure should trigger the development of specific gas projects involving expenditure of £2.4 billion, the creation of 4,000 British jobs and £600 million of additional tax revenues for the public purse,” said Webb.

In Budget 2012, the Chancellor was given powers to introduce a brown-field allowance to promote investment in existing fields.

According to Webb, this would build on recent constructive interventions boosting investment by a further £3.5 billion, creating tens of thousands of jobs, adding tax revenues of over £2 billion and increasing oil and gas recovery by over 200 million barrels of oil equivalent.

“While we are encouraged by the Chancellor’s confirmation that the Government will continue to work with the industry on this, discussion with the Treasury has been ongoing for many months and time is now of the essence,” concluding Webb.

“For some fields near the end of their planned life, an early decision on support for further investment is urgently required if the UK is to reap the full benefit in terms of jobs, tax revenues and energy security.”