The future of the north-east’s offshore oil and gas industry could be under threat if the government imposes a windfall tax on energy companies, it was claimed last night.
Trisha O’Reilly, communications director for Oil and Gas UK, said the move would cause “enormous damage” to investors’ confidence and could drive them to relocate.
The remaining oil and gas might then be left in the ground, costing the country jobs and cash from tax and investment.
Her comments came after Scottish Energy Minister Jim Mather called on Prime Minister Gordon Brown to protect hard-up customers by giving them a share of the windfall picked up by the Treasury and energy suppliers.
MP John Robertson, a Foreign Office ministerial aide, also publicly backed the idea of a windfall tax at the weekend in light of soaring energy costs and record profits for providers.
Ms O’Reilly said: “We’ve seen in the past that, when we have been hit with taxes, it does enormous damage to investors’ confidence.
“We have to look very hard for investment when there are much more attractive propositions elsewhere in the world. We’re one of the most expensive places for doing business.
“We’re at a critical phase in the basin’s life. Unless we attract further major investment, we will be unable to sustain it for as long as it will take to maximise recovery of our oil and gas resources.”
Ms O’Reilly said an estimated 25billion barrels of oil were left in the North Sea and plans were in place to recover 10billion. But investment was vital to ensure it was not left in the ground.
“The issue is how we secure the investment to make sure the remaining 15billion can be recovered,” Ms O’Reilly said.
“The way to do that is to make sure it remains competitive, that we continue to attract money to the UK and that it is attractive to oil and gas developers.”
She said most of the remaining oil and gas was to be found in small “puddles” that would not merit major investment individually. But if the infrastructure was already in place, it was financially viable to recover the product.
Ms O’Reilly said the majority of UK businesses paid 28% tax but the oil and gas sector paid 50-75%.
“No other sector, no other business, pays that rate,” she said.
“Therefore we already pay on a regular basis more tax than any other business sector and, as a result of the high prices, the government, the state, has benefited.”
She estimated the government would collect £16billion in oil and gas industry taxes this year, against £8billion last year.
Over the past four decades, the industry has provided £248billion to the UK Exchequer.
In addition, it has invested £256billion in exploration and capital development and spent £137billion on operating costs.
But Mr Mather said the introduction of a windfall tax was needed to help struggling energy customers and ensure they got their share of providers’ profits.
He said a recent poll by YouGov showed 74% of people were in favour of a windfall tax and insisted it was time to take action.”
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