Scottish Energy Minister Fergus Ewing has made an 11th-hour plea to Westminster over a tax raid on the North Sea.
Chancellor George Osborne is facing mounting pressure over his decision to slap an extra tax on rigs and flotels coming into the North Sea to carry out work – a practice known as bareboat chartering.
The Treasury says it will cost the sector in the region of £175million per annum – but industry insiders say it could cost up to £1billion in total.
The UK is already in the midst of an “exploration crisis” and industry chiefs fear the new tax will drive rigs away at a time they are needed more than ever.
Mr Ewing has written to the UK Government urging it to rethink the “damaging” raid.
“As Scotland’s Energy Minister – but without crucial powers over these matters – I am seriously concerned the UK Govern-ment’s plans could undermine industry confidence and destabilise future North Sea investment,” he said.
“This, like decisions of successive Westminster governments to spend Scottish oil revenues rather than invest a proportion of them, is a major mistake and also goes against the spirit of the Wood Review by clearly inhibiting the business conditions necessary to encourage investment in the exploration, appraisal and development that is needed to maximise economic recovery in the North Sea.
“It was curious to say the least, that this measure was brought in in the same budget the UK Government pledged it would take forward the Wood Review and review the oil and gas fiscal regime.”
He added: “In my letter to the Chief Secretary to the Treasury (Danny Alexander) I argued that this oil exploration tax should be reversed because it could reduce the availability of rigs and increase the costs of production, with potential impacts on investor confidence and exploration activity.
“To date the North Sea has suffered from poor stewardship from successive UK Governments. There have been numerous substantial changes to the fiscal regime over the last decade and a conveyor belt of 14 oil ministers in the last 17 years. The time has come to end this mismanagement once and for all.
“This action substantiates the industry’s perception that there is a distinct lack of awareness within the UK Government as to what is required to support and sustain the offshore oil and gas industry.”
An HM Treasury spokeswoman said: “The government has clearly demonstrated its commitment to the oil and gas industry, with field allowances and decommissioning relief certainty generating record levels of investment last year. At Budget 2014 the government went further, announcing a new allowance for ultra high pressure, high temperature fields, which will create over 700 new jobs; a commitment to quickly implement the Wood Review recommendations; and a review of the overall oil and gas tax regime. Industry has widely welcomed the package.
“However, the government is also committed to making sure all companies involved in exploiting the UK’s oil and gas resources pay their fair share of tax. Currently, some companies making significant operating profits in the UK are able to move up to 90 per cent of these profits overseas and out of the UK tax net. The measure announced at Budget will amend the rules so that more of the profits made by these companies in the UK are subject to UK tax.”
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