International network of environmental organisations, Friends of the Earth (FoE), has accused the UK’s Chancellor of the Exchequer, George Osborne, of providing nearly £1bn of tax breaks to oil companies in an effort to encourage oil and gas production in the North Sea.
FoE said that Osborne had ignored World Bank president Jim Yong Kim’s advice by providing subsidies to oil firms to ensure that "every last drop of oil" is extracted from the UK’s rapidly diminishing reserves.
According to FoE, the Chancellor had significantly expanded field allowances, which were introduced by Alistair Darling in 2009, to boost production from "small or technically challenging new fields", reported The Guardian.
Field allowances worth £300m were reportedly provided to the energy sector during the past three years.
The tax breaks offset a £2bn a year supplementary charge imposed by the Chancellor in 2011 by freeing the industry from a certain amount of tax from particular fields.
FoE economics campaigner David Powell said apart from creation of new field allowances, an existing field has also been expanded in the current financial year.
Since the 2012 budget, the industry has been provided with tax breaks worth £864m, which is expected to increase further due to the field allowance provided to Dana Petroleum for its $1.6bn oil and gas development east of Shetland, announced at the end of 2012.
"With almost £1bn of tax breaks lavished upon them this financial year alone, it’s bonanza time for dirty gas and oil," Powell added.
"George Osborne is bending over backwards to help the big oil barons, but getting him to support renewable energy is like trying to squeeze blood from a stone".
Oil production in the North Sea has declined sharply since the 1990s. However, the high price of oil in the international markets has made unprofitable oil fields commercially viable.
Revenues from the oil and gas sector, which were more than £11bn in 2011-12, are expected to decline to £4.5bn by 2017-18.
A Treasury spokeswoman was quoted by The Guardian as saying: "The government’s package of changes to the oil and gas tax regime is expected to stimulate billions of pounds of investment, supporting jobs, delivering revenue for taxpayers and helping ensure we make the most of this valuable national asset."
"The changes should be considered in the context of the oil and gas tax regime as a whole, including the supplementary charge, which was increased at budget 2011," the spokeswoman added.
Image: Chancellor of the Exchequer, George Osborne. Photo courtesy of HM Treasury.
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