UK North Sea Tax Break Plan to Boost Investment

By MarEx 2014-03-20 10:11:00

Denmark's Maersk Oil, a unit in A.P. Moller-Maersk, said on Thursday it expects a UK proposal for new tax breaks for ultra-high-pressure high-temperature (HPHT) oil and gas projects to increase investments in the North Sea.

Britain's Chancellor George Osborne this week announced plans for a new allowance for HPHT in an effort to maximize the benefits of North Sea oil and gas for the UK economy.

"The announcement is a welcome development which can enhance the development prospects of the Culzean project and other HPHT projects in the North Sea," Chief Executive Jakob Thomasen from Maersk Oil wrote in a mail to Reuters.

The Culzean project, in which Maersk has a near 50 percent interest, is one of the largest UK discoveries in recent years and could meet around 5 percent of the UK's energy needs in 2020.

It is due to come on stream in 2019.

"If sanctioned, the estimated Culzean investment would be more than 3 billion pounds ($4.99 billion) with billions more spent over the operating life of the asset," Thomasen wrote.

The UK government has already provided significant tax incentives for oil and gas projects that have unlocked billions of pounds of investment - around £7 billion in 2013 alone.

"The allowance is expected to support the development of big HPHT projects which would create and sustain thousands of jobs, provide a significant portion of UK gas demand, and generate billions of pounds of capital investment," Britain's Osborne said in the budget.

Maersk Oil, as operator, holds a 49.99 percent interest in Culzean, with partners JX Nippon UK (17.06 percent)Eni UK (16.95 percent) and BP (16.00 percent). ($1 = 0.6014 British Pounds) 

Copyright Reuters 2014.