The oil sector could be abck on the agenda of fund managers as a viable investment after chancellor George Osborne gave the UK’s oil industry a £1.3bn cash injection.
Mr Osborne said his range of measures would “introduce a package of reforms to ensure that the North Sea continues to attract investment and to safeguard the future of this vital national asset”.
Specifically, the chancellor said the Government would introduce a new ‘investment allowance’ to “stimulate investment at all stages of the industry life-cycle” and, importantly for the investment industry, “provide investors with greater certainty which they can factor into their long-term investment decisions”.
The supplementary charge is to be reduced from 30 per cent to 20 per cent, which Mr Osborne said built on the 2 per cent cut announced in the Autumn Statement in December.
He said this move would “send a strong signal that the UK is open for business and ensure the UK Continental Shelf remains competitive as the basin matures”.
There were also moves to reduce the petroleum revenue tax, a tax on oil companies’ profits, from 50 per cent to 35 per cent to “promote investment in incremental projects in older fields and extend the life of key infrastructure”.
He added he would provide £20m of funding for “a programme of seismic surveys to boost offshore exploration in under-explored areas of the UK Continental Shelf”.
Mr Osborne predicted the measures would lead to more than £4bn of investment and at least 120m barrels of oil “equivalent of additional production in the next five years, boosting oil production in 2019 by 15 per cent, equivalent to around 0.1 per cent of GDP”.
“This will provide certainty for investors and create the right conditions for the basin to flourish and deliver maximum economic benefits for the UK,” he said.