Scotland business

North Sea oil summit to hear pleas for action

North Sea oil rig Image copyright PA

Industry body Oil and Gas UK is to call for "meaningful action" from government in order to tackle major challenges facing North Sea operators.

Chief executive Malcolm Webb will tell an oil and gas summit in Aberdeen on Monday that "an unpredictable and harmful business environment" has put the sector "at great risk".

The body wants urgent tax cuts amid falling oil prices and rising costs.

It also wants a new oil and gas regulator in place as soon as possible.

The UK Treasury said it was working with industry leaders "as a matter of priority" to address the challenges the industry faces.

The summit, which has been organised by Aberdeen City Council, will be attended by local and national politicians as well as industry and union representatives.

Scotland's First Minister Nicola Sturgeon and the UK government's Scottish Secretary Alistair Carmichael will be among the participants.

Oil price slump

The summit was called amid warnings the industry was in crisis.

A barrel of Brent crude has more than halved in price since its peak of $115 last summer. On Friday it was standing at less than $53 a barrel.

Last month, the chairman of the independent explorers' association Brindex told the BBC the industry was "close to collapse".

Robin Allan claimed almost no new projects in the North Sea were profitable with oil below $60 a barrel.

However, Sir Ian Wood, another leading industry figure, said Mr Allan's warning was "well over-the-top and far too dramatic".

Aberdeen City Council leader Jenny Laing, who is a Labour councillor, said the summit was aimed at coming up with "meaningful" responses to the oil price slump, and other challenges facing the industry.

Image copyright Newscast

In recent weeks hundreds of North Sea jobs have been cut by oil firms, including BP and Talisman Sinopec.

Both industry leaders and the Scottish government are calling for taxes to be cut further as a matter of urgency to help the sector deal with falling oil prices and higher costs.

Unions have also raised safety concerns over the number of job cuts being made in the industry.

'Meaningful action'

In a speech at the oil summit, Mr Webb will say: "Britain's great oil and gas industry has over the last four decades overcome challenging geology and volatile commodity prices to provide hundreds of thousands of high skilled jobs, generate hundreds of billions of pounds in tax revenues and foster innovation.

"However the inconsistent and unpredictable government policy it has faced, now combined with sharply rising costs and a sudden drop in oil price, has dealt a blow which is doing real and potentially long-lasting damage.

"If we are to avoid lasting damage to this industry and its £35bn supply chain, now is the time for meaningful action.

"The industry is having to take tough decisions and implement necessary cost reduction and efficiency improvement measures.

"Alongside this, the Department of Energy must proceed as quickly as possible with the full establishment of the new Oil and Gas Authority, and HM Treasury must radically reduce the tax burden on this mature oil and gas province."

'Important opportunity'

Speaking ahead of the summit, Ms Sturgeon said fiscal and regulatory change in the oil and gas sector was "vital" in order for the industry to succeed in the decades ahead.

She said: "In the short term, that means urgent action on taxation to give the industry the certainty and security it needs to protect jobs and investment.

"It is essential that the tax reductions are sufficient to instil investor confidence, as without that maximised recovery will not be achieved.

"This is because the extra investment needed for smaller fields, ageing infrastructure as well as much more exploration and appraisal is only going to be made by operators with substantial tax reductions."

A UK Treasury spokeswoman said the government was following developments in the North Sea closely.

She added: "In December, the chancellor announced an ambitious programme of reform across the oil and gas tax regime, including an immediate cut to the Supplementary Charge, already in effect, and recognition that the tax burden must continue to fall over time.

"In January, the government launched a fast-tracked consultation into a new streamlined investment allowance designed to reward investment in the North Sea."

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