The tax cuts announced for oil and gas industry in the 2016 UK Budget could reduce the tax outgo from a range of 50–67.5% to 40%, but are expected to give limited benefit to the oil and gas projects amidst the current low oil prices, according to a new analysis by Globaldata.

According to the report, ‘Challenging Economics Threaten Effectiveness of Latest UK Oil Tax Cut’, many oil and gas fields are not taxable due to the low oil prices.

The larger than anticipated tax cuts could, however, increase the value of assets up to 20% for new developments and up to 70% for mature fields.

The tax revenue from the North Sea operations were negative in the first half of the 2015 and the Office for Budget Responsibility is expecting similar revenues for the next five years.

GlobalData expressed the need for UK offshore operators to reduce cost further to improve the project economics, reap profits in the UK Continental Shelf and, in turn, generate more revenue for the government.

Click here for more details of the report.