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13/06/2016

March budget a ‘missed opportunity’ for oil and gas sector

Words: Laura Edgar
Keith Brown

The UK Government must “urgently” provide more fiscal support for the exploration of oil and gas, Scotland’s cabinet secretary for economy, jobs and fair work Keith Brown told a conference today.

Brown, who holds responsibility for energy, energy consent and infrastructure, gave a speech at the Oil and Gas UK’s Open for Business conference today (14 June) in Aberdeen.

The Scottish Government said exploration levels are currently at an “all-time low”, with recent projections for 2016 estimating half number of exploration wells compared with 2015.

Brown told delegates at the conference that the UK Government must “take action” by considering how to best encourage exploration through the provision of financial support. Additionally, the Scottish Government, he said, plans to highlight the lack of progress made by the UK Government on its budget commitment to use the UK Guarantees Scheme for oil and gas infrastructure to secure new investment in assets of strategic importance.

He said: “The Scottish Government is engaging closely with the industry, trade unions and regulator to overcome the current challenges to ensure a long-term future for the sector.

“However, the UK Government retains control of the key taxation levers affecting the sector and must take the action needed to protect businesses and jobs. Although the fiscal changes announced in the March budget were welcomed, it was ultimately a missed opportunity as a number of challenges remain.”

Brown also said that exploration is the “future lifeblood” of the industry, without which “we will never realise the 20 billion barrel potential of the North Sea”.

“Higher rates of exploration are crucial if we are to maximise economic recovery and avoid premature cessation of production.”

Brown referred to loan guarantees, something the UK Government promised to consider in the Budget.

“Access to finance continues to be considered one of the greatest challenges in the basin, but we have heard no further details since the Budget on these critical issues. The UK Government must provide more clarity on their use - they could potentially be used to ensure critical assets and infrastructure remains operational, preventing systemic risks.”

* This story has been updated since its publication yesterday (13 June).

Image credit | Shelter UK

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