(Except clauses 1, 3, 7, 8, 12, 20, 21, 25, 67 and 81 to 84, schedules 1, 18, 22 and 23, and new clauses relating to microgeneration) - Clause 101

Finance Bill – in a Public Bill Committee on 7th June 2007.

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Abolition of PRT for fields recommissioned after earlier decommissioning

Question proposed [this day], That the clause stand part of the Bill.

Question again proposed.

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

Before lunch, I was about to say a few words about the clause. I am tempted simply to ask the Economic Secretary what it means and sit down—

Photo of Paul Goodman Paul Goodman Shadow Minister (Childcare), Treasury

As the hon. Gentleman says, it is all in the notes. I was simply going to observe, given the Committee’s inexhaustible appetite for information, that the clauses dealing with petroleum revenue tax are relatively uncontentious. They implement a commitment that the Government made in last year’s pre-Budget report to even up some discrepancies in petroleum revenue taxation. We understand that the clauses are welcomed by the industry, and nothing has been raised with us. I have no further questions or points to raise.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

Clauses 101 and 102 go together. I want to ask my hon. Friend the Economic Secretary—he may need to write to me, because we are pressed for time—whether the clauses on petroleum tax will have an effect on carbon capture and storage, because in the North sea, the old oilfields, the use of which has been discontinued, may well be used as a repository for carbon dioxide to be pumped and stored there for ever.

Photo of Edward Balls Edward Balls The Economic Secretary to the Treasury

It is a pleasure to serve under your chairmanship again, Mr. Gale. I add my congratulations to those expressed earlier on the promotion of the hon. Member for South-West Hertfordshire. My hon. Friend the Financial Secretary is the Minister responsible for oil and gas industry issues in the Treasury, but he is currently in the Chamber,  about to speak on another matter, so I have taken it on myself to answer and to lead the debate in his absence.

As the hon. Member for Wycombe said, the measure was first announced in the 2006 pre-Budget report and will remedy a problem that arose during discussions between the Government and the industry on the wider strategic issues facing the North sea fiscal regime by providing for the removal of petroleum revenue tax from oil and gas fields where full decommissioning has been completed—that is, all infrastructure has been removed and the fields in effect have been returned to bare seabed—and the fields are subsequently redeveloped.

Under current legislation, if a field on which PRT was chargeable was fully decommissioned and later recommissioned, it could still be liable to PRT. However, the challenge of redeveloping a previously decommissioned field is closest in appearance to the challenge of developing a completely new field. I am referring to fields on untouched seabed, which are not liable to PRT; it was abolished for new fields in 1993. Therefore, it is arguable that there is a disincentive to recommission old fields. Clause 101 is designed to remedy that anomaly and create a level playing field between old decommissioned fields and new fields. As the hon. Gentleman said, the change has been welcomed by the industry following consultation.

My hon. Friend the Member for Wolverhampton, South-West raised the issue of carbon capture and storage. As he will know, new technologies can potentially be used to extract carbon dioxide from gas or coal during the energy production process. Therefore, it will be possible to deliver carbon free, or substantially reduced carbon, electricity from coal and gas and for those carbon dioxide gases to be taken away and stored.

One option is to store those gases in previously used oilfields in the North sea. The Government are considering how to encourage and develop those technologies. My assumption, though, is that if one of those fields is subsequently to be used for such a practice, it would come under a different tax regime to the one that would be applied here. In this instance, we are trying to ensure that it is tax free for the development of new petroleum oil production. If an incentive was needed to encourage gas fields to be used subsequently, a different tax regime would be required. We are currently looking at the nature of incentives that might be needed and the legislative base within which that could occur.

I am very happy to keep my hon. Friend and the House informed of any developments. The Financial Secretary may be able to provide more details on that. The policy area is at an early stage. Her Majesty’s Revenue and Customs is considering what the legislative and tax framework would be. While the clause corrects the anomaly, it would not make it more difficult for us to use those fields for carbon capture storage in future. On that basis, I commend the clause to the Committee.

Question put and agreed to.

Clause 101 ordered to stand part of the Bill.

Clauses 102 to 104 ordered to stand part of the Bill.