(MENAFN- ProactiveInvestors - N.America) Oil firms in the UK North Sea are set to receive further tax breaks, Chancellor of the Exchequer George Osborne revealed today.
The Chancellor released the details of the mature, or brownfield, oilfield tax incentives initially mooted in the last budget.
And it also follows last year's unexpected tax hike that proved unpopular with the oil industry.
North Sea firms will be able to shelter a portion of their income from certain mature oilfields.
The field must be increasing production volumes, as a result of re-development work, to qualify for the tax break.
The tax break could save firms up to £160 million.
The treasury believes the initiative will cost it £100 million a year, but will boost the North Sea industry and help attract an extra £2 billion of investment in the sector â€" in turn driving greater tax revenues in the long term.
"(We are) encouraged by the support announced for oil and gas 'brown-fields' in the UK which typically have high running costs and are subject to up to 81 per cent tax on production," said Mike Tholen, economics and commercial director of industry group Oil & Gas UK.
"This initiative will have an immediate impact in that it will help to promote investment and sustain production from many mature fields, enabling more oil and gas to be recovered from them and postponing decommissioning by a number of years."
Oil & Gas UK claim that the changes could see an additional 150 million barrels of oil produced from maturing fields that would otherwise be left in the ground.
Today's announcement comes in the same week as two AIM-quoted oil firms set their stalls out to cash-in on the increased interest and investment in the North Sea.
On Monday, Lochard Energy (LON:LHD) told investors that it would seek buyers following earlier attempts to farm-out its Thunderball and Moby discoveries.
The company said there would be a higher level of interest for the entire company.
Elsewhere, Valiant Petroleum (LON:VPP) said the company might be sold as it undertakes a review of its strategic options.
The company has established production of around 7,500 barrels per day and has built an attractive portfolio of projects.
In a note to investors today City researcher Edison said that half of the North Sea companies it identified as possible targets earlier this year have now been either sold or are reviewing their options.
Edison analyst Will Forbes says further consolidation will continue to occur while there is a disconnect between market values (implied by weak share prices) and asset values.
Following the respective takeovers of Encore Oil and Nautical Petroleum there are still a number of junior North Sea oil firms trading publicly in London.
And they continue to attract the attentions of investors.
Indeed, this morning Xcite Energy (LON:XEL) told investors that during pre-production testing at the Bentley field it has now sold 135,000 barrels of oil with the help of its marketing partner BP and that it received a better than expected price for the oil.
Ithaca Energy (LON:IAE) is now looking to the development of the next projects in its pipeline follow the start of production at the Athena field.
Fellow Athena partner Trapoil (LON:TRAP) is in the early stage of a multi-well programme across a portfolio of exploration and appraisal projects, and the acquisitive junior remains on the lookout for other opportunities.
Canadian headquartered Antrim Energy (LON:AEY) is also pursuing a number of appraisal and development projects, and it is working towards the start of production at the Causeway field.
Meanwhile Bridge Energy is currently planning to join London's AIM market in the coming weeks.
The oil firm, which is also listed on the Olso bourse, has interests in 28 licences in the UK and Norwegian continental shelves. It already has producing assets and it has a 'high impact' exploration portfolio.
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