North Sea oil bosses will meet today to decide how they will respond to the UK Government’s surprise tax increase.
The members of industry body Oil & Gas UK will gather in Aberdeen and London and exchange views by video link. There are fears that tens of thousands of jobs will be lost and dozens of projects cancelled after Chancellor George Osborne’s decision to grab an extra £10billion off North Sea producers over the next five years.
Meanwhile, two north-east Liberal Democrats are to discuss the Budget tax increase with the oil and gas sector today.
The Commons meeting involving Gordon MP Malcolm Bruce and West Aberdeenshire and Kincardine MP Sir Robert Smith threatens to open up a rift in the Lib Dem ranks.
Senior Lib Dems, including Scottish party leader Tavish Scott, support the tax move, but Mr Bruce said it would discourage investors and cost jobs.
Chief Secretary to the Treasury Danny Alexander, MP for Inverness, Nairn, Badenoch and Strathspey, has tried to play down the impact of the tax increase on the North Sea industry.
He told a Sunday newspaper that warnings about job losses were “scaremongering”.
Despite Mr Alexander’s comments, pressure is mounting on Mr Osborne over his tax grab.
It was reported on Saturday he was considering offering hundreds of millions of pounds in tax breaks to gas companies.
The Treasury said field allowances could be paid out to firms investing in the North Sea to ensure they remain profitable as long as they can present a “robust business case”.
The report said Centrica, which operates British Gas and Scottish Gas, had told ministers that further investment in the Morecambe Bay gas field could be shelved leaving Britain more dependent on imports from the Middle East and Russia.
It was also claimed yesterday that North Sea asset deals worth hundreds of millions of pounds have already been cancelled since the Budget last Wednesday.
The chancellor’s tax move has come in for widespread criticism from the oil industry.
Mike Bowyer, chief operating officer of Aberdeen energy service company Senergy, said yesterday: “Being hit with an increase in tax will have a significant impact on the industry in the UK.
“These changes to the fiscal regime will make us less competitive, less attractive to investors and will threat-en the security of energy supply in the UK, as we will see a reduction in capital expenditure which will re- sult in less oil and gas being extracted from the North Sea and increased imports.
“The price of oil has been high of late, but it’s important to remember that it fluctuates in response to supply and demand and is not dictated by the oil and gas industry.”
The tax rise has hit share prices of many North Sea firms.
Ithaca Energy has said it was continuing with development of the Athena field and the Stella hub, but it added that a review of the company’s portfolio of existing appraisal and development opportunities would be conducted as details of the draft tax change legislation emerged.
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