Alistair Darling has announced the biggest boost to the North Sea oil and gas industry for years with a tax break for energy companies that could create up to 600 jobs and produce a total investment of £14 billion.
The Chancellor is to provide up to £160m worth of tax relief for each oil and gas field in the West of Shetland, where almost one fifth of Britain’s remaining reserves are thought to lie.
Following extensive talks with industry leaders, the UK Government now wants to rush through legislation at Westminster “no later than the end of March” – in time for an expected May 6 General Election – to encourage energy companies to develop deep-sea oil and gas fields in some of the world’s most hostile waters.
The Atlantic Ocean between Shetland and the Faroe Isles is the last major area of the UK Continental Shelf to be developed. It covers some 170,000 square miles.
Mr Darling said: “This is a significant boost to the industry and I hope it will open up fields that otherwise would remain with gas and oil unrecovered. It’s a major step forward.”
He added: “It’s a very important step forward. It will help support the oil and gas industry in the UK, it will help in relation to jobs and, importantly, it will ensure we do more to extract the resources we have, which is important for the security of energy supplies in the future.”
One particular project that could benefit from the tax break is Total’s Laggan and Tormore fields, where the benefit to the oil and gas giant could be as much as £320m.
It is being considered for development this spring. If it gets the go-ahead, it could be producing its first gas by 2014.
Last night, Jim Murphy welcomed the Chancellor’s announcement as “great news for Scotland”.
The Scottish Secretary said: “This incentive will improve security of supply, sustain jobs, encourage investment and build skills here in Scotland and the rest of the UK.”
Roland Festor, managing director of Total E&P UK, which employs around 750 people at its Aberdeen headquarters, also welcomed the announcement, saying: “We are very pleased with this positive proposal to encourage the industry to explore and develop the hydrocarbon resources of the area.”
Oil & Gas UK, the industry’s leading body, said the new tax break would be “a major step forward in unlocking the oil and gas potential of this remote, hostile frontier area and could significantly bolster the industry’s contribution to the UK’s economy and security of energy supply”.
Malcolm Webb, its chief executive, noted: “This could result in early investment of over £2bn and another £12bn over the next eight years, ultimately bringing almost two billion barrels of oil and gas into production.”
Industry leaders have repeatedly warned that the huge potential of the North Sea could be wasted unless the Government did more to encourage investment in challenging areas .
In November, Sir Ian Wood, the oil services tycoon, warned that the UK could miss out on more than £750bn in oil and gas revenues unless industry players and ministers ensured the recovery of reserves beneath the North Sea was maximised.
