For years, the North Sea was a fertile source of extra money for the Treasury. This year, it got something back: the Chancellor confirmed that oil & gas companies operating in the North Sea will be entitled to tax relief on the cost of decommissioning ageing production facilities.
The announcement comes ahead of an autumn statement by the Energy Secretary, expected to outline the government's growing commitment to natural gas as the preferred means of generating the UK's future electricity needs.
While the news will be welcomed by the oil & gas industry as a whole, and oil services companies in particular, it may be seen as a sop to critics of last year's rise in the supplementary tax on North Sea oil profits. That raid disproportionately affected companies operating mature fields - those nearest to decommissioning.
The Chancellor also signalled that he would introduce new allowances, including a "£3bn new field allowance, for large and deep fields to open-up west of Shetland". A number of heavyweights, such as BP, Statoil and Royal Dutch Shell, have already initiated exploration ventures in the area, but the allowances could also provide a fillip for North Sea specialists like Nautical Petroleum.
Angelos Damaskos, chief executive of the Junior Oils Trust, believes that "support for deep-water exploration will bring the UK system closer to that of Norway, which provides refunds on the majority of exploration expenditure, and stimulate activity and investment in the UK North Sea territory".
