Oiling our future

The North Sea oil and gas sector in Scotland has been hitting the headlines over the past few months as the global oil price fluctuates and thousands of jobs hang in the balance. The issue is one of much concern to people across Banffshire and Buchan Coast.

Last week I spoke in a debate addressing the challenges facing the sector and what the Scottish Government is doing to support it. But this work is being done despite a clear lack of intention from Westminster to improve the situation and invest in our future with meaningful action.

In January, the First Minister set up the Energy Jobs Taskforce to maintain jobs where possible, and to mitigate the potential impact of any losses. But the Oil and Gas UK Activity Survey published on 24 February has highlighted the problems with investment and exploration that have been created by a lack of movement on the part of the UK government, including a refusal to review high tax rates.

Sources within the industry have been scathing in their view of the situation.

Malcolm Webb, Chief Executive at Oil and Gas UK, writing in Energy Voice on January 5th said:

“There have been times when I have been truly bewildered by the way in which successive governments have treated the UK offshore oil and gas sector.

“We have experienced repeated and increasingly aggressive tax hits, pushing taxation rates on production up to a maximum of 81 per cent, while at the same time an under-resourced, overstretched regulator failed to deliver the expert and engaged stewardship which this mature and complex basin so badly needs.”

He also commented on the UK Government’s ‘revolving door’ of ministers responsible for oil and gas – with 35 different Energy and Treasury ministers taking responsibility for the industry in the last 14 years.

It is for this reason that the Scottish Government has supported calls for the UK’s key oil and gas industry figures to be moved to Aberdeen to tackle the issues. Ministers have backed a letter to George Osborne from the independent N-56 business organisation, ahead of the UK Government Budget, setting out a “five-point plan” for the industry.

This includes short-term tax breaks, a ­hydrocarbon investment bank, a Norwegian-style long-term approach and more support for offshore fracking, and the Aberdeen city base for oil industry policy and decision makers – where development of the industry is properly understood.

Alex Russell, Chair of the Oil Industry Finance Association, writing in the National last month called the UK Government “very slow”, adding:

“They are trying to time it just prior to the General Election. They are playing politics with the future of the North Sea oil industry… the pace of change from Westminster has been just dire, absolutely dire.”

It is important to emphasise that the Scottish Government has used every means within its power to support the oil and gas industry in Scotland. Last November, the Oil and Gas Innovation Centre (OGIC) was launched, providing funding of £10 million over five years. In 2013/14, Scottish Enterprise provided £15.1 million in funding to the oil and gas sector, and the economic agency now has 344 Oil and Gas companies on its portfolio.

Now the UK Government needs to act.

George Osborne announced in his Autumn Statement a reduction in the supplementary charge by two per cent and stated the UK Government would “aim to reduce the rate further in an affordable way”. However no details have been given about the scale of future cuts or when they will occur.

North Sea Oil still represents huge opportunity for Scotland but we need to make sure that everything is being done to ensure the industry is fully supported in Scotland for now and for years to come.