TOMORROW’S Budget is “the most important” in terms of the future of the North Sea oil and gas industry, a leading figure in the sector has claimed.
Sir Ian Wood called for “really significant” action from Chancellor George Osborne to address a lack of confidence in the region and protect jobs. He warned that up to 80,000 jobs could be lost in the coming year if political steps were not taken.
Sir Ian, who founded the Wood Group and has conducted a review of offshore oil and gas recovery for the UK government, said: “Unless we get this right we will lose a huge amount to the UK economy and the UK will be the loser.
“I suspect this is the most important [Budget]. It’s very simple to say this is another downturn but the North Sea actually is a lot more vulnerable than it has been in the past.
“We’re coming to a very mature period in time, it’s a very expensive region and it’s extremely important, if we’re really going to get the next 30-40 years, if we’re going to get the 16 billion barrels out there, if we’re going to maintain anything like the present 380,000 jobs, this is a watershed, step-change Budget with a clear message to the industry to give it the chance to recover its confidence, for the UK Continental Shelf to become more competitive and start looking to investing again.”
The sector has been hammered by the plunging price of oil with hundreds of job cuts announced in recent months. Some oil services firms have taken extreme measures to cut costs with one – Talisman Sinopec Energy UK – having cancelled its subscription to Sky television on its rigs and replaced it with Freeview and BT Sport, saving £600,000 a year.
Sir Ian added: “This is a watershed moment. I know it’s a difficult Budget for the Chancellor but it’s absolutely essential that he’s prepared to make some significant reduction in the headline rate (of tax) as well as the investment allowances.”
Mr Osborne has already vowed to take further action to support the industry in his statement to MPs this week. Oil & Gas UK has warned that the North Sea will need £93 billion of investment to extract a further 10bn barrels of oil equivalent from the region. Exploratory drilling in the UK’s North Sea has fallen to just 12 wells last year, down from 44 in 2008.
Yesterday, Deputy First Minister John Swinney renewed calls for a fundamental change to oil and gas taxation ahead of the Budget statement.
Sir Ian said that failing to address the downturn could lead to “irreversible damage” in the industry.
He said: “I reckon if we don’t begin to recover the confidence in 2015 then I think that the 380,000 jobs could easily be down to 300,000 into 2016-17, so it’s a very important moment to try and turn the tide. Right now, an awful lot of North Sea assets are up for sale. That speaks for itself in terms of the lack of confidence in the region.
“I don’t think we’re too late but I think if we don’t do something really significant in this Budget then I think we are in danger of being too late.”
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