UK Treasury To Discuss N Sea Oil Fiscal Rebate But Not General Cut

LONDON -- The U.K. Treasury is ready to consult the oil and gas industry on possible incentives for marginal fields but not a general tax cut, it said in a document published Monday.

The decision is expected to disappoint critics of the tax, which are blaming the current level - currently at 50% of North Sea oil profits - for a decline in production and may have hoped lower oil prices could lead to a fiscal reduction.

In a document attached to the 2008 pre-budget report, the Treasury said it had started consultations on Monday with the industry on changes in tax laws that could become applicable for the 2009 budget.

The Treasury said it was favoring incentives for marginal fields, particularly under the form of a "value allowance" - by which the first given number of million of pounds of income from a development is taxed at a lower rate.

However, the document also said the Treasury "does not believe that an across the board reduction in the rate of (supplementary North Sea tax) would be desirable" as it would favor the most profitable projects.

The document also said "a joint government and industry West of Shetland Taskforce is looking closely at proposals that could unlock West of Shetland."

The U.K. Continental Shelf "is expected to produce around three quarters of the U.K.'s oil requirements and two thirds of its gas requirements in 2010," it added.

-By Benoit Faucon, Dow Jones Newswires; +44-20-7842-9266; benoit.faucon@dowjones.com