THE UK Government can no longer ignore calls for urgent tax changes that could spark a “resurgence” in the North Sea oil industry, Nicola Sturgeon has said.
Scotland’s First Minister claimed it was clear that “urgent fiscal stimulus” was needed to increase exploration work.
Senior UK Government ministers have already hinted that measures to help the North Sea could be included in George Osborne’s Budget next month.
But politicians at Holyrood are continuing to press the case for action to help the crucial industry.
As part of that, Ms Sturgeon has taken her Scottish Cabinet team to Aberdeen, where the oil industry is based, visiting a pipeline support service provider in the city with Deputy First Minister John Swinney.
The First Minister argued that “simple steps” taken by ministers in Norway a decade ago had reversed a decline in oil and gas exploration work in the country.
With the equivalent of 24 billion barrels of oil said to remain in the North Sea, she said action was needed to encourage companies to continue to invest in the area.
The Scottish Government is calling for the headline rate of tax on the industry to be reduced as well as the introduction of an investment allowance and a new tax credit for exploration.
Ms Sturgeon said: “I believe that North Sea oil is a fantastic asset for Scotland and will continue to be so for decades to come.
“There are up to 24 billion barrels of oil and gas equivalent remaining, and it is essential that we have a stable and proportionate fiscal regime which encourages the investment, innovation and exploration required.
“But we need action now from the UK Government to help ensure we maximise future production and economic recovery.
“Quite frankly, the UK Government has failed to address the exploration problem in the North Sea.”
The First Minister, speaking as she visited Pipelines 2 Data in Aberdeen, added: “It cannot be clearer that urgent fiscal stimulus is required to improve the exploration outlook.
“Around 40% of production is expected to come from new field developments by 2018: that’s only three years away.
“Fiscal measures to incentivise exploration, coupled with the appropriate regulatory expertise, have the potential to drive forward a resurgence in exploration in the North Sea.
“We only have to look at the situation in Norway in 2005 to see that simple steps can be taken to restore a decline in exploration. In the course of three years, the introduction of the exploration tax credit saw the number of exploration wells increase an incredible fourfold.
“We have also called for the reduction in the headline rate of tax in the North Sea and the introduction of an investment allowance, all of which have the potential to provide an important signal to investors, increase the attractiveness of North Sea exploration projects and enhance the competitiveness of the sector.”
She insisted that politicians at Westminster “cannot continue to ignore calls from the Scottish Government and the industry themselves” for changes.
Ms Sturgeon said industry expert Sir Ian Wood had recently warned that as many as six billion barrels of oil reserves could be lost “unless radical measures are taken by the UK Government”.
The First Minister pledged: “We will continue to call on the UK Government to maintain the momentum for fiscal and regulatory change in the oil and gas sector, both of which are critical to prolonging the life of the industry beyond 2050 and maximising the total value generated in the economy.
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