North Sea oil companies, which were pummelled by plunging oil prices and dwindling reserves over the last year, will be put on life support by the UK government.
As part of the UK Chancellor’s Budget 2015 announcement, George Osborne warned that falling low oil prices “pose a threat to the North Sea” and that “bold and immediate measures are needed.”
He confirmed that he will cut North Sea oil revenue tax to 30%, from 50%, in a bid to stop firms axing jobs and investments in the embattled sector.
The government will also cut the supplementary charge to 25% from 30%. This will be backdated to the start of the year.
Oil prices plunged by over 60% since June last year. While the oil price has recovered slightly, Brent crude is still around $US53 per barrel, compared to $US115 per barrel in June 2014.
In 2012 and 2013, oil prices averaged $US100 per barrel.
In 2014, the Organisation of the Petroleum Exporting Countries (OPEC) laid out how the North Sea oil industry is in dire straits. The average oil output in 2013 from the North Sea clocked its lowest level since 1977.
The Office of Budget Responsibility also showed production forecasts for North Sea oil continue to drop dramatically: