September 18 has been and gone and now we are less than a month from another critical political event.
On December 3, George Osborne will undertake his Autumn Statement – often a damp squib, but this year vitally important.
The contents of the speech could have wide-reaching impacts for the North-east of Scotland and England, East Anglia and a number of other UK regions.
However, in the short-term it will have the most impact offshore in the UKCS.
We’ve spoken with our members and the view is clear, the Chancellor has to make a positive announcement on the fiscal regime in the UKCS in four weeks’ time.
Operators tell us the UKCS fiscal regime is unpredictable, unnecessarily complex and simply too burdensome.
The North-east asks are clear – we want a reduction in the headline rate of tax in the UKCS, we want exploration to be made more attractive, we want allowances to be simplified.
However, these asks are not parochial as they are important for the rest of the UK too.
A week before the statement we will be publishing our latest biannual oil and gas survey in partnership with Bond Dickinson. We have had a record response to our fieldwork this time round, perhaps that in part demonstrates the strength of feeling in the sector.
We have been asked by some sceptical (or realistic) members why we should expect any change.
Simply put, it makes common sense and because not making changes will:
· lead to premature decommissioning which will cost HM Treasury revenue as well as reducing the long-term potential of the UKCS, impacting on security of energy supply
· reduce longer-term value added from the £35billion UK supply chain. Our mature basin must continue to act as a ‘sandpit’ in which to test innovative solutions which make companies based in the North-east and the rest of the UK internationally competitive
· work against the recommendations of the recent Wood Review (UK Government) and Independent Oil & Gas Commission (Scottish Government)
· further break trust between industry and government following a year in which the importance of the oil and gas industry to the UK was exalted by the Yes and No referendum campaigns
A positive statement will, we believe:
· breed new confidence amongst existing and potential investors in the sector
· create a radical shift in activity by creating the basis for a new level of trust between industry, government and politicians
· ensure the sector supply chain can continue to support the 200,000 FTE employees across the UK who deliver work around the globe
Given an appropriate statement from the Chancellor on December 3, we believe industry will respond strongly with efforts to cut costs, innovate and increase collaboration.
James Bream is the Aberdeen Chamber of Commerce’s research and policy director.
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