Confidence plunges as North Sea firms call for taxation change

Confidence among North Sea oil and gas companies has plunged to a six-year low, according to a report published today that calls for a change in tax laws to support mature fields.

The survey reveals that more operators and contractors are pessimistic about their UK continental shelf activity than are optimistic

The 21st oil and gas survey by Aberdeen & Grampian Chamber of Commerce, sponsored by law firm Bond Dickinson, reveals that, for the first time since 2008, more operators and contractors are pessimistic about their UK continental shelf (UKCS) activity than are optimistic.

Almost two-thirds of all firms surveyed said the government’s top priority with regard to the sector should be a revision to the fiscal regime to ensure it encourages exploration and extraction.

Uisdean Vass, oil and gas partner at Bond Dickinson, said the survey was a stark warning for the government: “Costs are making exploration and production in the UKCS, relative to other petroleum provinces worldwide, increasingly less economical, exacerbated by low oil prices and high tax rates ranging from 62 per cent to 81 per cent paid by producers in the UKCS.

“It is vital that a high level of activity is maintained in the North Sea because, as well as its direct importance for employment and the economy, it is a testing and training ground for personnel and technology which are exported around the globe. Not addressing problems now could mean thousands of jobs will be lost to Scotland in the years ahead.”

But even amid the warnings, slightly more than half of operators and contractors reported increases in their headcount in the past year, with a particularly strong demand among firms for permanent staff.