Prime Minister David Cameron has defended plans to give new tax breaks to North Sea oil and gas firms – describing the industry as “valuable and vital”.
The UK Government announced a series of measures in this month’s Autumn Statement to boost the offshore sector as it struggles to cope with falling prices and rising costs.
Mr Cameron, the Conservative leader, was questioned at yesterday’s liaison committee about how the tax cuts squared with the government’s environmental targets.
The prime minister insisted that the measures – including a 2% cut in the supplementary charge and new tax credits for exploration – were “environmentally sensible as well as economically sensible”.
He said: “In terms of the North Sea, you know, this is a valuable and vital industry for the UK.
“I think it’s right to have a care for the North Sea oil industry, it’s vital for our country and plays a role in giving us energy security.
“I think we should use tax measures to do what actually is, I would argue, environmentally sensible as well as economically sensible.
“It make sense to make sure you can get as much oil and gas out of oil fields as possible.
“It also makes sense that we encourage the industry to decommission oil and gas platforms in an environmentally sensible way.
“And the tax system has a use in making sure we achieve those two goals.
“So if the argument is that you shouldn’t do anything to help oil recovery in the North Sea by changing the tax system, I don’t accept that, I think that would a bad idea.”
The fifth carbon budget is due to be set in 2016, and Mr Cameron said he would resist measures which could increase heating and fuel bills.
He said that one of the stumbling blocks was the development of carbon capture and storage (CCS) technology to help clean-up the emissions from power plants.
Shell is currently developing plans for a world-leading CCS plant at Peterhead’s gas-fired power station.
The scheme is one of two to have received UK Government backing and remain in line for a slice of a £1billion fund.
Mr Cameron told MPs: “On carbon capture and storage, which is absolutely crucial if we’re going to decarbonise effectively, we’ve put a lot of money as a government into carbon capture and storage experiments, but we haven’t yet got, as I understand it, a workable system.
“So before we commit to the next stage (of the fifth carbon budget) we need to know more about whether gas in particular can play a role in a decarbonised electricity system, and until we know more about carbon capture and storage, I think it’s difficult to make that judgement.”
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