By Rob Starr, Content Manager, Big4.com
A broader range of tax allowances and a sustained high oil price boosted drilling activity on the UK Continental Shelf (UKCS) by one third in 2012, according to a new report by Deloitte, the business advisory firm.
Last year also saw a surge in deal activity (where oil and gas fields are bought and sold). Across North West Europe, 129 deals were announced, 80 of which took place in the UK. This equates to a 30% increase on the UK’s 2011 deal figure. These were split almost equally between farm-ins – companies taking a stake in another company’s field – and deals to purchase oil and gas fields, at 40% and 43% respectively. This compares to 64% of all deals in 2011 being farm-ins and deals to purchase fields only representing 14%. The fact that companies are buying more fields outright is another indicator of rising investor confidence.
Graham Sadler, managing director of Deloitte’s PSG, said current circumstances were driving confidence in investment on the UKCS.
He said: “After several years of caution and uncertainty, we have a more positive environment, where a number of factors such as tax incentives, high oil price and appetite to invest have combined to make 2012 the most encouraging year for a long time.
“The Government introduced a range of tax reliefs which have sufficient breadth and depth to create an environment in which companies of all sizes and investors have the confidence to take some risk and expand their operations in the North Sea.”
More than 90% of new field developments in the UK were eligible for tax allowances following the 2012 Budget.
In March 2012, the Chancellor announced an increase in the small field allowance, and introduced a new allowance for large deep-water developments targeting West of Shetland. A further new allowance for shallow water gas field developments was announced by the Government in July 2012.