The head of oil and gas for professional services firm EY said the government has taken a “crucial step” towards protecting the longevity of the UK’s oil and gas industry.
Derek Leith said the recommendations were also in line with what had been set out in the Wood Review.
The Chief Secretary to the Treasury, Danny Alexander, was in Aberdeen to outline three principles which will underline the future of oil and gas fiscal policy, as well as a new set of proposals.
Mr Leith’s comments come after he spoke to Energy Voice yesterday to give his initial reaction to the Chancellor’s Autumn Statement.
The senior partner in Aberdeen and head of oil and gas taxation at EY, said: “The principles set out by Danny Alexander are very much in keeping with the output from the Wood Review, where the focus was on maximising economic recovery, and the findings of the Scottish Oil and Gas Expert Commission, which stressed that North Sea fiscal policy should focus on the wider economic benefits of the industry rather than merely being a source of tax revenues.
“The final principle highlights global competiveness, which will be a key feature in attracting investment.
“There could be a sting in the tail by the reference to monitoring commodity prices. However the industry will be pleased to see that, for the first time, the Government appears to have openly acknowledged that commodity price increases are inexorably linked and closely followed by cost increases to the oilfield services supply chain.
“Higher prices in themselves don’t necessarily lead to windfall profits.
“The new proposals set out today, will require further work before implementation but clearly seek to support exploration; relieve some of the tax burden from new investment when the headline tax rate is still high; and rationalise the complexities of the current system in relation to infrastructure and decommissioning.
“Provided that these measures can be implemented quickly, and a further tax rate reduction can also be delivered, the government has taken some critical steps to protecting the longevity of the oil and gas industry in the UK. However, with the low oil price making the need for reform acute, there is absolutely no room for complacency.”
Mr Leith’s comments come after Danny Alexander sat down with Malcolm Webb for an exclusive interview with Energy Voice.
UK ministers had been under intense pressure to act to ease the burden on oil and gas firms in the run-up to yesterday’s Autumn Statement, as plummeting prices and rising costs have been combining to put jobs and projects at risk.
The industry’s problems were further underlined yesterday as official figures showed tax receipts from the sector were now predicted to fall by 40% to just £2.8billion over this year.
In his speech, Mr Osborne announced that the supplementary charge on offshore companies would be cut from 32% to 30%.
