New Oil and Gas Authority will be able to impose £1 million fines and revoke licences

31 March 2015

The Oil and Gas Authority (OGA), which is formally established today, will have the power to fine oil and gas companies up to £1 million and revoke operating licences to maximise production, the UK government has said.

The right to levy fines of up to £5 million on under-producing oil and gas companies in certain circumstances could also be granted to the Aberdeen-based authority, which has been set up as an executive agency of the Department of Energy & Climate Change.

OGA's creation was recommended in last year's Wood Review and as part of what the government describes as a major package of support for the oil and gas industry it said the regulator would have the right to attend meetings and access oil and gas companies’ data.

It will also have powers to scrutinise companies' decommissioning programmes to ensure they are cost-effective and that the supply chain was equipped to “take up the opportunities offered by timely decommissioning”.

Meanwhile the government also outlined the design of the new investment allowance for the North Sea basin oil and gas industry, which will be available on investment expenditure incurred after 1 April. 

This is intended to boost investment by simplifying the existing system of offshore field tax allowances and providing greater certainty for investors.

North Sea oil producers will receive a £1.3 billion tax cut in a bid to extend the life of ageing fields, the supplementary tax on the industry will be reduced from 30 per cent to 20 per cent, and the petroleum revenue tax will fall from 50 per cent to 35 per cent. The government also plans to invest £20 million in a programme of seismic surveys to boost offshore exploration.

It claimed the package would encourage £4 billion of additional investment and the production of an extra 120 million barrels of oil by 2019-20.

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