AS someone who has worked in UK and international oil and gas since 1983, I must respond to some of the points made by Patrick Harvie and also Gordon Macintyre-Kemp in last Friday’s National. To read these gentlemen, you would think the North Sea tax regime is all about giving dodgy tax breaks to multi-nationals.
Let us briefly reflect on how taxation on UK offshore oil and gas companies works. Oil and gas companies having production from fields in the United Kingdom Continental Shelf (UKCS) pay a ring-fenced corporate tax of 30 per cent and a further supplementary charge of
10 per cent. Prior to the 2016 Budget, rates were much higher and included an additional 35 per cent petroleum revenue tax for certain old fields. The normal corporate tax which applies to all other UK corporates is now 20 per cent. So even in the current relatively generous (by historic standards) oil and gas tax regime, UKCS oil and gas companies pay TWICE as much tax as other companies.
Naturally, offshore oil companies can take their capital and operating costs to reduce tax. There is nothing surprising about that. Patrick Harvie does have one interesting point on tax but he fails to develop it properly: because capital expenditure on development programmes is so huge (and exploration is so risky) oil companies are (rightly in my view) allowed to take most capital costs against revenue on a 100 per cent upfront basis.
This does indeed serve to depress tax revenue in the early stages of field production. As it happens, the last two years (2013 and 2014) of high oil prices saw some of the highest development expenditure in the history of the North Sea and that is a secondary reason (the main one being the collapsed oil price) for the dramatic fall in revenue.
What one must not forget is that rapid depreciation of capital costs on new fields implies that after a few years, there will be production which does not need to bear significant capital costs and (all things being equal) tax revenue should therefore rise again.
Beyond that, Patrick Harvie is quite wrong to claim that the North Sea tax system encourages exploration. There is indeed an investment allowance for supplementary charge but this only helps if you make a discovery and bring it on to production. There is a considerable debate in the industry as to whether we should take stronger steps to encourage exploration by instituting a same year exploration tax credit like Norway does.
The industry’s continuing Achilles' heel is precissely lack of exploration. It is interesting to note that production has recently risen again, and supply chain costs have fallen by around 50 per cent. It is not all doom and gloom. Our oil industry and its people are very resilient.
Harvie laments the fact that Scotland is failing to develop its offshore petroleum decommissioning business. There is partial truth in this. He is right to suggest that offshore decommissioning is a huge economic opportunity as our offshore infrastructure will need to be decommissioned some day. However, it is virtually impossible for government to favour Scottish or UK firms through local content requirements because of EU rules. In fact, it was the EU Commission who put paid to the DTI`s long-standing rules favouring UK industry in the early 1990`s. With Brexit, we can have this debate again.
To finish, I would like to note that renewables companies receive huge subsidies and pay only the regular corporate tax on profits. Additionally, they suffer from the curse of being intermittent energy sources. No doubt one day another fuel will replace oil and gas as being cheaper, more reliable and more abundant. However, that day is far off. The end of the oil industry, like the Brexit economic collapse or even the end of capitalism itself, is always imminent but it does have to be continually postponed.
William Ross, Address supplied
Oil and gas industry is no longer profitable for Scotland
WITH the GERS results dominating much of the debate around independence last week, it does make Scotland’s deficit and struggles with the oil price all too real.
Perhaps with the drop in the oil price it is time to move away from fossil fuels altogether as Partick Harvie has suggested and countries like Sweden are moving towards.
He correctly pointed out that the oil and gas industry is no longer profitable as it is wrapped in
multi-national companies and even draining public funding initiatives to sustain this dying industry.
Furthermore, companies like Ineos are ignoring potential environmental risks by demanding fracking to be made legal and even holding the government to ransom over employment practices (such as the strikes overturned back in 2013).
An industry designed to generate profit for CEOs, not for the interest of the country which houses it.
What is possible in an independent Scotland is to be bolder in our choices for our economy and freeing up funds by scrapping Trident, taxing our highest earners and holding private companies to account on profits and business taxes.
Our deficit could be cleared if an independent Scottish Government was to follow through on the aims and objectives of the current
SNP administration. Moreover, support from a positive left-wing rainbow parliament we would see pressures on moving away from fossil fuels and retraining oil and gas professionals by the Scottish Greens and perhaps see the return of representation from Socialist parties which helped mould the society we have today.
Brian Finlay, Rutherglen
I WAS pleased to read Ian Russell’s letter in yesterday’s National. He took the words right out of my mouth. His point about needing to keep society secular was well made.
We no longer allow iron and bronze-age thought systems to dictate to us on medicine, law etc, so why do we allow these same iron or bronze-age systems interfere with society on a religious level?
We need to base our morals and ethics in reality and not old stories. Stories, moreover, that continually contradict each other. Try squaring the Koran with the Mayan Popol Vuh. Religion is killing us as a species. Nations armed with nuclear weapons have leaders who talk to imaginary friends. At least Kennedy and Khrushchev were realists. For our species to continue, we must abandon irrationality or suffer the consequences.
Peter McAllister, Methil
EX-ATHEIST Jeff Fallow (Letters, Aug 29) can’t get away with the assertion that atheism is an invention of “English academics”. Atheist thought predates both Dawkins and England! And since thoughtful atheists usually don’t start wars to defend their particular brand of atheism, it’s a bit rich to try to discredit them by routinely describing them as “militant”. In exactly the same way, any woman who tries to challenge male privilege is routinely decried as a “militant feminist”.
“What do we mean by God?” A better question would be “In how many ways in our society, schools and government, is religion used to manipulate and subjugate us?”
Derek Ball, Bearsden
NOW let us work out what makes these atheists militant. Have they killed anybody for their religious beliefs? Nope. Have they attacked churches or mosques? Nope.Have they blown themselves up in the name of atheism? Nope. Have they blown anybody else up? Nope.
If somebody is fanatical about their religion they are called devout. If they express views questioning God they are called “militant”.
Walter McLean, Anniesland
I WAS intrigued when I read that a small Spanish publishing house had won the right to print copies of the Voynich manuscript (The National, August 22).
As a keen amateur linguist who has dabbled in ancient as well as modern languages, I find this a most tantalising and maddening book and would love not only to know the secret of what it contains but also to examine it at my leisure and make an attempt to translate it myself.
This is why I am so disappointed that these copies will only be available to a few owing to the ridiculously high price of each copy. I wonder, would it be impossible to produce paperback editions so that ordinary people like myself might have the opportunity to have a really good look at it?
Charlotte Hunter, Ancrum, Jedburgh
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