Trade body Oil & Gas UK welcomed the announcement in the UK Budget that Scotland’s oil and gas industry will benefit from the introduction of a Transferable Tax History — which will enable oil companies to pass on their tax history to new buyers when they sell their UK oil and gas fields.
“This will encourage investment in North Sea oil production, safeguard jobs and ensure that the UK benefits from every last drop of oil,” said the UK Government.
Currently, existing owners of oil and gas fields are unable to pass their tax history onto a buyer.
This means the buyer perceives the field to be less attractive commercially, partly because they are unlikely to be able to access the same level of tax relief than the current owner when decommissioning.
Enabling the transfer of tax history allows the purchaser to value the asset on a similar basis to the vendor and removes a significant barrier to asset trading.
Oil & Gas UK CEO Deirdre Michie said: “We very much welcome the chancellor’s action to enable the implementation of transferable tax history.
“This is a vital step that can bring in new investment to increase recovery from existing fields and fund fresh investment which is key to generating activity for our hard-pressed supply chain.
“It will also help extend the lives of many mature fields and postpone decommissioning.
“While there have been a number of deal announcements in the basin over the last year, these have mostly been for less mature assets, have been extremely complicated and taken a very long time to negotiate.
“This tax measure should help complete deals more quickly and in a more efficient way.
“Prolonging the life of mature assets better allows the industry to deploy its skills and technology to maximise extraction of the UK’s oil and gas, increasing production tax revenues to the Exchequer and securing highly-skilled jobs.
“We note the measure is intended to be effective by November 2018 and are committed to work closely with Treasury to ensure the change delivers the intended outcome.”