The UK Government will officially launch its review of the North Sea oil and gas tax regime today.
Financial Secretary to the Treasury Nicky Morgan is to jet into Aberdeen for talks with oil and gas leaders this morning.
The fiscal forum will outline the scope and objectives of the review of the fiscal regime, which will look at the longer term tax treatment of the industry, including field allowances and how best to incentivise investment.
Heads of industry have been asked to set out their priorities for how the remaining resources can best be exploited. The review will report its initial findings at the Autumn Statement.
It is the first time that a Treasury minister has faced the industry since the government announced it was slapping 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 this will cost the sector in the region of £175million a year – 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.
But the Budget 2014 did contain some good news for the industry with the introduction of a new allowance for ultra high pressure, high temperature projects.
The allowance will reduce the tax rate on a portion of a company’s profits from 62% to 30%. For every £1billion spent, companies will get at least £200m in tax relief, according to the government.
Ms Morgan said “The government is committed to supporting investment in the oil and gas industry, a vital sector that provides jobs and growth across the United Kingdom.
“Today’s fiscal forum will be a positive start to the review of the fiscal regime for oil and gas, and I look forward to working with the sector on the long-term future for the industry.”
Earlier this year, an international oil boss has claimed that the North Sea can no longer compete with the rest of the world – because of George Osborne’s tax regime.
CNR International managing director James Edens said the firm now sent its experienced UK staff elsewhere around the globe.
He said authorities were “not getting it right” and, as a result, the firm has cut its spending in the UK dramatically over the past decade.
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