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Chancellor hints at boost for oil sector

Chancellor George Osborne has dropped his clearest hint yet that the oil and gas industry will receive a boost in this month’s Budget.

He spoke yesterday about providing long-term “certainty” to the offshore sector over decommissioning costs, and offering measures to help drive “new exploration” in the North Sea.

The chancellor said he recognised there were “enormous” reserves remaining, but also highlighted the importance of safeguarding Aberdeen’s post-oil economic future.

His remarks were made as it emerged that UK Government Business Secretary Vince Cable had admitted the industry felt it had been “taken for granted” in recent years.

In a leaked letter criticising the government’s lack of vision, the former chief economist for oil giant Shell said: “In recent years the oil and gas exploration feels it has been taken for granted, despite generating vast investment and supporting impressive supply chains with unexploited potential.”

North Sea producers reacted angrily to the government’s surprise £10billion tax raid in Mr Osborne’s Budget last year. However, hopes that the they will receive decommissioning relief and help to unlock reserves in the March 21 Budget received a boost from the chancellor.

During a Westminster debate yesterday, Sir Robert Smith, Liberal Democrat MP for West Aberdeenshire and Kincardine, called on Mr Osborne to offer incentives to the sector.

The chancellor said: “I am very aware of what an important industry this is for the UK, and how important it is to extract what remains of the oil and gas in the North Sea, and of course there is still an enormous amount of oil and gas in the North Sea, but also that we have an industry in Aberdeen and other places that continues long after the oil runs out.

“We are very specifically engaging with the industry on decommissioning relief in order to give certainty to the industry about the years ahead, and also on specific field allowances which might aid new exploration.”

Sir Robert said later: “I welcome the recognition by the chancellor of the importance of the industry.”

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