UK Finance Minister Renews Upstream Commitments

UK finance minister Philip Hammond said November 23 the government would "deliver the commitments we have made to the oil and gas sector," referring to the Driving Investment plan drawn up by the previous, coalition government in 2014.

Presenting the last mini-Budget ever to parliament before switching to only annual budgets in a year's time, he also said the Carbon Price Support, another coalition initiative to make coal cost more and so drive other fuels such as gas in the power generation sector, will continue to be capped out to 2020.

Offshore industry group Oil & Gas UK said the statement sent "a strong signal to investors that the government recognises that the UK oil and gas tax regime needs to be predictable and internationally competitive.

“Today’s Treasury forecasts show our industry will be contributing £10bn ($12.4bn) more in production taxes over the next five years than was previously expected. While this can be attributed in part to changes in commodity prices and exchange rates it also reflects the significant work of industry to make our operations more efficient and to increase production," said CEO Deirdre Michie.

“Our industry can make a vital contribution in delivering the Chancellor’s ambitions for the economy and the government’s industrial strategy. We are developers of cutting edge technology, providing highly skilled jobs, helping power to the nation and exporting to the world.

UK finance minister Philip Hammond

(Credit: Govt)

“We will continue to work with Treasury on the important issue of decommissioning tax relief, key to stimulating investment and activity for the supply chain, which we hope to see resolved by the 2017 Budget."

The energy union GMB was less than happy however with the Budget, pointing out there was no mention of the £14bn needed for the government’s flagship smart meter project. The project will see new smart meters installed in 30mn homes and businesses at an estimated cost of £215 a go, it says.

The initial price tag for the project is £11bn, but with massive staff shortages the cost of the project looks underfunded in the lead up to the target date of 2020.

Critics of smart meters say that the much-delayed project is anyway pointless, delivering a tiny rate of return compared with other internet-based devices that may be fitted by the householder for a fraction of the price. 

William Powell