Tax boost to fuel new boom in North Sea oil

Mr Osborne said that income from older fields will be spared from paying full duty to ensure that their reserves are fully exploited.

It is the latest in a series of reliefs introduced for the industry, after the coalition Government was criticised for increasing the supplementary charge on North Sea producers from 20 per cent to 32 per cent last year.

The new Brown Field Allowance will shield up to £500m of income from the charge when firms are boosting production from established oil or gas fields – potentially cutting their tax bill by £160m.

The move is expected to cost the Exchequer £100m per year initially – but officials insist long-term tax revenues will be significantly higher.

Mr Osborne said: “Today’s tax allowance is more good news for the North Sea, good news for jobs and good news for the broader economy.

“It will give companies the incentive to get the most out of older fields, creating jobs and delivering more revenue for taxpayers.

“This Government has signalled its absolute determination to get more investment in the North Sea, a huge national asset.

“Just last week, I saw the benefits at a supply chain factory creating many hundreds of jobs in the North East thanks to Government support for North Sea gas which made a major project possible.”

Today’s announcement could attract at least £2bn of investment in the short term and is a step towards a potential 50 years of further activity in the North Sea, according to industry body Oil and Gas UK.

Economics director Mike Tholen told BBC Radio Scotland’s Good Morning Scotland programme: “It’s certainly a very good step in the right direction.

“I think the Chancellor is right to recognise that many of the older fields in the UK struggle to attract new investment, and this is a bit of a shot in the arm for them.

“I’m very well aware that in the short term there are some very substantial projects waiting for this announcement, and I’m very confident that there will be some big investments announced in the very short term.

“We think investments over the next year or so could be at least £2bn better because of the news today.”

He said such announcements “help to attract new investment to keep these old fields going which is crucial for everyone in Scotland”.

He added: “If we get this right we’re looking at another 50 years activity still in this basin.”