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UK Government must do more to help oil industry, Holyrood minister says

Published 14/06/2016

Keith Brown said measures set out to help the oil and gas industry in the March Budget were not being taken forward quickly enough
Keith Brown said measures set out to help the oil and gas industry in the March Budget were not being taken forward quickly enough

The UK Government must take further urgent action to boost oil and gas exploration in the North Sea, according to Scotland's Economy Secretary.

Keith Brown said measures set out to help the struggling industry in the March Budget, while welcome, were not being taken forward quickly enough.

He told the third annual Oil and Gas UK conference in Aberdeen the Budget had been a "missed opportunity" in not addressing the "critical challenge" of increasing low rates of exploration.

Mr Brown said: "From our point of view, the UK Government cannot consider the last Budget, welcome though some of the measures in that Budget are, as a job done.

"Further fiscal support for exploration is needed and it is needed now.

"I think the one thing more than anything else, from talking to people in the industry and to colleagues in government, is that the pace, the urgency, of what is required has not been taken forward by that Budget and real urgency is required."

Mr Brown said there was also a lack of urgency in addressing problems with access to finance faced by some in the industry.

He said: "There is that period in the next few years when you really have to take action now in terms of these loan guarantees to see the investment that's required to keep thing moving along.

"It's quite clear that access to finance continues to be considered as one of the greatest challenges in the basin but we've heard no further details since the Budget on these critical issues.

"The UK Government has to provide clarity on their use. They could potentially be used to ensure critical assets and infrastructure remains operational, preventing systemic risks."

Deirdre Michie, Oil and Gas UK chief executive, also issued a "call to action" on short-term activity stimulation for exploration.

She said: "Maximising economic recovery means we need to recover more of what we have already found as well as finding more, so we do need to kick-start activity in these vital areas to keep the hopper replenished and future production flowing.

"Stimulating activity is also key to providing some immediate relief and support to the supply chain and if we don't do something urgently then the current hiatus in exploration and appraisal will become the norm, with the basin focusing mainly on production and decommissioning, our world-class supply chain can disperse and relocate as business take their focus elsewhere."

In a video address to the conference, Damian Hinds, Exchequer Secretary to the Treasury, said the £1 billion package for the industry in the March Budget had en sured a "truly globally competitive tax regime".

He said: " I have to say I know of no other government in the world that has responded in such a way, on such a scale, to such a degree, to the challenge that comes from these very low oil prices that we have seen.

"I think and hope it sends a very clear signal to the world that the UK continental shelf is open for business."

Addressing the conference, Stephen Halliday, group president of research and consultancy Wood Mackenzie, challenged the oil and gas leadership at president and chief-executive level to work together to maximise opportunities.

He said: "Oil companies like to knock lumps out of each other. They like to win, they like to see people lose and that's just the reality of any negotiation.

" They just need to get together and realise that by compromising they win."

A Government spokesman said: "This government is clear that the broad shoulders of the UK are 100 per cent behind our oil and gas industry and the thousands of workers and families it supports.

"We have established the Oil and Gas Authority to drive greater collaboration and productivity within industry and in the last two budgets we announced radical packages of tax measures worth £2.3 billion to ensure the UK Continental Shelf (UKCS) remains an attractive destination for investment.

"No other government has made fiscal changes as extensive in response to falling oil prices. In January this year we announced a further package of measures including another £20 million funding for a further round of seismic surveys and our strategy to maximise economic recovery of the UKCS.

"We look forward to the industry capitalising on this, to deliver efficiencies and make the industry more robust now and for the future."

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