The new Oil and Gas Authority (OGA) will be given the power to fine oil and gas companies up to £1million and to revoke operating licences in order to maximise production, the 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, the government added.
As part of what it describes as a major package of support for the oil and gas industry, the government said the regulator would also have the right to attend meetings and have access to oil and gas companies’ data. The OGA 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 has also outlined the design of the new Investment Allowance for the North Sea basin oil and gas industry.
The new measure is intended to boost investment by simplifying the existing system of offshore field tax allowances and providing greater certainty for investors and will be available on investment expenditure incurred after 1 April 2015. 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 to 20 per cent while the petroleum revenue tax will fall from 50 per cent to 35 per cent. The government 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 to 2020.