Scotland wants tax support for North Sea energy

Outlook for regional exploration and production very challenging, first minister says.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |  Jan. 27, 2016 at 7:04 AM
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EDINBURGH, Scotland, Jan. 27 (UPI) -- The Scottish government said it would call on its British counterparts to create a favorable climate for North Sea investments in exploration and production.

"There is no doubt the industry is currently facing an extremely challenging outlook, but oil and gas can continue to make a significant contribution to the Scottish economy and energy security for decades to come," Scottish First Minister Nicola Sturgeon said in a statement.

British energy company BP said mid-January it would trim around 600 from its payroll to ensure it remains competitive in the North Sea environment. Mark Thomas, a regional president for North Sea operations, said maturation of North Sea reserve basins made for challenging conditions.

In December, industry group Oil and Gas U.K., said there were signs of life in the regional energy sector, but those signs shouldn't mask the underlying risks facing the industry moving forward into 2016.

Sturgeon said the tax policies needed to incentivize the industry were reserved to the British government, adding Finance Secretary John Swinney would move for an extraordinary meeting with his counterparts in London to review the burdens facing North Sea operators.

Total production of all hydrocarbons in Scottish maritime territory is on the decline. Data published by the Scottish government in October show production down about 1.7 percent year-on-year. Total production in the United Kingdom offshore was reported as down 2.4 percent.

Lower crude oil prices may be pressuring some economies. Scotland does not count oil and gas exports in its economic data, though gross domestic product grew 0.1 percent during the third quarter of 2015. The production sector, however, contracted by 1 percent during the same period.

Sturgeon said her government would continue to make the case that support for the industry will stimulate the regional economy as a whole.

"By encouraging exploration we will ensure future production levels can be maintained when the oil price inevitably rises," she said.

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