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Fossil Fuels: Exploration

Question for HM Treasury

UIN 60018, tabled on 16 January 2017

To ask Mr Chancellor of the Exchequer, what assessment he has made of the effect of fiscal changes made in the Budget 2016 on exploration in the oil and gas sector.

Answered on

19 January 2017

The Office for Budget Responsibility’s Economic and Fiscal Outlook (November 2016) includes the latest forecasts for oil and gas. The November Outlook indicates a downward trend in planned capital expenditure in the oil and gas sector, from £10.1 billion in 2016 to £3.7 billion in 2021. This reflects a lower oil price and its consequential effect on overall production.

The Government has taken unprecedented action to support jobs, investment and activity in the UK and UK Continental Shelf. Budget 2016 announced a £1 billion package of fiscal reform, supporting the industry through the challenging commercial conditions caused by the steep fall in oil prices. Lower tax rates will improve the economics of new investment and future discoveries. The basin-wide Investment Allowance, introduced in 2015, further reduces the effective rate of tax for many companies, including at the exploration stage.

As a result of these changes, the UK now has one of the most competitive tax regimes for oil and gas in the world, supporting jobs and investment.

Answered by

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