The move is designed to encourage the development of remote gas fields in the West of Shetland region and it will enable the development of strategic gas infrastructure in the region.
The area to the West of the Shetland Islands is the last major area of the UK Continental Shelf to be developed and infrastructure will be critical to fully unlocking the gas potential of the region. It is estimated that the area contains around 20 per cent of the UK's remaining oil and gas reserves.
Chancellor, Alistair Darling said, "The government recognises the importance of the UK oil and gas industry to our economy and the dependable foundation it provides for the UK's energy security.
"We must ensure that the UK taxpayer receives a fair return from the extraction of our national resources and we are committed to maximising the economic exploitation of the UK's reserves. Today's announcement will continue to support investment in the North Sea, the fuel this delivers, the contribution this makes to our economy, and the jobs and skills the industry supports and develops."
The legislation is subject to approval by the House of Commons, which will be sought no later than the end of March 2010.