§ Mr. BurnsTo ask the Chancellor of the Exchequer whether he has any plans further to encourage investment in North sea oil and gas projects.
§ Mr. MaplesSome future North sea projects may involve the landing of gas outside the United Kingdom, or its initial treatment or storage outside the United Kingdom or the United Kingdom continental shelf. At present, the petroleum revenue tax—PRT—and "ring fence" corporation tax—CT—rules do not cater for these situations. To ensure that these tax rules do not distort the economics of such investments, we propose bringing forward legislation in the next Finance Bill to take account of new developments of this kind. In particular PRT relief, and CT relief within the "ring fence", will be given for the cost of transporting oil or gas to the nearest reasonable place of delivery outside the United Kingdom; and relief for initial treatment and storage costs will similarly be extended to costs incurred outside the United Kingdom or the United Kingdom continental shelf. Relevant expenditure already incurred will qualify for this new relief.
A double charge to both PRT and gas levy could arise if gas were sold, under a new contract, from a reservoir which was previously exploited under a contract which pre-dated PRT and so was subject to gas levy instead. Although production under the new contract would be within the scope of PRT, gas levy would under the present law still be payable. To remove this unintended double charge, the proposed legislation will cancel gas levy when a PRT exempt gas contract which already contains a single fixed termination date comes to an end at that date, and gas from the reservoir begins to be sold under a new contract which is not exempt from PRT.
These changes should encourage companies to proceed with worthwhile and substantial North sea investments.