Pressure for more tax relief to encourage offshore exploration and ease the threat to North Sea jobs was stepped up last night.
West Aberdeenshire and Kincardine Lib Dem MP Sir Robert Smith sought Scottish Secretary Jim Murphy’s support for an industry plea for help to offset difficulties facing newer and smaller companies raising finance for exploration and development.
The proposal is for the payment of tax relief to be offered upfront to companies. These would be received when production is under way and they have a revenue stream against which to offset expenses. Larger existing operators are able to obtain the relief immediately because they can set exploration costs against revenue from other operations offshore.
Sir Robert told Mr Murphy during Scottish questions that a new relief in the Budget for a value allowance lowering the tax take on the first £75million of revenue was welcome. However, he said this did not go far enough to help with problems caused by the difficulty in raising credit in the markets.
Mr Murphy said he had discussed North Sea tax issues with Chancellor Alistair Darling but did not explain why the idea had been dropped. This was despite claims that, since the relief would be payable anyway, there would be little permanent loss of revenue.
Mr Murphy said he believed the industry still has a big future, especially as a potential world centre for carbon capture and storage in old fields offshore. He said the concession had been carefully targeted to encourage the development of fields that would not otherwise go ahead. He promised the UK Government would continue to look at other ways to support the industry.
Sir Robert repeated his request to Chief Treasury Secretary Yvette Cooper when the Commons turned to debate details of the Finance Bill. He urged the necessity to get as much oil out of the ground as quickly as possible to maintain revenue to the Treasury.
She responded that the government had received a lot of representations and had taken a balanced judgement on what steps to take.
Aberdeen North Labour MP Frank Doran said the government did understand the industry’s position. He added: “I think in the not too distant future we will see more significant concessions to encourage new entrants to the industry – and to existing smaller operators to undertake more exploration.”
SNP energy spokesman Mike Weir said later the relief “is needed to ensure a vibrant and stable future offshore and particularly to encourage development west of Shetland”.
The upfront relief is already being made available to companies operating in the Norwegian sector.