The Chancellor of the Exchequer has delivered his 2015 budget and has handed the North Sea a £1.3 Billion boost which is already being welcomed across the sector.

In delivering his budget speech the Chancellor said: “falling oil price is good news for families across the UK but it brings with it challenges for hundreds of thousands whose jobs depend on the North Sea.

Thanks to the field allowances already introduced we seen a record of £15 Billion of capital investment last year in the North Sea.

Fall in oil price poses a pressing danger to the future of our North Sea industry unless we take bold and immediate action.”

The 4 major announcements expected to give the North Sea Industry a significant boost were:

1st - A single, simple and generous tax allowance to stimulate investment at all stages of the industry from the 1st of April.

2nd - The government will invest in new seismic surveys in under explored areas of the UK continental shelf.

3rd - From next year the Petroleum Revenue tax will be cut from 50% to 35% to support continued production in older fields.

4th - With immediate effect the Supplementary Charge will be cut from 30% to 20% and back dated to the beginning of January 2015.

The Chancellor said: “The measures announced amount to £1.3 Billion of support for our vital North Sea industry and gives an expected boost of 15% to North Sea Production by end of the decade.

Profits from UK oil and gas production in most fields face two main taxes:

30% corporation tax and 30% supplementary charge.

The Supplementary Charge was introduced in 2002 at 10%, and raised up to 32% in the 2011 Budget. It had already been announced that it was coming down to 30% but todays budget announcement sees the rate reduced to 20% and back dated to the 1st of January 2015.

Older fields have a higher tax level, through Petroleum Revenue tax. For fields approved before 1993, the combined taxes amount to 80% of which the Petroleum Revenue tax is currently set at 50%. From next year Petroleum Revenue tax will be reduced to 35%.

There are complex tax allowances to set against the cost of investment. Some can be spread over several years of profits.

Field allowances include targeted tax breaks for high-pressure, high-temperature oil wells, heavy oil geology, and deep water drilling. Oil fields can also avoid paying tax for the first year of production.

These allowances are offset by a 'ring-fence' to ensure spending on other activities is not included in company tax calculations.

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