Energy minister Andrea Leadsom has revealed “further fiscal measures” to support the oil and gas industry are “on the table” – prompting speculation of a positive announcement in the Budget.
The Tory front bencher also highlighted a series of meetings between the UK Government, the Oil and Gas Authority (OGA) and North Sea operators at the end of last year to discuss future steps.
She was speaking in the Commons in response to a question from SNP MP Hannah Bardell, who raised the prospect of additional tax reliefs, including a refundable tax credit, to incentivise exploration.
The remark was widely welcomed, with Aberdeen South MP Callum McCaig, the SNP’s energy spokesman at Westminster, calling it “encouraging”.
Shadow Scottish secretary Ian Murray said he suspected options were being considered for the Budget, but added it would depend on the resources available.
Northern Isles MP Alistair Carmichael, a former Scottish secretary, said he hoped the UK Government would act on “any reasonable request” from the industry.
Mrs Leadsom said the latest projections showed that in 2030, oil and gas would still be a core part of the UK’s energy mix, providing nearly 70% of primary requirements.
SNP business spokeswoman Ms Bardell said Professor Alex Kemp at Aberdeen University had described further tax reliefs as “clearly necessary to exploit the remaining physical potential”.
Mrs Leadsom replied: “You will be aware that the chancellor has already improved the fiscal regime significantly to encourage further exploration in the North Sea basin.
“Further fiscal measures are certainly on the table, but so too are vital measures such as getting production costs down, making more efficiencies and sharing infrastructure.”
Asked by Tory MP Peter Aldous for an assurance she would leave “no stone unturned”, Mrs Leadsom insisted the government was “totally focussed” on looking at what could be done “in all areas”.
Liberal Democrat home affairs spokesman Mr Carmichael said the UK Government must give the OGA the “space and support” it needs to do its job.
He added: “The pressures brought from the current low price of oil are having a real impact on North Sea operations.
“There is still a strong, viable industry in the North Sea but it needs support at this time.”
Labour’s Mr Murray said only with tax incentives could the assets of the wells be maximised.
He stressed the “short-term fix” need not be a giveaway, as it could come in the form of refundable tax breaks.
Mr McCaig said: “At long last we have heard a positive response to SNP pressure on incentives for oil and gas exploration in the North Sea.
“It’s something we have been calling for for a long time and the industry has. I very much hope this signals some movement.”
Mike Tholen, Oil and Gas UK’s economics director, said the Norwegian exploration tax credit had helped new entrants to the Norwegian Continental Shelf.
But he added: “It is considered that the measure would have little material benefit in the UK given the difference in tax rates between the two countries.”
He said measures such as the current funding of seismic and the review of licensing would help maximise the chance of successful exploration.
He added: “Whilst existing tax allowances have unlocked some new developments, with the oil price remaining low for a sustained period we will need to work with Treasury to see what additional
measures may be required to make the UK Continental Shelf yet more fiscally competitive.”
In last year’s March Budget, Chancellor George Osborne unveiled a £1.3billion package for the North Sea.
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