The allowance for “brown field” areas will shield some income from the supplementary charge on their profits. The chancellor said the measure would give companies the incentive to “get the most out of” older fields. Industry body Oil and Gas UK told BBC Scotland that the tax breaks could generate a further £2bn of investment.

The Treasury said it was expected that the long-term tax revenues generated by the change would significantly outweigh the initial cost of the allowance.

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Mike TholenOil and Gas UK

The brown field allowance will shield up to £250m of income in qualifying brown field projects, or £500m for projects in fields paying Petroleum Revenue Tax, from the 32% supplementary charge rate.

The chancellor increased this charge in his 2011 budget to fund a fuel duty cut after a surge in global oil prices.

The level of relief available to an individual project will depend on its size and unit costs.

Speaking about the new allowance, the chancellor said: “Today’s tax allowance is more good news for the North Sea, good news for jobs and good news for the broader economy.

“It will give companies the incentive to get the most out of older fields, creating jobs and delivering more revenue for taxpayers.

“This government has signalled its absolute determination to get more investment in the North Sea, a huge national asset.”

‘Shot in the arm’

Oil and Gas UK’s economics director Mike Tholen told BBC Radio Scotland’s Good Morning Scotland programme the announcement was “a very good step in the right direction”.

He said: “I think the chancellor is right to recognise that many of the older fields in the UK struggle to attract new investment, and this is a bit of a shot in the arm for them.

“I’m very well aware that in the short-term there are some very substantial projects waiting for this announcement, and I’m very confident that there will be some big investments announced in the very short-term.

“We think investments over the next year or so could be at least £2bn better because of the news today.”

He said such announcements “help to attract new investment to keep these old fields going, which is crucial for everyone in Scotland”.

He added: “If we get this right, we’re looking at another 50 years activity still in this basin.”


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