Decom North Sea (DNS) and the Oil and Gas Authority (OGA) are “aligned” on the urgent need to stimulate decommissioning activity so that North Sea jobs can be saved.
But the trade body and the regulator still don’t quite see eye-to-eye on the best way of spurring well plug and abandonment (P&A) work.
DNS interim managing director Will Rowley said the OGA continued to favour its idea of securing a £100 million loan from the UK Government to help companies pay for offshore P&A campaigns.
But the regulator has not completely dismissed DNS’s own suggestion that HM Treasury (HMT) should pay out tax reliefs early, Mr Rowley claimed.
He said representatives of both organisations had met for talks and that a follow-up meeting had been scheduled for this week.
Mr Rowley said the OGA informed him that it had weighed up a host of proposals and felt the loan scheme was the fastest way to support the sector.
However, he said the OGA hadn’t provided details of any timeline for “activity, progress or a response from HMT”.
Mr Rowley pointed out that DNS’s tax relief advancement proposal would not require any changes to the existing energy sector fiscal system.
Under the current system, oil and gas companies can claim back some of the taxes they paid on profits previously to help cover decommissioning costs.
The refunds are not normally provided until a year or two after the work has been completed, whereas DNS wants some of the money to be provided upfront.
Mr Rowley has stressed that action must be taken in a matter of weeks or it will be too late to save hundreds, if not thousands, of at-risk roles.
If companies haven’t booked in the well P&A work by the end of 2020, it is unlikely to take place next year.
Mr Rowley claimed the OGA’s own fiscal experts understood how DNS’s proposal could potentially provide a stimulus, while the regulator’s external fiscal advisors noted its “merits and challenges”.
A tax expert at a major accountancy firm told Energy Voice that the application of DNS’s proposal could be quite “narrow”, but may help some operators.
Mr Rowley said he never claimed that DNS’s idea was a silver bullet that would work in every circumstance, but feels it is worth implementing.
Ultimately, he is keen to see action taken in whatever form.
Mr Rowley said: “DNS’s objective is to safeguard jobs and has no particular preference for any loan scheme or proposal but notes the urgency of any scheme as immediate action is critical to saving high-value Scottish jobs.”
The OGA previously insisted it was leaving “no stone unturned” in its efforts to protect jobs.
Mr Rowley wrote to UK Energy Minister Kwasi Kwarteng on August 21 to press the case for early tax relief payments, but still hasn’t had a response.
In the letter, he said a recent survey of DNS’s membership indicated more than 10,000 oil jobs were at risk between now and the end of this year.
The organisation also estimated that every well P&A project supported in excess of 200 jobs directly and 500 indirectly, mainly in Scotland.