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North Sea tax break set to boost the region
THE region's subsea sector could be set for a major investment boost following the announcement of new tax breaks for North Sea oil and gas producers.
The Chancellor said yesterday that income earned by offshore developers will be spared from paying full duty to ensure that older sites are fully exploited.
It is the latest in a series of reliefs introduced for the industry, after George Osborne was criticised for hiking 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 but officials insist the long-term tax revenues will be significantly higher.
The announcement could attract £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.
Durham City based-NOF Energy, the business development organisation for oil, gas, nuclear and offshore renewables sectors, welcomed the announcement as very positive move that could lead to job creation for its 200 members in the North-East.
Last night its chief executive George Rafferty said: "Following the announcement in his 2011 Budget the Chancellor quickly realised he had made a faux pas and since then he has become much more supportive of our industry. This is another step in the right direction."
Mr Rafferty predicted that the regions subsea businesses, that collectively support 10,000 jobs, could benefit from the move. "These older oil and gas fields are in difficult to get to locations which means developers are likely to call on the expertise of subsea companies, and the North-East is blessed with some world class companies in that area." DeepOcean Group, formerly known as CTC Marine and Modus Seabed Intervention, both based in Darlington, are among those firms that could be set to benefit.
Mr Osborne said: "It will give companies the incentive to get the most out of older fields, creating jobs and delivering more revenue for taxpayers."
In July, the Chancellor pledged hundreds of millions of pounds of tax breaks to encourage more drilling for gas off the coast of the UK. Hours after that announcement, British Gas owner Centrica pledged to plough £1.4bn into developing its Cygnus gas field in the North Sea, which led to Hartlepool-based Heerema Fabrications securing a multi-million pounds order to build offshore platforms.
The Government has also introduced tax relief on decommissioning rigs and the introduction or extension of allowances for small fields.