By DARA BUTTERFIELD
The leaders of both the major fossil-fuel renewable energy associations in the UK have welcomed Chancellor Osborne’s budget for ‘positive steps”.
Oil & Gas UK described the budget announcements as ‘both sensible and far-sighted’ saying that the changes will help to sustain an industry which supports hundreds of thousands of British jobs.
However, while the REA welcomed the commitment to investing in renewable energy, it described this as a ‘missed opportunity’ for the government to take this further.
“The procurement of renewable energy is crucial to meet the UK’s legally binding energy targets in a cost-effective manner, improving energy security and delivering skilled jobs and inward investment.
“However, our members will feel strongly that there was a missed opportunity to spread this commitment more widely to renewable power generation and renewable heat – both of which would thrive under a more stable regulatory framework which is fairer to smaller suppliers.
“We challenge the next government to level the playing field for emerging technologies and create a policy framework which provides long-term certainty for investors.”
Malcolm Webb, Chief Executive, Oil & Gas UK, said: “This budget lays the foundations for the regeneration of the UK North Sea. The industry itself must now build on this by delivering the cost and efficiency improvements required to secure its competitiveness.
“These measures send exactly the right signal to investors. They properly reflect the needs of this maturing oil and gas province and will allow the UK to compete internationally for investment.
“With exploration drilling having collapsed to levels last seen in the 1970s, the announcement of £20 million for the newly formed Oil and Gas Authority to commission seismic and other surveys on the UK continental shelf (UKCS) is a very positive step.
“Along with substantial industry efforts to address its high cost base and the regulatory changes now in train to provide more robust stewardship, the foresight shown by the Chancellor in introducing these measures, will, we believe pay real long-term dividends for the UK economy.
“I commend the Government for its long term vision. The industry looks forward to working in the tri-partite approach with the Treasury and the Oil and Gas Authority to maximise economic recovery of the UK’s substantial remaining oil and gas resource. Stability and predictability will be key for the industry to support British investment, jobs and energy security for decades to come.”
The Chancellor confirmed a ten percentage point reduction in the supplementary charge, which reduces the headline rate of tax to 50 per cent. The rate of petroleum revenue tax (PRT) is also being cut by 15 percentage points from next year, resulting in a headline rate for PRT-paying fields of 67.5 per cent. The new, simplified Investment Allowance will also provide a further engine for growth and investment.
Oil & Gas UK estimates that, in the near-term alone, these measures could incentivise an additional £4 billion of capital investment, enabling the development of 500 million barrels of oil equivalent which at today’s prices are worth £20 billion.