He said he would change the rules to allow tax history to be rolled over to the new owners of oil fields, allowing them to reclaim the cost of decommissioning.
Industry leaders have long-called for the policy arguing it will make buying and selling much easier, with smaller producers able to snap up ageing assets owned for decades by industry giants such as Shell and BP.
In turn, this would allow the North Sea to keep producing for much longer and would also help unlock up to £40billion of new investment in decommissioning, according to trade body Oil and Gas UK.
Delivering his Autumn Statement, Mr Hammond said it was an “innovative” move for the basin, which still holds 20 billion barrels of oil. It is expected to come into force in November next year.
The announcement came as Office for Budget Responsibility (OBR) downgraded its forecast for offshore receipts since March, from £4.5billion between 2017/18 and 2020/21 to £2.6billion.
Revenues were zero in 2016/17 in what have been the first year of independence if voters had backed the SNP’s vision of breaking up Britain in 2014.
The Scottish Government White Paper forecast between £6.8billion and £7.9billion of revenues for that year.
The OBR noted that revenues had been boosted by £9 a barrel rise in the price of oil.
Welcoming the Chancellor’s announcement, Oil and Gas UK chief executive Deirdre Michie said: “This is a vital step that can bring in new investment to increase recovery from existing fields and fund fresh investment which is key to generating activity for our hard-pressed supply chain.
“It will also help extend the lives of many mature fields and postpone decommissioning.”
EY’s head of oil and gas tax Derek Leith said the move was an “unprecedented” change to UK oil and gas tax law.
“The proposed changes, the details of which will be worked through in 2018, have the potential to revitalise the UK oil and gas industry.”
Source : EXPRESS