'Radical Change Needed' On Oil And Gas

Radical change is needed to get the absolute maximum oil and gas from the North Sea, according to a report.

The expert group was set up by the Scottish government ahead of the independence referendum.

It says focus should change from controlling access deposits, to encouraging investment, while tax rates should be lowered and the system simplified.

The Oil and Gas Expert Commission was asked to:

• Consider specific proposals for providing long-term fiscal stability and predictability for the oil and gas industry in an independent Scotland.
• Consider amendments to improve the fiscal regime that are consistent with the Scottish Government’s objective of delivering a tax regime that supports production.
• Consider options to increase competition and reduce entry barriers in the UKCS, including options to support exploration activity by both new entrants and established operators.
• Consider specific arrangements for the North Sea licensing and regulatory regime in an Independent Scotland and, in consultation with the industry, examine options available to enhance the existing regime.
• Examine, in consultation with the industry and other stakeholders, how the fiscal framework in an independent Scotland will provide certainty for operators in regards to decommissioning.
• Consider potential implications arising from the trasition to separate Scottish and rUK jurisdictions for taxation, licencing and the offshore regulatory regime, to ensure that it will not have any adverse impact on the sector

Chairman, Melfort Campbell said:

“Within the current regime and climate of declining investment, we are seeing inadequate returns for operators, significantly reduced income for the Treasury and the loss of the added value through the supply chain and into the wider economy.

"The Commission concludes that Government must recognise that policy must swiftly change from seeking to control access to a sought-after resource to one where investment has to be attracted by positive features.

“In other words, the UKCS used to be like an exclusive nightclub with bouncers on the door only allowing celebrity VIPs access. Now, it is more akin to a trattoria with waiters touting for business on the pavement outside,” explained Mr Campbell.

The fact that that virtually every development in the UKCS needs a tax allowance means the tax rates are too high and too complex, added Mr Campbell: “There is a need for clarity and visibility of a tax regime that will become, and then stay, competitive in global terms, attracting investment in even the more difficult and expensive fields from exploration through to consolidation of decommissioning certainty.”

Fergus Ewing, the Scottish Energy Minister, is welcoming the publication: