(MENAFN- ProactiveInvestors) Pressure is growing on the exchequer to support the North Sea as crude prices remain within touching distance of five and a half year lows.
A few short months ago it was seen as the crown jewel in tug-of-war for Scotland but now the North Sea’s apparently flailing profits mean Westminster may have to act.
George Osborne who last week described crude’s decline as a ‘net positive’ for the UK is being called upon by industry voices to cut taxes to keep North Sea oil producers afloat.
It comes just days after () director Robin Allan said the region’s producers were “close to collapse”.
Allan speaking in his capacity as chairman of the independent explorers' association Brindex described making money with oil at current prices as “almost impossible”.
In this environment ongoing operations and new projects are under threat company headcounts are expected to fall – and all that is bad news for the Treasury.
Nevertheless amid falling receipts both the industry groups and workers unions are pleading for a reduction to taxes that could according to report come in the 2015 Budget as soon as March.
In Aberdeen the UK’s so called oil capital city council leader Jenny Laing has announced plans for a summit between government union and industry representatives.
Political leaders including prime minister David Cameron have been invited to the talks.
Osborne’s Autumn Statement already proposed to simplify the regime of tax incentives aimed at the oil industry – by replacing several allowances for specific field and operation types with a single allowance.
Comments in today’s press from Mike Tholen economics director at North Sea industry group Oil & Gas UK claim its members are confident in the government’s tax proposals but are keen to see them formally in place for the 2015 budget.
“Signs are good at the minute but we have to make sure the details are right for both sides” he said.
The government earlier this year released a report from North Sea veteran Sir Ian Wood which made recommendations to reform the sector to maximise long term recovery from the region and to attract investment.
Among the primary findings was the proposal to initiate a new North Sea regulator reforms relating to decommissioning and a drive to a new era of co-operation among North Sea firms so that remaining infrastructure was maximised.
Sir Ian last week whilst admitting the industry was set for job losses countered predictions of the North Sea’s collapse saying they were “well over the top and far too dramatic”.
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