This is the second year in a row the Treasury has cut taxes in response to falling wholesale oil and gas prices.Last year the supplementary charge was cut by 10% and PRT was reduced. PRT applies to fields that had development consent given before March 1993.

 

Osborne told parliament in his Budget speech: "In my Budget a year ago, I made major reductions to their taxes. But the oil price has continued to fall. So we need to act now for the long term."

 

Oil prices have slumped from $100/b to $30-40/b in recent years, leaving operators complaining their facilities will struggle to remain economic.

Industry association Oil & Gas UK had been calling for greater cuts this year of 20%. A recent study by the lobby found that approvals for new investment offshore the UK are likely to fall to less than £1bn this year, from a typical £8bn/year over the last five years.

 

"We welcome any steps to reduce the heavy tax burden on the oil and gas industry," the group said on Twitter immediately following the Budget.

 

Osborne also announced £730m of auction funding to support renewable energy technology, and invited bids to help develop a new generation of small modular reactors.

 

The future of the government's planned giant new 3,200 MW nuclear plant at Hinkley has come under question recently. The finance director of the lead project developer, French generator EDF, resigned over concerns about the cost.

 

There have been some calls for a new wave of smaller plants instead, with the added benefit that parts for smaller reactors could be manufactured within the UK, supporting local industry.