UK Producers Call for Support from Finance Minister

UK oil and gas producers have written to the UK finance minister Philip Hammond, asking him to take measures that will boost investor confidence in North Sea exploration and production. He is due to present the Autumn Statement, a mini-Budget, to the House of Commons on November 23.

Apart from the regular request for lower taxes, the wish-list of items put forward by lobby group Oil & Gas UK November 7 includes new measures to extend the Investment Allowance for operating expenditure to get more out of a field, such as enhanced oil recovery techniques; the promotion of the UK’s oil and gas supply chain as part of the UK’s new industrial strategy; and new tax relief rules allowing decommissioning relief to be transferred on asset sale. This would enable more asset trading, as well as enable more companies to enter the sector as fields reach the end of their life, it said.

OGUK's recently published Economic Report 2016 found that investment in the UK continental shelf has fallen to around £9bn ($11.3bn) this year, from a record £14.8 billion in 2014, illustrating the difficulty for investors in accessing finance for asset development.

UK finance minister Philip Hammond

(Source: Govt)

CEO Deirdre Michie said "sentiment and stability are important," and Hammond has a "real opportunity to use the Autumn Statement to send a clear message to investors that the UK Continental Shelf is a great place to do business." She said she had asked Hammond to "get behind the UK’s oil and gas industry by providing certainty in our fiscal regime, recommitting to the Treasury’s ‘Driving Investment’ strategy for the sector and, as part of the UK’s new industrial strategy, recognising its supply chain as a key strength in the economy, with world leading capability."

She also said the UK oil and gas industry is now much more globally competitive than it was two years ago, and the cost of doing business in the North Sea has come down significantly and production has increased for the first time in 15 years thanks to the industry’s efforts to make its operations more efficient.

“But investors are also looking for certainty and we can’t underestimate the importance of government sending a strong signal of confidence and support.”

Less than £100mn of fresh capital has been committed to the basin this year, with only one new field approved – this compares with five greenfield projects sanctioned last year with associated development capital at more than £4.3bn.

William Powell