LONDON (Reuters) - Britain will look at ways of making it easier to sell North Sea oil and gas fields by changing tax rules in order to keep them producing for longer, the finance ministry said.
The move, which is due to be announced in Chancellor Philip Hammond’s budget on Wednesday, follows a call by the industry’s oil lobby group for a change to decommissioning tax rules that have prevented deals in the North Sea.
Owners of oil and gas assets get tax relief on the future costs of dismantling them, but as assets are sold the relief cannot be passed on to new owners.
“The UK government will publish a discussion paper and establish a panel of industry experts to consider how tax can assist sales of oil and gas fields, helping to keep them productive for longer,” the ministry said in a statement.
The North Sea has seen an uptick in deals this year, mainly due to the $3.8 billion (3.13 billion pounds) acquisition of a large chunk of Shell’s (RDSa.L) assets by private equity-backed Chrysaor.
But deals would have been concluded more quickly and others would come to fruition if the decommissioning cost taxation regime is updated, Mike Tholen, economics director of Oil and Gas UK, said.
“For (new buyers) it would be easier for the deals they are thinking about if the ability to release decommissioning tax relief between the vendor and the purchaser was part of the tax regime,” Tholen added.
Many traditional North Sea operators, such as Shell (RDSa.L) or BP (BP.L), are gradually winding down ownership of old North Sea assets as smaller, more nimble companies snap them up to apply new technologies that help extract more oil or gas.
“The right assets need to be in the right hands to maximise economic recovery late in the life of the North Sea,” said EY’s head of oil and gas tax, Derek Leith.
Editing by Alexander Smith