A Government tax cut along with low capital expenditure is likely to increase exploration on shore in Britain by small oil companies, according to industry analysts.
In a bid to unlock 400 million barrels of North Sea oil plus an unspecified amount of oil onshore to try and secure reliable energy supplies, Britain cut the tax rate on small oil fields from 50% to 30% in April.
At present, only 2% of Britain`s oil comes from onshore, while the bulk of it is delivered from the North Sea. The Government hopes to slow the decline of the country`s oil and gas output from its peak in 1999.
“It’s a viable business because of the low lifting costs and the low capital expenditure. The flip side is that the typical size of the fields is small,” said oil analyst with Edison Investment Research Alessandro Pozzi.
“If they manage to maintain this 30% tax rate on onshore fields as well, that will be a good thing. You will see probably even more companies doing exploration,” he added
Britain awarded 96 new licences for onshore exploration to 54 companies in the latest licensing round. The firms are now applying to the relevant local authorities for permits.