24th Feb 2015 09:33
LONDON (Alliance News) - UK Chancellor of the Exchequer George Osborne is to meet the chief executive of Oil and Gas UK, the organisation that represents the UK offshore industry, on Wednesday to discuss what action is needed by both industry and government to "ensure the long term success of the sector."
Oil and Gas UK has conducted a survey to show its member companies' upcoming plans for exploration, investment and production in the UK, predominantly in the North Sea, and the organisation said the industry is "facing a difficult period as a result of falling oil prices."
But the organisation did say the current environment "highlights opportunities available if there is a continued joined-up action between the government, the Oil and Gas Authority and industry."
Most oil and gas fields in the North Sea are ageing and becoming more expensive to maintain. The recent sharp slide in oil prices to about USD58 a barrel, from over USD115 a barrel last June, has put pressure on the North Sea operators and threatens tax revenue from a source that is still important to the UK's overall tax receipts.
Oil majors BP PLC and Royal Dutch Shell PLC are amongst the operators to have said they will cut North Sea expenditure plans amid broader spending cuts in the wake of the oil price drop.
The Oil and Gas Authority is currently being set up and fast-tracked by the Department for Energy and Climate Change to regulate the North Sea.
The Treasury Tuesday said the Chancellor has "vowed to take further action to support the North Sea oil and gas industry" in response to Oil and Gas UK's survey.
In 2013, Sir Ian Wood was commissioned to carry out a comprehensive review of the North Sea, and following on from the report by Wood, the Chancellor announced he would implement a tax cut of 2% from the beginning of 2015, which the Treasury calls a "radical plan."
The 2% cut was applied to the supplementary charge, which dropped to 30% from 32% and Osborne said the rate would be reduced further "in an affordable way."
Osborne has also recognised that "the tax burden needed to fall further over time," and the Treasury said that Osborne "has taken further action and fast-tracked a consultation on the investment allowance" since December.
"As part of the continuing work between the government and the industry, the Chancellor is tomorrow meeting with Malcolm Webb, chief executive of Oil and Gas UK, and other industry leaders, to discuss what action is needed by both industry and government to ensure the long term success of the sector," said the Treasury in a statement.
"We've got record investment in the North Sea, and there?s a lot of oil still in there. We want to continue to maximise investment in the North Sea to make sure it continues to provide jobs and economic benefits to the whole of the UK. The North Sea is a great national asset and we will do everything to protect it," said Osborne.
"I?ve already cut taxes in the North Sea and we're now looking at what more we can do to work with industry to support investment in this important sector," he added.
By Joshua Warner; [email protected]; @JoshAlliance
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