UK Chancellor of the Exchequer George Osborne has marked further progress in modernising the tax regime on the UK Continental Shelf (UKCS) as part of this year’s budget.

Offering a tax support worth £1bn for the oil and gas industry, Osborne stated the effective abolishing of petroleum revenue tax, which currently stands at 35%.

The supplementary charge will also be reduced on oil and gas extraction from 20% to 10%.

"We welcome these measures as they will build on the industry’s achievements in improving efficiency in the face of low oil prices."

Welcoming Osborne’s Budget, Oil & Gas UK said that it will reduce the headline rate of tax paid on UK oil and gas production, falling from 50%-67.5% to 40% across all fields.

Oil & Gas UK chief executive Deirdre Michie said: "Today’s announcement does indeed mark further progress in modernising the tax regime for an increasingly mature basin.

"We welcome these measures as they will build on the industry’s achievements in improving efficiency in the face of low oil prices, boosting the sector’s competitiveness and helping to restore investor confidence.

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"We will continue to work with the Treasury to complete its ‘Driving Investment’ plan to ensure that the fiscal regime reflects the business needs of a maturing basin and signals to global investors that the UK is truly open for business."

The budget provided certainty on availability of decommissioning tax relief. The government will also provide funding of $28m for another round of seismic surveys in 2016-17.

Recently, the trade body proposed tax reforms in the UK’s oil and gas sector to increase industry competitiveness in the UKCS.

The proposal follows its recent publication of new forecasts, which show that more than one billion barrels of oil and gas are no longer considered economically possible to extract in the existing price and business environment.