The UK Government has launched a consultation into a proposed tax allowance to encourage investment in ultra-high-pressure, high-temperature (uHPHT) oil and gas fields in the UK North Sea.
The allowance could reduce the tax on a portion of a company's profits from 62% to 30%, at current rates. A final policy decision is due to be made in Autumn this year.
Industry body Oil & Gas UK welcomed the government's move. It described the proposal as a "new cluster area allowance" to support investment in uHPHT oil and gas fields.
Michael Tholen, Oil & Gas UK’s economics director, said: “We welcome the announcement by HM Treasury that they have opened a formal consultation on how best to incentivise exploration and investment in the uHPHT opportunities on the UK Continental Shelf (UKCS).
“Experience shows, uHPHT fields are technically demanding and commercially difficult to develop, the current tax regime is seen by all to be a barrier to investment. The government will need to work closely with industry to develop a simple allowance which promotes investment in uHPHT, encourages exploration of the surrounding area to fully utilise the potential of any resulting new infrastructure; a complex solution could lead to the wrong outcome.
“The Chancellor has recently launched a separate consultation into the overall fiscal regime for the UKCS and the uHPHT consultation should be seen in the wider context, a fundamental recalibration of the fiscal regime is essential if we are to build on Sir Ian Wood’s recommendations to maximise economic recovery and send a strong signal that the UKCS is open for investment.”
Read more: North Sea tax review welcomed
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