EDINBURGH, UK – Scottish Energy Minister Fergus Ewing has published a report calling for reform of the North Sea oil and gas taxation regime.
The report proposes fiscal changes to support investment and encourage exploration.
Its three main proposals are:
- An investment allowance to provide support for fields that incur higher costs to develop
- A phased and timetabled reversal of the increase in thesupplementary charge introduced by the UK government in 2011
- An exploration tax credit to help increase levels of exploration and sustain future production.
Ewing said: “We are calling for an investment allowance – as recommended previously by the Scottish government in 2011 and Scotland’s Oil and Gas Expert Commission last year. This will simplify the fiscal regime and potentially boost investment by between £20 billion and £37 billion [$30.3 billion and $56 billion] – supporting up to 26,000 jobs annually.”
Malcolm Webb, CEO of industry association Oil & Gas UK, responded: “Sharply falling oil prices are now adding to the significant challenges theUK offshore oil and gas industry was already facing. The current tax regime is one such challenge and a key factor for companies making decisions on investment and activity. All helpful insights on that issue are welcome, so we will certainly respond to the Scottish government’s request for views and information.
“We would hope this exercise will complement the crucial work already well under way between the UK Treasury and the industry to make urgent changes to the UKCS [UK continental shelf] tax regime in order to both sustain and encourage further investment.
“If the Treasury’s new Investment Allowance is to have any impact it must be implemented by Budget 2015 at the very latest. However, with theoil price now at around $50/bbl, it is becoming increasingly apparent that this measure is not enough and a significant reduction in the headline rate is required.”