Scotland politics

UK ministers urged to act over oil situation

Oil instillation Image copyright Getty Images

Scottish First Minister Nicola Sturgeon has told the UK government to "get its act together" on backing the oil and gas industry, amid falling prices.

Her comments came as Holyrood ministers outlined a series of measures they said must be taken to support the sector.

The UK government said action was being taken after oil prices dropped by more than half over the past six months.

The SNP's opponents said Scotland had dodged a bullet, given its focus on the oil wealth of an independent Scotland.

The day after the price of Brent crude oil fell below $50 a barrel for the first time since May 2009, Scottish ministers called on the UK government, which is largely responsible for energy policy, to introduce in its March budget:

  • An investment allowance for oil and gas fields which cost more to develop, potentially boosting investment by between £20bn and £37bn.
  • A tax credit to help increase oil and gas exploration and production.

Speaking during first minister's questions, Ms Sturgeon said: "I will do everything on the part of the Scottish government to support the industry - the Scottish government cabinet will meet in Aberdeen next month - but the UK government has to get its act together, stop talking about supporting the industry and actually start to do it."

Meanwhile, Scottish Secretary Alistair Carmichael, who was meeting industry representatives, said the UK government unveiled a series of allowances and tax reliefs to help the industry in the Autumn Statement and was taking action now to support the sector.

"I, and my colleagues, will be listening closely to what the industry has to say and having a full exploration of the additional options available to us to help secure jobs and the future of this key sector," he said.


ANALYSIS

By Douglas Fraser, BBC economy editor

The North Sea itself looks particularly vulnerable in this downturn.

It has weathered sharp changes before. But the industry is now at a turning point.

Mature fields are depleting and the remaining oil and gas is getting more expensive to extract.

New fields offer new and expensive challenges - in deep water, or requiring new technologies to handle difficult geology, high pressure and high temperatures.

And while Britain is still among the world's top 30 producers, it's now seen as one of the more expensive places to operate, given a black mark by the industry for three unexpected tax hikes in the past 15 years.

With a sharp decline in exploratory drilling, higher costs and poor recent results when it's tried, the replacement rate of reserves also looks downbeat.

Read more from Douglas.


Scottish Labour said Scotland was facing its biggest jobs threat since the closure of the Ravenscraig steel works, saying 15,750 Scottish oil posts were at risk.

"This is too important for the UK and Scottish governments to score political points by playing pass the parcel," said Jackie Baillie, the party's economy spokeswoman.

Meanwhile, opposition parties seized on UK government figures claiming Scotland could have been facing an £18.6bn shortfall, had the country become independent in September's referendum.

The Scottish government's White Paper blueprint on independence forecast the amount of oil revenues Scotland could receive on a projected value of 110 US dollars, or £72, a barrel.

Image copyright PA
Image caption Nicola Sturgeon said the Scottish government was doing what it could to support the industry
Image copyright PA
Image caption Alistair Carmichael also said the UK government was taking action

Scottish Conservative leader Ruth Davidson said the referendum outcome was "a bullet dodged", adding: "The best approach for both the industry and the country is for us all to work together on a UK-wide basis."

Green MSP Patrick Harvie said the Scottish government had "failed to acknowledge the vulnerability of a Scottish economy over-exposed to the carbon bubble".

Elsewhere, the Scottish and UK governments both urged energy companies to cut heating bills as a result of the low oil price.

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