Angus MP Mike Weir has hit out at the UK government for making changes to the oil and gas fiscal regime which, he believes, could damage the local economy.
Commenting on the passing of the Finance Bill, Mr Weir said the UK government’s decision to introduce new bareboat chartering tax arrangements for leasing oil and gas rigs in the North Sea is likely to damage exploration activity as it could push up costs and reduce the availability of rigs.
He said: “This is an important issue for Angus as so many people and companies are involved in the oil and gas industry and the implications of a slowdown in exploration will work its way down the supply chain which relies upon the industry.
“At a time when we have seen much more interest from young people taking on engineering apprenticeships to pursue a career in the industry, to take action that could reduce future activity is nonsensical.
“The action of the UK government is especially puzzling coming so soon after it enthusiastically welcomed the Wood report into maximising recovery of oil and gas from our waters. This measure will increase costs and lead to a reduction in exploration activity – the very opposite to what the report was seeking to achieve.”
Mr Weir pointed out that the Scottish government has repeatedly called on Westminster to reverse the changes, arguing the UK government are undermining exploration activity and could ultimately reduce the revenue that companies contribute to public finances. The proposed legislation has been entered as an amendment to the 2014 Finance Bill and it will replace a long-standing global arrangement for negotiated fiscal agreements between offshore drilling rig owners and HMRC.
He added: Westminster’s volatile tax regime is damaging the oil and gas industry.
“The measures proposed in the new legislation entirely remodel the economics of the UK Continental Shelf, effectively putting up the rent whilst driving down international competitiveness and scrapping any credibility that the UK is open for business.
“Stability and predictability are essential if we are to realise the North Sea’s full potential. That is why the Scottish government appointed an Independent Expert Commission on Oil and Gas in September 2013, who will report shortly and will make specific proposals in relation to the North Sea fiscal regime with a view to providing long term stability and predictability for the industry.”
Taf Powell, speaking on behalf of the International Association of Drilling Contractors, said:”With new exploration wells at an exceptionally low number in the UK, the drilling contractors would have much preferred to have engaged with the UK Government on initiatives for stimulating activity rather than have additional tax burdens imposed.
“These new measures move the UK from a middle ranking tax environment, comparable to the USA and Europe to the unstable high end of global tax regimes. We are concerned that the massive investments by drilling contractors in new and upgraded rigs will now be directed to more fiscally stable regions.”