Some good news emerges from UK budget.
The UK government pledged to end the unpredictability of taxes related to the dismantling of North Sea oil platforms to encourage investment in Britain’s energy industry.
Chancellor of the Exchequer George Osborne said he would guarantee tax relief for the dismantling of installations, making it easier to sell off assets to buyers who will spend more on them. U.K. law holds sellers responsible for decommissioning if the buyer can’t pay, leading sellers to demand letters of credit for the potential costs and adding to the expense of deals.
“While much work remains to be done to work out the detail, and legislation is not expected until 2013, this is a very positive development,” said Roman Webber, head of U.K. oil and gas at accountancy firm Deloitte LLP. “This will remove a major fiscal risk for U.K. North Sea investors and release significant funds for investment.”
Companies including BP Plc (BP/) are trying to dispose of older fields in the North Sea to focus on new exploration. The government is seeking to unlock as much as 17 billion pounds ($27 billion) of investment in North Sea energy that is being held back because of uncertainty over decommissioning costs, which amount to 30 billion pounds for the rigs currently operating, a person familiar with the Treasury’s plans said last week.
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