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Statoil, the Norwegian oil company, is to resume work on a large North Sea project and Centrica, the UK utility, said that it had reopened Britain’s biggest gas field following concessions by the government on taxation.
The Treasury has said it will increase the ring fence expenditure supplement from 6 to 10 per cent, a measure that allows energy companies to offset the losses they make from investments against tax payments from future profits.
The change was enough for Statoil to say that it would resume developing the Mariner oilfield, south-east of the Shetland Islands, which might hold 430m barrels. All work had been suspended after George Osborne, chancellor, raised the supplementary tax for oil and gas production in British waters at prices exceeding $75 per barrel from 20 to 32 per cent in the last Budget.
“The negative impact from the tax increase proposed in March has been neutralised for the Mariner investment and the project is now back on track,” said Statoil. “We will resume technical and commercial work with full speed.”
Centrica has reopened the UK’s largest gas field after choosing to leave it dormant for a month, a move that it linked to the tax increases in the Budget. Production from South Morecambe resumed last Friday.
A Centrica spokesman said this was because of “commercial optimisation” and the need to use the field in order to complete the maintenance process.
The tax increase had the effect of raising the threshold that wholesale gas prices must reach before it becomes viable to run South Morecambe.
That “trigger price” appears to have been achieved, allowing normal production to resume.
South Morecambe is the biggest of three adjacent fields in the Irish Sea that together provide about 6 per cent of the UK’s annual gas requirement and 12 per cent of residential demand.
John Cridland, director general of the CBI, said the Treasury’s adjustment of the ring fence expenditure supplement had been “the first step forward” in repairing relations with the energy companies.
“Raising the ceiling for field allowances is one way government can help industry without going back on what they have already done,” he said.
Additional reporting by George Parker