LAWSON OIL TAX BREAKS TO HELP NEW FIELDS - REVENUE

  Two new U.K. Tax relief measures for oil
  producers, announced today, are aimed at encouraging
  developments in the North Sea to go ahead and boost
  opportunities for the offshore supplies industry, the Inland
  Revenue said in a post-budget statement.
      Earlier, Chancellor of the Exchequer Nigel Lawson announced
  in his annual budget to Parliament that from today, companies
  will be allowed to offset up to 10 pct of qualifying
  development expenditure on certain future oil fields against
  Petroleum Revenue Tax (PRT).
      To date, full relief was allowed for expenditure on an
  individual field itself, when its income stream began, but was
  not immediately available against other development
  expenditure, the statement said.
      The new relief will apply to fields outside the southern
  basin for which development
  consent is first given on or after today, and will improve the
  post-tax economics of new developments and encourage companies
  to proceed with project which might have been delayed, it said.
      Lawson also announced that he would henceforth allow
  certain expenditure on oil related research which does not at
  present qualify for PRT relief to be offset against PRT
  liability.
      This means oil-related expenditure in the U.K. Or on the
  U.K. Continental shelf, which has not become allowable in a
  particular field within three years of being incurred, to be
  allowed against PRT liability in any oil field, the Inland
  Revenue said.
      This brings the scope of PRT relief for research costs more
  in line with corporation tax relief measures, and is planned to
  encourage general research into ways of reducing field
  development costs, it said.
      In due course, the industry should benefit by over 100 mln
  stg a year, it calculated.
      The Inland Revenue statement also included other technical
  measures that Lawson did not comment on in his budget speech.
      These included measures to allow companies to balance their
  shares of PRT-exempt oil allowances through reallocation in two
  past periods of allowance utilisation.
      Tidier rules on incorrectly allowed PRT expenditure reliefs
  were announced, while there were also ammendments on rules on
  corporation tax and Advance Corporation Tax relating to the
  so-called "ring fence" of activities in the U.K. And its
  continental shelf. The Finance Bill will have provisions for
  the implementation of measures announced in November, it said.
      Gareth Lewis Davies, a North Sea expert with stockbrokers
  Wood Mackenzie and Co Inc in Edinburgh, thought the two reliefs
  on PRT would help the depressed offshore industry.
      He said the 10 pct cross field allowance relief would
  favour chances that development of smaller North Sea fields
  such Osprey, Don and Arbroath would be brought forward.
      Early development of the larger Miller and Bruce oil fields
  might also be encouraged, he said.
      Lewis Davies said the measure might also aid the offshore
  construction industry, which suffered a huge amount of lay-offs
  under the price slump of more than 50 pct last year.
      He pointed out that the relief only applies to the
  development of new fields outside the Southern Basin.
      This means more jobs could be created, as the fields in the
  central and northern sectors of the North Sea are deeper than
  in the south and thus have greater capital and labour
  requirements as the waters are deeper than in the south.
      He said the PRT relief for certain research expenditure
  would help fundamental research in the oil industry, although
  the benefits of this research would not be seen for several
  year.
  

