Oil & gas tax break to fuel brown field investment

London - The UK government is to introduce a new tax relief to encourage investment in older oil and gas fields.

The Brown Field Allowance, announced 7 Sept by the Chancellor, will shield up to £250 million of income in qualifying brown field projects. It can also cover £500 million for projects in fields paying petroleum revenue tax, from the 32% supplementary charge rate.

Oil and gas ‘brown-fields’ in the UK which typically have high running costs and are subject to up to 81% tax on production, according to Mike Tholen, Oil & Gas UK’s economics and commercial director,

The industry group director forecast that the tax break would create many thousands of high skilled jobs, add tax revenues of over £1.5 billion and increase oil and gas recovery by 150 million barrels of oil equivalent.

The move, he said, will have an immediate impact on investment and help sustain production from many mature fields. More oil and gas will, therefore, be recovered while decommissionings will be postponed for several years.

“The measure builds on recent constructive interventions by the Treasury and we believe in the near term it should rapidly lead to a number of new investments amounting to £2 billion,” said Tholen.