Granite City oil expert calls for Norway-style tax credit to boost North Sea industry

Professor Alex Kemp, University of Aberdeen
Professor Alex Kemp, University of Aberdeen

The SNP is supporting the call for a refundable tax credit to encourage exploration in the North Sea after leading industry experts highlighted the benefits of such a move. 


Alex Kemp, professor of petroleum economics at the University of Aberdeen, said that the case for a refundable tax credit is stronger in the current circumstances – and highlighted the fact that the measure “increased exploration substantially” and increased the number of discoveries when enacted in Norway.


Prof. Kemp said: “The case for an exploration tax credit now that we are at $50-barrel rather than $100-barrel is clearly now much stronger, because smaller companies will have difficulty raising finance and they are often the explorers.


So the case for a refundable tax credit, like in Norway, is stronger now than it was at $100-barrel.

 “When I talk to our Norwegian counterparts there is a unanimity that the refundable tax credit has increased exploration substantially, and more importantly has increased the number of discoveries – some of which are commercial.


The need for a fiscal regime which supports the industry was also underlined by Malcolm Webb, Chief Executive of Oil and Gas UK, who said: “I really don’t think it is any coincidence that exploration fell off a cliff when the supplementary corporation tax was jacked-up to 62%, so a move there is going to help.”


SNP MSP Mark McDonald said: “This further expert agreement on the need for an exploration tax credit to help support our oil industry is welcome – and should be the wake-up call the UK Government needs to finally take the serious action the industry needs. The SNP have been calling for such a move since the start of the year.


That Professor Alex Kemp has supported plans for a refundable tax credit is particularly welcome. The measure has achieved real results in Norway – with a substantial increase in exploration activity while exploration rates in the Scottish sector of the North Sea are at historically low levels.  

 “Westminster should finally learn lessons from Norway and take the effective action the industry clear needs to boost exploration and support jobs.


“The sensible measures proposed by the Scottish Government have would help support the jobs of thousands of workers. Further Westminster delay and inaction would be completely unacceptable – it’s time for them to step up to the plate and give our oil industry and hard-working staff the support they deserve.”

The Scottish Government has proposed three key measures to support the industry – an investment allowance to provide support for fields that incur higher costs to develop, an immediate reversal of the increase in the Supplementary Charge implemented by the UK Government in 2011 and the introduction of an exploration tax credit to help increase levels of exploration and sustain future production.

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