The Chancellor's Budget announcement saw some positive steps for the North Sea, many in line with the recommendations of Sir Ian Wood's recent report on maximising recovery from the UKCS. However, there will be disappointment that the much discussed changes to taxation around bareboat charters will still come into force on 1 April.

So among the measures announced, which hit the mark, and which missed the target?

1. Review of the UK's oil and gas fiscal regime

The Chancellor announced a tax review to ensure the regime continues to be fit for purpose as the North Sea basin matures. This will be a significant undertaking for all involved and require considerable collaboration amongst operators, service sector, Treasury, DECC and HMRC - and will involve the new arm's length body announced as part of the government's implementation of the Wood Review recommendations. The initial findings will be provided at the Autumn Statement later this year and any specific proposals will of course be subject to full consultation with Industry.

Hit or miss? A qualified hit; the scale of the job is significant.

2. Allowance for ultra high-pressure, high-temperature projects

Working on such fields is increasingly common in the maturing North Sea, where easy-to-access reserves are now rare. It is expected that the this allowance will be similar in structure to the onshore allowance announced at last year's Autumn Statement, whereby a portion of a company's profits will be exempt from the supplementary charge. The amount of profit exempt will equal at least 62.5% of the capital expenditure a company incurs on qualifying projects (though the exact rate will be announced following consultation).

Hit or miss? Hit. This sort of targeted approach to incentives is becoming the norm – hopefully more of the same will follow with the review of the fiscal regime.

3. New bareboat chartering tax

These additional tax costs on large assets, such as drilling rigs, came as a shock to industry when announced at the Autumn Statement last year, without any prior warning. Widely considered to be potentially damaging to the competitiveness of the UKCS, and brought in despite strong representations from the industry. The measure will be reviewed a year after being implemented, which does little to settle nerves around long-term business planning. In addition, the measure will now only apply to drilling rigs and accommodation vessels; there will be a cap on the amount deductible of 7.5% of the historical cost of the asset subject to the lease, increased from the 6.5% previously announced at the Autumn Statement. The pro-rata calculation will also now be based on worldwide utilisation of the vessel.

Hit or miss? Miss. The industry is looking for incentives to invest in North Sea exploration, and there are fears assets will be moved overseas in light of this announcement.

Download a copy of Deloitte's comprehensive commentary of Budget 2014 here

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