Lobbying from the oil and gas industry saw the Chancellor use the Budget to reveal a doubling of tax breaks on certain small oil and gas fields. The new field allowances "should lead to exploration that would not otherwise have happened", the Treasury said.
Less than 24 hours after the Budget, however, Premier Oil said it could now save up to $100m (£63m) in tax on fields it was likely to have proceeded with anyway.
Speaking after posting full-year pre-tax profits of $142m, Simon Lockett, Premier's chief executive, and Tony Durrant, finance director, said the company hoped to save $25m in tax on a project already in the pipeline before the Budget.
Premier Oil said it had taken the "tough" decision to go ahead with the Solan project prior to the Budget. It had anticipated reaching final decisions on three similar fields it was "very keen on" this year, which, pending policy details, the Budget allowances could also be applicable to.
A spokesman for Premier Oil said the board's decision on Solan had been "subject to... the outcome of the Budget" and that the company plans to invest $1bn a year in the North Sea. Among other companies likely to benefit is Valiant Petroleum whose chief executive, Peter Buchanan, said: "There are a few fields that we will be proceeding with that we would have proceeded with otherwise. Initial work suggests... it's probably about $10m of value that we didn't otherwise have on an individual field."
He added the tax breaks would also stimulate investment in fields that the company would not otherwise have seen as economic.
Malcolm Graham-Wood, oil analyst at VSA Capital said the "windfall" across several "lucky" companies could total hundreds of millions of pounds.
A spokesman for industry body Oil & Gas UK, which helped to negotiate the tax breaks, said: "There was a lot of pushback from the Treasury saying, 'We need to be convinced that these are projects that would not go ahead anyway'. Clearly they would not put taxpayers' money out there for fields that would have gone ahead anyway – that was a theme of the negotiations. But they cannot guarantee that won't catch fields that some companies would have perceived as economic anyway."
Oil & Gas UK estimates that in the long-term the field allowance package, which also includes tax breaks for deepwater fields west of Shetland, could eventually lead to £10bn of investment that would not otherwise have happened.
Treasury costings forecast that the package of field allowances will result in a net cost to the Exchequer over the next five years. A Treasury spokesman said the longer-term impact would be positive, leading to "increased overall revenue to the Exchequer in the years ahead".