The UK Government should pledge not to increase taxes for the oil and gas industry for the next five years, Nicola Sturgeon has said.
Scotland’s First Minister issued the demand at the annual Oil and Gas UK Conference in Aberdeen.
She outlined three changes that she believes the UK Government should make to the current fiscal arrangements for the industry, which has been hit by plummeting oil prices and job losses in recent months.
Ms Sturgeon also called for urgent consultation on incentives to boost exploration in the North Sea and for expansion of the investment allowance to improve production efficiency.
“At this time in the previous parliament nobody in the industry had any inkling that the UK Government might decide to increase the supplementary charge from 20% to 32%. Indeed, even on the morning of the announcement, nobody expected it,” Ms Sturgeon said.
“The Scottish Government argued strongly for reversing that increase – and also for replacing the current system of field allowances with one unified investment allowance. We are pleased that the UK Government has introduced both measures.
“But it now needs to go further.
“We believe that some relatively straightforward changes to the investment allowance could have an important impact on production efficiency.
“I understand the UK Government is already looking at this issue and I urge them to confirm that these changes will be announced in July’s Budget.”
She added: “Secondly, the UK Government should do much more to encourage more exploration.”
Figures show that North Sea exploration last year reached its lowest level in at least two decades, with 14 explorations wells drilled compared to 44 in 2008.
The Scottish Government claims the Westminster Government has yet to deliver any follow-up action after committing at the end of 2014 to further work on options for supporting exploration through the tax system.
Ms Sturgeon suggested that financial incentives such as a new exploration tax credit will help companies to find new oil.
“Finally, the UK Government should make a commitment that there will be no tax increases for the industry for the whole of this UK Parliament,” the First Minister said.
“Even more importantly, it should promise that all significant policy proposals will be subject to consultation with industry and the Oil and Gas Authority.
“The UK Government should demonstrate that it has learnt from the mistakes of five years ago. Working in partnership is far more effective than operating in isolation.”
A spokeswoman for the Treasury said: “The UK’s oil and gas industry supports hundreds of thousands of jobs, most of them in Scotland, and we want to make sure it’s in the best possible position to manage the current decline in investment.
“We can’t control the oil price – but we’ve delivered on the Wood Review recommendations and established the Oil and Gas Authority.
“In addition, the package of support announced in the Budget in March is expected to encourage over £4 billion of additional investment in the UK’s oil and gas industry over the next five years.
“We look forward to the industry capitalising on this, to deliver efficiencies and make the industry more robust, now and for the future.”
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