Coalition ministers have been urged to back the offshore sector in next month’s Budget – and boost the north-east economy as well as the Treasury’s tax take.
The boss of industry body Oil & Gas UK said huge reserves could be unlocked by Chancellor George Osborne taking steps which would not cost the Exchequer a penny.
Malcolm Webb spoke out as the organisation released the results of its latest activity survey.
It revealed that only a few new small fields were brought online last year – a slump blamed on the aftermath of a tax increase in 2006.
The report also said production fell 18% in 2011, compared with a previous 6% average increase, annual exploration drilling halved to 15 wells and, of 16 projects agreed last year, just five accounted for 85% of the total investment.
Had the production not dropped, the UK’s gross domestic product (GDP) would have been 0.2% higher than it was, the report claimed.
Mr Webb said the chancellor could help unlock three billion barrels of oil equivalent and in turn secure jobs and help keep the industry competitive.
The chief executive of Oil & Gas UK added that, despite record spending of £11.5billion predicted this year, it would be wrong to think there was long-term confidence across the industry, which was left reeling when Mr Osborne announced a £10billion tax raid on the sector in last year’s Budget.
He said: “This year and next will see high investment on a few large projects which were commercially committed before last year’s Budget. However, 2011 production saw a record drop, exploration halved and business confidence remained sluggish, despite an average oil price of £70 per barrel.
“We are not asking for a handout. We are asking for certainty on decommissioning costs – a bankable assurance the UK Government will do what it says in law.”
Previous governments have said they would give tax relief to firms to help cover the cost of removing old oil and gas platforms and pipelines from the North Sea.
Mr Webb added: “We need a little more help on field allowances, those fiscally stranded by the 2011 Budget, all of which would be at no cost to the Exchequer.”
Speaking in Aberdeen today, energy economist Tony Mackay will say that capital expenditure in Scottish energy industries is expected to total £66.5billion in the decade to 2020.