Scottish Government calls for vital reform of Oil Fiscal Regime

9 Jan 2015 12:51 PM

New report proposes fiscal changes to support investment and encourage exploration.

Scottish Energy Minister Fergus Minister Fergus Ewing yesterday published a new report calling for urgent reform of the taxation regime for North Sea oil and gas and also setting out the Scottish Government’s work to support the sector.

The report proposes fiscal changes to support investment, encourage exploration and ensure that the North Sea is a competitive investment location.

The three key 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 the Supplementary Charge implemented by the UK Government in 2011; and
• Introduction of an exploration tax credit to help increase levels of exploration and sustain future production.

Mr Ewing said yesterday:

“The oil and gas industry is a strong success story for Scotland and will continue to be. However, because of the mismanagement of oil and gas fiscal policy by the UK Government, challenges remain and we must tackle the on-going cost pressures and the fall in oil prices head on.

“ That is why today the Scottish Government is publishing a report setting out a range of taxation changes and we will now consult closely with industry on these proposals.

“Our proposed fiscal changes will not only boost the economy but analysis based on industry data shows that they will support thousands of jobs.

“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 – supporting up to 26,000 jobs annually.

“Last year the UK Government announced a 2 per cent reduction of the Supplementary Charge rate – this reduction doesn’t go far enough. We are calling on the UK Government to provide a clear timetable to fully reverse the increase brought in in 2011. That will provide a strong signal for investors that the North Sea is open for business.

“After years of using the North Sea as a cash cow the UK Government must finally and urgently take substantive action. We believe there is a long term sustainable future for the North Sea and we are committed to using every lever at our disposal. It is time for the UK Government to follow suit.”

The report can be found at: http://www.scotland.gov.uk/Publications/2015/01/9742