Budget: £1.3bn package of support of oil and gas industry

The Chancellor has announced measures to help the North Sea oil and gas sector cope with the fall in

The Chancellor has announced measures to help the North Sea oil and gas sector cope with the fall in oil prices.

The Chancellor has announced a £1.3billion package of support for the oil and gas industry in his final Budget before the General Election.

Among the measures George Osborne set out is a cut in the supplementary charge on oil industry companies’ profits from 30% to 20%, backdated to January – effectively reversing an increase in the 2011 Budget when oil prices were much higher.

Mr Osborne said the UK Government will cut petroleum revenue tax from 50% to 35% next year, introduce a “simple and generous” tax allowance to stimulate investment in the North Sea from the start of April and boost offshore exploration by investing £20 million in new seismic surveys of the UK continental shelf.

The package is expected to result in more than £4 billion of additional investment over the next five years and increase production by 15% by the end of the decade.

“It goes without saying an independent Scotland would never have been able to afford such a package of support,” Mr Osborne said.

The North Sea has been hammered by the plunging price of oil, with hundreds of job cuts announced in recent months and fears a drop in investment could lead to the accelerated decommissioning of oil fields.

Danny Alexander, Chief Secretary to the Treasury, said: “The major package of investment in our oil and gas sector, including a new investment allowance, a 10% cut in the supplementary charge and a 15% cut in petroleum revenue tax, shows that the UK Government is determined to safeguard the future of this vital national asset and keep our economy on the road to recovery.”

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Malcolm Webb, Oil & Gas UK’s chief executive, said: “Today’s announcement lays the foundations for the regeneration of the UK North Sea. The industry itself must now build on this by delivering the cost and efficiency improvements required to secure its competitiveness.”

Mr Webb said the measures “send exactly the right signal to investors”. He added: “hey properly reflect the needs of this maturing oil and gas province and will allow the UK to compete internationally for investment.

“We also welcome the Government’s support for exploration announced today. With exploration drilling having collapsed to levels last seen in the 1970s, the announcement of £20 million for the newly formed Oil and Gas Authority to commission seismic and other surveys on the UK continental shelf (UKCS) is a very positive step.”