FURTHER exploration and investment in the North Sea is only going to be made by operators with “substantial tax reductions”, Scotland’s First Minister has said.
Speaking ahead of an oil industry summit this week with the UK and Scottish governments, unions and industry figures, Nicola Sturgeon reiterated calls for tax reform from the Treasury.
Chancellor George Osborne said last week that he will do everything he can to support the oil and gas industry as it attempts to cope with falls in the oil price, but that the Budget is the right time to bring forward any tax changes.
Hundreds of job losses, pay cuts and freezes have been announced by companies including BP, Taqa, Petrofac and the Wood Group in recent weeks.
The Oil and Gas Summit will be held in Aberdeen on Monday.
Ms Sturgeon said: “The North Sea has made an enormous contribution to both the Scottish and UK economies over the last 40 years and I am certain this will continue for many years to come. However, it is vital that for the industry to succeed in the decades ahead we need fiscal and regulatory change in the oil and gas sector.
“In the short term, that means urgent action on taxation to give the industry the certainty and security it needs to protect jobs and investment.
“It is essential that the tax reductions are sufficient to instil investor confidence, as without that maximised recovery will not be achieved. This is because the extra investment needed for smaller fields, ageing infrastructure as well as much more exploration and appraisal is only going to be made by operators with substantial tax reductions.
“This summit is an important opportunity for joined up action from industry leaders, unions and government to ensure the industry has the brightest possible future.
“Investors need a strong signal that the North Sea is open for business and they need that signal now.”
Unions are also raising safety concerns over the number of job cuts being made in the industry.
Unite’s regional officer John Taylor, said: “The rush by firms to cut jobs and reduce costs is placing enormous pressure on the remaining workforce, and is harming the industry’s reputation.
“Unless something is done soon to stem the flow of job losses, key skills will be lost. Our worst fear is that these cuts could create the potential for another health and safety disaster on the scale of Piper Alpha.
“We are seeing already that in the shift to working three weeks on followed by three weeks off in an intensely harsh and demanding environment is taking its toll on workers. The climate of cost-cutting that is descending is not consistent with maximum public and worker safety.”
A Treasury spokeswoman said: “The Government is following developments in the North Sea closely and is working with industry leaders as a matter of priority to address the challenges the industry faces.
“In December, the Chancellor announced an ambitious programme of reform across the oil and gas tax regime, including an immediate cut to the Supplementary Charge, already in effect, and recognition that the tax burden must continue to fall over time.
“In January, the Government launched a fast-tracked consultation into a new streamlined investment allowance designed to reward investment in the North Sea.”
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