UK chancellor urged to boost decommissioning

The Scottish Government has urged the UK Chancellor’s Autumn Statement to include measures that widen access to North Sea decommissioning tax relief and for the UK Government to “meet its obligations to the oil and gas industry.”

The Scottish Government’s minister for business, innovation and energy Paul Wheelhouse claimed that nine months after the UK Government’s March Budget, there has been no action on the commitment to use loan guarantees to support infrastructure investment, which could help the sector access a further two billion barrels of oil and gas.

The Scottish Government said its analysis of fields already nearing decommissioning has identified “that the remaining value of these assets could increase by more than 50%, or almost half a billion pounds, if there were successful measures to reduce costs and increase production.”

This could also have future benefits for other fields that are currently in earlier stages of their production cycle.

“The UK Government retains control of the key taxation levers affecting the sector and must take the action needed to protect businesses and jobs,” said Wheelhouse.

“Last week’s Decommissioning Insight report from Oil and Gas UK highlighted the £17.6 billion decommissioning opportunity over the next ten years and the need for HM Treasury to work with the industry to attract fresh investment, avoid premature decommissioning, and ensure decommissioning is carried out in a timely and cost-effective manner.

“The Chancellor’s Autumn Statement presents an ideal opportunity to offer the industry the support and clarity it deserves.

“The UK Government must provide support in widening access to decommissioning tax relief to ensure that the full potential of late-life assets can be realised …

“The UK Government should also reaffirm its commitment to provide loan guarantees to the sector, which could be important for unlocking capital investment and stimulating investment.

“This is of vital importance to the supply chain, which is being hardest hit by the recent slowdown and requires immediate support.

“Scottish Government analysis has identified 45 unsanctioned potentially commercial fields within the North Sea with the potential to unlock around two billion barrels of oil and gas, however this will require around £39 billion in capital expenditure.

“Without greater investment and activity we risk losing vital capacity and skills that will support production and ensure we maximise economic recovery from the North Sea.”