UK improves field allowance terms

Offshore staff

LONDON – Britain’s government has introduced a concession to offset the impact of its recent petroleum tax increases.

The Treasury has raised the annual rate of the Ring Fenced Expenditure Supplement (RFES) from 6% to 10%.

The aims are to ensure existing field allowances work more effectively to support investment in marginal fields, and to improve terms for new categories of field allowance.

Mike Tholen, Oil & Gas UK’s Economics director, said: “Oil & Gas UK considers HM Treasury’s announcement of an extension to the ‘Ring Fence Expenditure Supplement’ to be a constructive move. Whilst the change to the allowance will not redress the damage caused by the recent tax increase, it will help new investors to the UKCS who are otherwise disadvantaged compared to more established players.

“In making these changes, the government appears to acknowledge that the increase in supplementary corporation tax announced in this year’s Budget has made the UK less competitive …We anticipate that further measures, including extension of the existing field allowance structure to sustain investment in both existing fields as well as in new fields will be required.”

Oil & Gas UK also is working with the Treasury to clarify oil companies’ access to tax relief for decommissioning. This, Tholen said, would encourage late field life investment, and free the transfer of assets to those companies best suited to maximizing investment and mature field life extensions. He hoped to see these issues resolved before the 2012 Budget next March.

The Oil and Gas Independents’ Association (OGIA) welcomed the RFES proposal, saying it would provide incentives for numerous non tax-paying companies exploring and developing new hydrocarbon resources on the UK continental shelf.

Steve Jenkins, OGIA chair, said: “We see this as a positive first step and feel it will generate confidence for companies wishing to develop new fields in the UK.”

One independent, Aberdeen-based DEO, said it expected its Perth field development in the North Sea and the Spaniards prospect to benefit from the changes.

CEO David Marshall said: “This is encouraging news for DEO. The RFES increase provides extra support for investment in the North Sea and demonstrates the Government’s commitment to engage with oil and gas companies and to the North Sea.”


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