THE UK’s Oil and Gas industry faces a “perilous future” unless more can be done to encourage exploration.
Speaking to the National on the first day of the UK Oil and Gas conference in Aberdeen, Professor Peter Strachan from Robert Gordon’s University called on the Treasury to scrap the industry taxes that stood in the way.
Professor Strachan was responding to a speech by the First Minister where she called for the Treasury to rule out tax increases and give the industry stability.
Addressing delegates at the conference Sturgeon again criticised the UK Government’s decision to impose a substantial tax hike on oil and gas profits five years ago.
“The UK Government should make a commitment that there will be no tax increases for the industry for the whole of this UK Parliament” said Sturgeon. “Even more importantly, it should promise that all significant policy proposals will be subject to consultation with the industry and the Oil and Gas Authority.”
The First Minister continued: “The UK Government should demonstrate that it has learnt from the mistakes of five years ago. Working in partnership is far more effective than operating in isolation.”
Sturgeon also called on the Treasury to look at finding tax incentives for exploration for the industry, as the Government had promised it would do in December 2014.
Professor Strachan said: “In helping to create the sort of fiscal stability that the industry now needs and the First Minister now strives for, Westminster must bring the punitive North Sea fiscal regime into line with all other UK industries. It must pay the same rate of corporation tax. Both the Supplementary Charge and Petroleum Revenue Tax should be immediately abolished. Without new exploration the industry has a perilous future. A new exploration tax credit system should also be introduced along the lines called for by the Scottish Government back in January. Exploration is the life-blood of the industry”.
The Professor continued: “In the past year the business environment of the North Sea has changed so dramatically that in order to maximise economic recovery an urgent review of the much-heralded Wood Review itself should also be a key priority for the Department of Energy and Climate Change and the newly-established Oil and Gas Authority regulator.
“In the new era of low oil prices, industry restructuring, cost reduction and industrial relation tensions a new set of expert recommendations are desperately needed. It is now time for Westminster and the industry regulators to think outside of the box and listen more closely to a wider set of industry stakeholders including the First Minister and Scottish Parliament.”
Earlier in the day, Sir Ian Wood, the former chairman of the Wood Group, told BBC Radio Scotland that the industry was undoubtedly in the “final third” of its life.
Sir Ian suggested that there may be some stability with the oil price sitting at $60 a barrel “for possibly quite a long time, maybe two to three years”.
He said: “We’ve now got to assume the price isn’t going to rise significantly and we’ve got to buckle down and make the industry effectively viable at its present level.”
Sir Ian’s call was echoed during the opening address by the new Chief Executive of trade association Oil and Gas UK, Deirdre Michie.
During her speech Michie reminded the Treasury that the industry stood “head and shoulders above the rest” when it came to economic contribution and “value to the country”.
Michie said: “We have paid more to the Treasury than most other industrial sectors, we generate hundreds of thousands of skilled jobs, we have a vibrant supply chain, at home and abroad, and make a key contribution to the UK’s security-of-energy supply.”
Michie continued: “Over the last 20 years, the price has averaged at $62 per barrel and the forward curve is between $65 and $75. Therefore, it is not unreasonable for the North Sea to set out its stall at being sustainable in a $60 world.
“As a target, it’s one that we as a trade association can champion, government can align with and the regulator can pursue as an enabler, for example, to focus on key infrastructure.”
Meanwhile trade union Unite has warned that the sheer number of redundancies and amount of efficiency savings may put health and safety at risk
Unite regional officer Tommy Campbell said: “North Sea employers are trying to squeeze every last drop out of the offshore workforce.
“Attacks on jobs and working conditions could have devastating consequences for offshore workers and for safety.
“People are already telling us that they are operating at maximum capacity and these cuts could put workers in jeopardy.”
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