Extension of tax breaks for North Sea investment

Chancellor George Osborne extended incentives to develop so-called ultra high pressure, high temperature (HPHT) fields that typically demand higher spending to exploit because of the technical difficulties of bringing oil and gas to shore.

The allowances, which will affect companies that use ports in East Yorkshire and other parts of the UK to bring oil and gas to shore, build on previous tax breaks extended by Mr Osborne to brownfield extensions, smaller projects and developments in more demanding and remote waters west of Shetland.

The widening of allowances is aimed at extending extraction of oil and gas reserves, which are in economically marginal fields.

It is hoped the move will encourage companies looking to develop large HPHT projects, and boost exploration activity in the central North Sea. The initiative should also benefit the supply chain in the sector.

Meanwhile, onshore oil and gas exploration companies will receive a new tax allowance. The amount of profit exempt will equal 75 per cent of the qualifying capital expenditure a company incurs on onshore oil and gas projects from December 5, 2013.

Mr Osborne highlighted North Sea oil and gas resources as a key British resource and plans to launch a review of the tax regime for the entire oil and gas sector.