The Scottish Government has demanded urgent reform of the tax regime for the North Sea oil sector, claiming such changes could support tens of thousands of jobs and boost investment by more than £40 billion.
Energy Minister Fergus Ewing said it is “vital” that the UK Government makes the changes in the Budget in March.
He insisted it is “crystal clear that it is the fiscal regime that needs to change”, as he called for action from Westminster.
But opposition MSPs at Holyrood said he had failed to address the impact of the falling price in oil on the North Sea.
The price of Brent crude yesterday slipped below $50 a barrel for the first time since 2009.
In the wake of the price fall, Labour MSP Lewis Macdonald said there is “little sense in the minister’s statement of the potential crisis we face”.
He said there was “nothing that is new” from Mr Ewing, and added: “The price of oil has fallen by half over the last few months and is now slipping below $50 a barrel. This is a new feature of the issues facing the oil industry and it must be a new feature of the Government’s response. We cannot simply have business as usual.”
Mr Macdonald demanded to know what assessment is being carried out by the Scottish Government on the impact of the falling oil price on the economy, jobs and business.
Fellow Labour MSP Jackie Baillie told the Energy Minister his statement had not included “one action that has changed or appeared since the dramatic fall in oil prices in the last few months”.
Labour claims that 15,750 jobs in the oil sector could be at risk – one in 12 jobs in the industry – adding the scale of potential job losses “is worse than the closure of Ravenscraig” steelworks.
She asked: “Given the price is now below $50 a barrel, what will the Scottish Government do to help ensure we don’t risk those jobs?”
Tory MSP Murdo Fraser said the Energy Minister “did not once mention the fall in the oil price” when addressing MSPs.
“What we have here today is yet another example of the minister refusing to take responsibility and trying to pass the buck entirely to Westminster for action,” he said. “That is not good enough.
“We support the call for a new investment allowance to be brought forward and we have made this clear to our colleagues in the UK Government.
“But what we want to know is this – what is this minister and this Government going to do themselves to help the industry, because this statement is totally devoid of a single, practical new measure.”
Mr Ewing argued fluctuations in the price of oil are nothing new, saying oil producers’ industry body Opec is predicting prices will recover to $110 US dollarsa barrel, before stabilising at about $100 “in the long term”.
He told MSPs: “Aberdeen has been here before. The oil price has been low, down to $10in 1999, more recently in 2007 and 2009 it has also been low, around the $40 to $50 mark.
“It does fluctuate, we’ve always said that, we have always recognised that.”
He stressed: “Aberdeen has been here before. It’s big enough and strong enough to survive. What it needs is the support from the UK Government that it has never had.”
Mr Ewing also stated: “It’s not really just us in the Scottish Government that are saying the urgent and pressing need is for the fiscal change. It’s the industry itself.”
Mr Ewing told MSPs the UK Government should introduce an investment allowance for the oil and gas sector, which he said would “potentially boost investment by between £20 billion and £37 billion”.
He also called for a phased reversal of the increases in the supplementary charge, saying this would “provide a strong signal to investors that the North Sea is open for business” and encourage investment of more than £7 billion.
He added: “Scottish Government analysis based on industry data shows that these measures can potentially support up to 26,000 and 5,600 jobs respectively.”
Mr Ewing also urged the UK Government to establish an exploration tax credit for the sector, in a bid to address the “historically low” exploration rate in the North Sea.
“Speedy action from the UK Government on these areas is vital,” he said. “Put simply, these measures must be delivered in the Budget this March.
“There is a long-term sustainable future for the North Sea and we are committed to using every lever at our disposal. It is time for the UK Government to follow suit.”
Former first minister Alex Salmond backed the prospect of new tax credits for exploration, saying such a scheme had had “a dramatic effect in Norway when it was introduced in 2005”.
Such a scheme, he argued, would do a “massive amount to protect and expand jobs now but also to discover new fields for the future”.
But Mr Salmond remarked there was a “tendency of the Treasury to move like lightning when prices are high to increase tax”, but “move at a snail’s pace when prices are low to reduce the tax burden”.
A UK Government spokesman said it had “used its size and strength to stand squarely behind this vital industry and will continue to do so”.
He said: “We have already produced a number of positive initiatives – such as brown field allowances and new field allowances. The Chancellor also used the Autumn Statement to announce a 2% reduction in the supplementary charge on oil and gas production profits. The broad shoulders of the UK economy means it can invest in the industry and support it even when the price of oil suffers significant falls, as we are seeing today.
“Officials are also working with industry with a view to consulting on detailed proposals for an Investment Allowance that would replace the existing suite of field allowances, and we are continuing to implement the Wood Review recommendations in the most efficient and practical way to make the most of our domestic resources.
“It’s clear that the oil and gas sector is far better placed to weather the current challenges as part of the UK, given the larger scale of our economy which can not only absorb these kinds of shocks more effectively but is also better placed to provide a stable fiscal regime.”
WWF Scotland director Lang Banks said the Sottish Government’s report on the tax changes it wants to see “sadly fails to mention the problems of climate change or the need for an orderly transition away from fossil fuels”.
He added: “To reduce the risk of dangerous global climate change, the vast majority of known fossil fuel reserves need to be left in the ground and not exploited.
“While it’s true that the oil and gas industry will continue to be a major contributor to our economy for some time, now is the time to be setting out a plan to sensibly transition away from dirty fossil fuels. We need to see a just transition that enables us to harness the engineering skills currently deployed in the North Sea and apply them to securing a slice of the multibillion- pound global decommissioning market and supporting a range of cleaner forms of energy production.”
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