Chancellor George Osborne was yesterday warned that the upcoming Budget represents “a final chance” to reduce and simplify the tax burden on North Sea operations.
Malcolm Webb, chief executive of industry body Oil and Gas UK, told delegates at a summit in Aberdeen that the struggling offshore sector is headed towards a “cliff edge” in terms of investment.
Mr Webb argued that the UK Continental Shelf (UKCS) remains a “major resource” and it would a “national disgrace” not to explore and produce the remaining oil, whether forecasts are for 16, 20 or 24million barrels.
He said: “On tax, we all know what needs to be done and I beg politicians not to make a political game of it.
“The upcoming Budget presents a final chance to get this right, half measures will not do and there will not be a second chance.
“In order to be encouraged to persevere on the UKCS, the industry needs to see cross party alignment for a permanent reduction and simplification of the tax burden on this industry. If not, many will quietly turn away and invest elsewhere.”
Oil and Gas UK has previously called for the entire supplementary charge tax to be abolished in the Budget.
The additional levy was raised from 20% to 32% in an infamous raid on the sector by the Conservative led government in 2011.
Mr Osborne said in his Autumn Statement in December that it would be cut from 32% to 30%, and recently said he was “sure” there would be further steps in the Budget.
Mr Webb said the overall fiscal regime was “outdated, complex and unpredictable”, including tax rates ranging from 60% to 81%.
He said: “The industry is currently headed towards a cliff edge on investment spend in 2017. And as we have repeatedly pointed out, the industry has already fallen down one cliff. In 2011, the number of exploration wells slumped to a miserly 14 and has not recovered since.
“Inevitably, the number of appraisal wells has now also slumped – almost to zero. This is not a good place to be.”
Scottish Secretary Alistair Carmichael insisted that the UK government was working to make the changes to the fiscal regime which the industry has been calling for.
He said: “We understand the significance of this moment. The message is being heard.”
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