Hopes that the Treasury might deliver a boost to the beleaguered North Sea in today’s Spring budget have been raised by plans to help the “vital” oil and gas industry.
Chancellor Philip Hammond will announce the formation of an expert panel to discuss proposals that will increase North Sea production and investment through tax reliefs.
Both the industry and Scottish politicians have been demanding that the UK government deliver further support to oil and gas through the tax system, ensuring that ageing North Sea fields are in the “right hands” of companies that will spend millions of pounds of investment.
Last night industry trade body Oil and Gas UK said the development “appeared to be positive” and that it hoped more detail would be provided today.
Scottish Finance Secretary Derek Mackay also welcomed the proposals but added that he hoped the expert panel is “not simply another talking shop”.
Aberdeen South MP Callum McCaig accused the government of displaying an “alarming lack of urgency” and said the panel had to get down to work quickly.
For months, industry leaders and politicians have been calling for the Chancellor to allow decommissioning tax relief to be transferred to the new owner when an asset is sold.
They said the reform would make it easier to sell oil and gas fields and attract badly needed new investment to the North Sea, which has been hit hard by low oil prices.
OGUK said in its latest outlook report, published yesterday, that a recent wave of multi-million pound asset sales involving BP, Ithaca Energy and Shell had been agreed in spite of the current system.
In response to yesterday’s announcement by the Treasury, OGUK chief executive Deirdre Michie said: “This appears to be a positive development and we look forward to hearing more detail in the Spring Budget statement.
“The sale of oil and gas fields is a complex issue and the tax regime can help facilitate the movement of assets and support maximising economic recovery.
“We have been working closely with Treasury and the Oil and Gas Authority to identify where the tax regime needs to improve. It is clear that the inability to transfer tax relief between the seller and purchaser of oil and gas fields is problematic.
“… We hope that we can work together with Treasury and the expert panel to progress reform as soon as possible, and certainly with the aim of having measures in place by the Autumn Budget this year.”
Scottish Finance Secretary Derek wrote to the Chancellor earlier this month to call for improvements to the decommissioning tax relief system.
Mr Mackay said last night: “It is encouraging that the UK Government has finally listened to the Scottish Government about the failings of the decommissioning tax regime.
“This is an area where we have repeatedly called for reform and which the UK Government have been slow to react, therefore it is important that this group comes to a swift conclusion and is not simply another talking shop.”
Mr McCaig, the SNP’s energy spokesman, said reforming the system could help put oil and gas fields in the right hands.
But Mr McCaig said the UK Government had been too slow to act and complained about a perceived lack of action from Westminster on boosting exploration.
He said: “The industry has been calling for action on this for well over a year. The fact that the chancellor is only getting to the stage of setting up a group to discuss this demonstrates an alarming lack of urgency.
“… These measures need to be implemented and the industry experts brought in by the end of the year, as this Tory Government cannot be allowed to stall yet again on supporting this vital industry.”
Liberal Democrat Alistair Carmichael said: “The North Sea oil crisis left hundreds of thousands of people out of work, hitting the pockets of too many families.
“It remains imperative that action is taken to get people back to work. That means protecting skills and providing the training to enable people to get on in life. A boost for Scotland in the budget is therefore welcome news.”
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