Announced as part of Budget 2015, the tax cuts are estiamted to save £1.3bn in expenses for the industry.
Osborne has cut the supplementary tax charge on oil and gas companies from 30% to 20%, effective from 1 January. The Petroleum Revenue Tax paid on older oil and gas fields has been reduced from 50% to 35%.
A new Investment Allowance will be established to support the oil and gas industry in the North Sea.
The government expects the tax cuts and the investment allowance to increase oil production by around 15% by 2019.
The measures come as a rescue step amid plunging oil prices. Companies have been announcing cuts in jobs and investments in their efforts to battle the falling prices.
Osborne said: "It’s clear to me that the fall in the oil price poses a possible danger to the future of our North Sea oil industry unless we take bold and immediate action."
Welcoming the announcements, trade body Oil & Gas UK said that the measures send the right signal to investors, and enable the country compete internationally for investments into the ‘maturing oil and gas province’.
Oil & Gas UK CEO Malcolm Webb said: "Today’s announcement lays the foundations for the regeneration of the UK North Sea. The industry itself must now build on this by delivering the cost and efficiency improvements required to secure its competitiveness.
"We also welcome the Government’s support for exploration announced today. With exploration drilling having collapsed to levels last seen in the 1970s, the announcement of £20 million for the newly formed Oil and Gas Authority to commission seismic and other surveys on the UK continental shelf (UKCS) is a very positive step."
Image: BP’s Andrew platform in the North Sea. Photo: courtesy of BP Plc.
