MORE than 700 new jobs are expected to be created following the announcement of a new tax allowance aimed at boosting investment in the North Sea oil and gas sector, the UK Treasury said.
Chancellor George Osborne confirmed during his Budget statement on Wednesday that a new allowance would be introduced for the region’s most challenging high pressure, high temperature (HPHT) fields.
Under the scheme, which is designed to encourage big development projects and exploration across the central North Sea, for every £1 billion a company spends on such projects, it will get at least £200 million in tax relief.
According to the Treasury, two major oil and gas producers - Maersk Oil and BG Group - have announced that the HPHT allowance will help enable the development of two new projects, which will lead to investment of £6 billion across new fields.
Both producers estimate that these big projects will create more than 700 new jobs, while close to 8,000 more jobs will be supported along the supply chain, the UK Government said.
These jobs will be spread across the country, with about half likely to be in Scotland.
Maersk Oil chief executive Jakob Thomasen said: “The proposed HPHT allowance provides a welcome boost to new and challenging projects and can contribute to energy security, jobs and the economy.
“Importantly, it can also help to stimulate a new generation of North Sea exploration.”
Andy Samuel, managing director of BG Group’s European upstream business, said: “BG Group welcomes the new proposals which improve the prospect of the Jackdaw gas discovery being developed.
“If approved, Jackdaw would make a significant contribution to UK gas security of supply, support thousands of UK-based engineering and construction jobs and help develop highly technical skills for many UK companies.”
HPHT fields have been given a new allowance because exploration wells in these fields are more technically difficult and expensive to drill.
The gas produced from these new fields could provide 10% of the UK’s gas demand when operating at peak rate, officials estimate.
The new HPHT allowance builds on recommendations from former oil industry boss Sir Ian Wood, aimed at maximising economic production of oil and gas, the Treasury said.
Mr Osborne said: “Backing businesses who in turn create jobs is part of our long term plan to fix the economy.
“The Government’s continued support for the oil and gas industry has led to billions of pounds of investment, and tens of thousands of jobs across the country.”
His coalition colleague, Liberal Democrat MP and Chief Secretary to the Treasury Danny Alexander, will open Maersk Oil’s new offices in Aberdeen today.
A Scottish Government spokesman said: “To realise the North Sea’s full potential then we need long term predictability and stability for the oil and gas industry, something that the UK Government has failed to achieve over the years.
“Sir Ian Wood’s recent report into the future of the North Sea has confirmed that fiscal instability has been a significant factor in basin underperformance.
“In contrast to the approach taken by the UK, the Scottish Government is clear on the need for closer co-ordination and co-operation between the industry and relevant bodies.
“That is why we have called for the new regulator for the North Sea recommended in Sir Ian’s report to be based in Aberdeen, and why we have proposed that the new energy department to be formed in an independent Scotland should be co-headquartered between Aberdeen and Glasgow.
“The independent expert commission on oil and gas set up by the Scottish Government is due to report in the spring, and will make specific proposals in relation to the North Sea fiscal regime, as well as considering Sir Ian’s recommendations in full.”