Against the backdrop of an oil price which has halved in the past year; where investment in the UKCS is forecast to fall dramatically over the next 2 years; and where exploration activity is at a worryingly low level, the pressure on the Chancellor has been mounting for the past few months.
In the Autumn Statement the reduction in supplementary charge of 2% fell far short of industry hopes. However, the comments by Danny Alexander, Chief Secretary to the Treasury, the following day were more encouraging, signalling a fundamental change in policy for UK oil and gas exploitation.
No longer is the focus to be on raising tax revenues but rather on the macro economic benefits of maximising the hydrocarbons extracted from the UKCS. The Budget tomorrow represents the first opportunity for the government to put this new policy into action.
Urgent reform of the oil and gas tax regime is essential to encourage exploration and ensure the North Sea is competitive for investors, Deputy First Minister John Swinney said.
