Oil industry leaders warned yesterday that companies could quit the North Sea for good if the UK Government did not provide immediate tax relief.
Bosses from industry body Oil & Gas UK told MPs in Aberdeen that 50,000 jobs could go if the government did not act swiftly.
Westminster’s energy and climate change committee was in the city as part of its inquiry into the UK offshore oil and gas industry.
Oil & Gas UK’s chief executive Malcolm Webb told MPs there was enough oil left in the North Sea to meet 65% of Britain’s oil needs and 25% of its gas demand in 2020.
But he warned that, without government help, investment in the industry could falter in the recession.
“Steps have to be taken urgently or we will not achieve our potential level of production, and that would be disastrous for the country,” Mr Webb argued.
He also said investors would have to be attracted to the UK’s oil and gas industry to avoid accelerating the process of decommissioning.
“If we lose the stream of new projects coming through every year, the infrastructure in the North Sea will become decommissioned. It will no longer have a useful economic life,” he said.
“If that happens we would not get the last 25billion barrels of oil that are still in the North Sea. After that I can see capacity being exported from Aberdeen, and once it is gone it would be difficult to get it back here.”
Mr Webb added: “This industry is not asking for a government bailout or any handouts. It is asking for the fiscal regime to be adjusted.”
He maintained that tax relief for oil companies during exploration would restore the industry’s confidence in North Sea operations and may save thousands of jobs.
Mr Webb said the banking crisis was putting severe strain on small oil firms, and warned that if investment in the industry falls by £2.5billion in the next two years, as projected, 50,000 oil workers could be out of a job.
Speaking after the meeting, Sir Robert Smith, MP for West Aberdeenshire and Kincardine and a member of the committee, said: “The evidence made clear just what potential there still is in the North Sea if the government can get the tax regime right.
“There was a message of hope that with the right incentives there is still a major industry here for many years to come.”
Following the meeting, committee members met representatives of Subsea UK to discuss its work.
The MPs had started their day at a breakfast in Aberdeen hosted by the Scottish Council for Development and Industry.
The select committee chairman, Elliot Morley, told the meeting it was recognised that the oil and gas industry was extremely important for the north-east, Scotland and the UK and said the committee would be asking questions such as whether the fiscal regime was right for the industry.
He said they would also ask if the industry was harnessing skills and the infrastructure already in place to best advantage.
Mr Morley added that, with the Budget around the corner, there were bound to be intensive discussions behind the scenes on tax measures to encourage the industry to do what it could to make oil and gas reserves go further.