LAWSON OIL TAX BREAKS TO HELP NEW FIELDS - REVENUE
Two new U.K. Tax relief measures for oil
producers, announced today, are aimed at encouraging
developments in the North Sea to go ahead and boost
opportunities for the offshore supplies industry, the Inland
Revenue said in a post-budget statement.
    Earlier, Chancellor of the Exchequer Nigel Lawson announced
in his annual budget to Parliament that from today, companies
will be allowed to offset up to 10 pct of qualifying
development expenditure on certain future oil fields against
Petroleum Revenue Tax (PRT).
    To date, full relief was allowed for expenditure on an
individual field itself, when its income stream began, but was
not immediately available against other development
expenditure, the statement said.
    The new relief will apply to fields outside the southern
basin for which development
consent is first given on or after today, and will improve the
post-tax economics of new developments and encourage companies
to proceed with project which might have been delayed, it said.
    Lawson also announced that he would henceforth allow
certain expenditure on oil related research which does not at
present qualify for PRT relief to be offset against PRT
liability.
    This means oil-related expenditure in the U.K. Or on the
U.K. Continental shelf, which has not become allowable in a
particular field within three years of being incurred, to be
allowed against PRT liability in any oil field, the Inland
Revenue said.
    This brings the scope of PRT relief for research costs more
in line with corporation tax relief measures, and is planned to
encourage general research into ways of reducing field
development costs, it said.
    In due course, the industry should benefit by over 100 mln
stg a year, it calculated.
    The Inland Revenue statement also included other technical
measures that Lawson did not comment on in his budget speech.
    These included measures to allow companies to balance their
shares of PRT-exempt oil allowances through reallocation in two
past periods of allowance utilisation.
    Tidier rules on incorrectly allowed PRT expenditure reliefs
were announced, while there were also ammendments on rules on
corporation tax and Advance Corporation Tax relating to the
so-called "ring fence" of activities in the U.K. And its
continental shelf. The Finance Bill will have provisions for
the implementation of measures announced in November, it said.
    Gareth Lewis Davies, a North Sea expert with stockbrokers
Wood Mackenzie and Co Inc in Edinburgh, thought the two reliefs
on PRT would help the depressed offshore industry.
    He said the 10 pct cross field allowance relief would
favour chances that development of smaller North Sea fields
such Osprey, Don and Arbroath would be brought forward.
    Early development of the larger Miller and Bruce oil fields
might also be encouraged, he said.
    Lewis Davies said the measure might also aid the offshore
construction industry, which suffered a huge amount of lay-offs
under the price slump of more than 50 pct last year.
    He pointed out that the relief only applies to the
development of new fields outside the Southern Basin.
    This means more jobs could be created, as the fields in the
central and northern sectors of the North Sea are deeper than
in the south and thus have greater capital and labour
requirements as the waters are deeper than in the south.
    He said the PRT relief for certain research expenditure
would help fundamental research in the oil industry, although
the benefits of this research would not be seen for several
year.
 REUTER
