Andrew Lister, energy tax partner at KPMG, commented:
“The oil & gas industry in the North Sea – having endured the shock tax announced in the Budget two years ago – will welcome the announcements on decommissioning certainty, which should support extraction of the UK’s precious oil resources to the tune of billions.
“Certainty on tax relief for decommissioning costs will encourage companies to invest in the North Sea as the proposals should provide the assurance companies have been wanting on the availability of tax deductions. The proposals are also designed to allow the tax effect of decommissioning costs to be sufficiently certain to allow companies to move to a post tax calculation in field security agreements. With hundreds of such agreements in the North Sea it will take many months to understand whether the proposals have had the desired result of freeing up capital and making late life assets more attractive for new investors.”
In terms of measures announced on shale gas, Emma Wild, oil & gas director at KPMG, added:
“Shale gas, with the right government support and investment, could become an important contributor to the UK energy mix in the long term. However, it is still unlikely the UK will enjoy a US-style shale gas boom. The announcements that consultation continues on fiscal support for shale gas will be seen as further evidence of government support. The industry will no doubt lobby hard during the consultation in anticipation of legislation promised for the 2014 Finance Bill.”
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