Scotland’s Deputy First Minister cautiously welcomed the ‘long overdue U-turn’ on the future of the North Sea, with the Chancellor finally acting on Scottish Government and industry calls for support for the sector.
John Swinney, MSP, said: “Measures to safeguard the North Sea are a step in the right direction for our oil and gas sector. The Scottish Government has been calling for such measures, along with the industry, for some time.
“Osborne’s measures are a glaring admission by the Chancellor that his policy for the North Sea has been wrong and the poor stewardship by the UK Government has had a detrimental impact on our oil and gas sector and the many people who work in the industry.
” It has taken the Chancellor four years to admit the tax rise he implemented in 2011 was a mistake. A heavy price has been paid for this mismanagement.
Full announcement: Osborne cuts N. Sea taxes by £1.3bn in Budget bonus for oil sector and invests £60m in new Energy Research Accelerator – http://goo.gl/8fUfpX
“I cautiously welcome the U-turn by the UK Government to take action on the future of the North Sea. We will study the proposals in detail. It is now essential that work is focussed on boosting investment and growth in the North Sea sector.”
At the CBI, Director-General John Cridland, commented: “The oil and gas industry, which supports 450,000 UK jobs and is a major contributor to GDP, has been given a much-needed boost with the reduction to the supplementary charge and other incentives.
“This will help address concerns over job losses and investment freezes, but pressures remain due to low oil prices.”
Dan Macdonald, Founder of independent business group, N-56, said: “The proposed overhaul of the tax regime as it relates to North Sea oil and gas is a much-needed contribution to boosting this sector.
“It is a great shame however that the tax increases previously introduced by the Chancellor, and the punitive tax burden it placed on the sector, had such a major impact, exacerbating the issue of global low oil prices and leading to the loss of thousands of jobs.
“It is also disappointing that the Chancellor did not heed our call for government policy and decision makers responsible for oil and gas taxation and regulation to be relocated from London to Aberdeen, moving them closer to the industry itself and echoing the situation in Norway; or for the delivery of a Hydrocarbon Investment Bank, boosting investment in the sector.
“We do however hope that this is the start of a new approach to UK government strategy for the oil and gas sector that takes a longer term view – and that industry and government work together to identify what else needs to be done to deal with short term challenges and the longer term opportunities.
“This would echo the strategic approach taken in Norway where policy has been developed by government, the industry, public sectors and others working collaboratively to identify the measures required to maximise the sector’s long term economic contribution, giving much greater support to the industry than from Government alone.”
Ken Ume, Director of Product Marketing, Petrotechnics – the operational risk management company for the oil and gas industry – said: “We are pleased to see support coming from the UK Government. However, in the current climate, it is important that operators continue to work on the dynamic between cost, risk and safety management.
“The historical impact of low oil price has been to upset that critical balance even more than usual and the consequences tends to manifest itself as increased operational risk, maintenance deferrals and eventually incidents.
“Government support and industry commitment by operators should form the foundation to deliver the innovative and cultural transformations to improve safer smarter operational decision making and working. Although a daunting task, success in managing this balance will result in getting more of the right work done, reduced operational risk and a healthy balance sheet.
Subsea UK, the body which champions the UK’s subsea industry, has welcomed the measures in the budget. The subsea industry generates annual revenues of £9 billion and supports around 55,000 jobs across the country.
Bill Edgar, Chairman, said: “All the measures combined are welcome, particularly the reduction in petroleum revenue tax. A temporary suspension of the supplementary charge for a period of at least two years is what was really needed to get things moving again in the low oil price era.
“However the reduction in supplementary charge combined with the investment allowances should stimulate new field developments where subsea engineering will play a vital role.
“Lower PRT should see increased investment in brownfield activity to maximise production and this is good news for the subsea inspection, repair and maintenance sector which has been feeling the pain in recent months.
“The seismic programme proposals will provide valuable information on areas of untapped potential which will largely be unlocked by subsea technology and expertise.”
OPITO, the oil and gas industry skills body, also welcomed the Budget. A spokeswoman said: “It was critical that action be taken to encourage investment, which will contribute to the retainment of skills held within the industry’s workforce.
“This will ensure the industry continues to be a positive contributor and source of employment in the years ahead. We are pleased the UK Government has listened to the industry’s concerns.”