Chancellor Alistair Darling was urged last night to widen offshore tax concessions to include potential new gas fields west of Shetland.
The plea from Orkney and Shetland MP Alistair Carmichael, the Liberal Democrats’ Scotland spokesman, and Shetland MSP Tavish Scott, leader of the Scottish Lib Dems, followed talks with oil and gas industry representatives at the Offshore Europe exhibition in Aberdeen.
The chancellor introduced a “value allowance” in his last Budget making £75million in tax breaks available to companies developing small fields, which are expensive to exploit, and £800million for those involved in technically-challenging fields requiring new high-pressure and high- temperature techniques to extract heavy oils.
The criteria are likely to ensure they cannot apply to the discoveries west of Shetland, which suffer from the additional problem of a lack of existing pipeline, platform and other infrastructure needed to bring the reserves of gas ashore.
Mr Carmichael said last night: “The west of Shetland has enormous potential with industry experts predicting the site could hold more than a fifth of our remaining oil and gas reserves.
“The work taking place is genuinely innovative, with little infrastructure, new procedures and new technology all working in a very harsh environment. As a consequence, margins are very tight.
“I will be making representations on this matter to both the Treasury and the Department for Energy and Climate Change when the Commons returns next month, pressing upon them the need for an extension of the current rules.”
Mr Carmichael said the Commons energy and climate change committee backed calls from across the industry for all fields west of Shetland to be eligible for “value allowance”.
Mr Scott said: “There is widespread consensus across the whole industry that fiscal assistance is required to accelerate activity west of Shetland that can help keep Sullom Voe jobs and create new ones.
“If the west of Shetland’s true potential for new discoveries and undeveloped fields is to be reached then the current relief offered to the rest of the industry must be extended.”
Their call received immediate support from industry body Oil and Gas UK.
Economics director Mike Tholen said: “The current sustained low gas price must preclude investment west of Shetland and any help to encourage investment in this area would be welcome so that we can maximise gas production and help ensure security of energy supplies.”
Earlier at Offshore Europe, Gordon Lib Dem MP Malcolm Bruce urged Scottish Secretary Jim Murphy and Energy Minister Lord Hunt to raise the need for further tax incentives to maintain investment with the chancellor. Mr Murphy said the government had introduced new incentives this year but agreed to draw Mr Darling’s attention to his call.