Lifeline for firms fighting to make cash in North Sea
THE North Sea oil industry was yesterday handed a major boost with tax breaks which could see billions invested in Scotland in the coming years.
Chancellor Philip Hammond wants to turn the fortunes of the sector around and unveiled plans to capitalise on decommissioning.
He has proposed a ‘world first’ which will allow oil and gas companies to transfer tax histories which will ‘facilitate the transfer of late life oil and gas assets’.
This means owners of mature producing fields can pass on their tax history to buy‑ ers when they sell their assets.
That allows the new firm, which may not have any tax history in the industry, to off‑ set the costs of decommissioning rigs against the tax paid by the original owner.
Experts believe this will encourage firms to invest in decommissioning in Scotland.
Draft legislation will be published in spring with ministers hoping to bring in the changes from November next year.
The UK Government will also launch a technical consultation on which could see a petroleum tax revenue cut for decommis‑ sioning costs incurred by a pre‑ vious licence holder.
Yesterday’s announcement came as it emerged Scotland’s oil and gas sector is set to raise £1.9billion less over the next five years than previously forecast.
The Office for Budget Respon‑ sibility (OBR) revealed officials had downgraded revenue fore‑ casts for the industry – as Philip Hammond unveiled his plans to make the North East a ‘global capital of decommissioning’.
The OBR, which provides inde‑ pendent estimates to the Treas‑ ury and Scottish Government, said oil and gas tax receipts will only raise £700million this finan‑ cial year – £200million less than previously forecast.
This comes despite previous Scottish Government predic‑ tions which claimed oil and gas revenues could bring in up to £11.8billion in 2017‑18.
In the Scotland’s Future White Paper, unveiled by Alex Salmond and Nicola Sturgeon in the run‑ up to the 2014 independence ref‑ erendum, it was claimed the North Sea would raise up to £7.9billion in 2016‑17.
The latest tax revenue figures published by the OBR show that there was no profit – despite previously forecasting the Treas‑ ury would receive £100million.
Last night Scottish Conserva‑ tive energy spokesman Alexan‑ der Burnett said: ‘This shows again just how deceitful the SNP has been on this issue. The Nationalists said an entire inde‑ pendent country could be built on North Sea oil.
‘Thankfully, Scotland said no to the SNP’s lies, and we have the strength of the UK economy to absorb this shock.’
The oil and gas sector in Scot‑ land had been lobbying for the changes along with Scottish Tory MPs and party leader Ruth Davidson.
She said the move could bring up to £40billion of investment and that Scotland could now become the ‘global capital of decommissioning’. She met Mr Hammond in September and took him to Aberdeen to show him how the changes ‘could drive a vital strand of Britain’s economy’. His announcement was welcomed by the oil and gas sector.
Deirdre Michie, chief executive of Oil and Gas UK, said: ‘We very much welcome the Chancellor’s action to enable the implemen‑ tation of transferable tax history.
‘This is a vital step that can bring in new investment to increase recovery from existing fields and fund fresh investment which is key to generating activ‑ ity for our hard‑pressed supply chain. It will also help extend the lives of many mature fields and position decommissioning.
‘This tax measure should help complete deals more quickly and in a more efficient way.’
‘This can bring in new investment’