The Treasury is abandoning the UK’s struggling oil and gas industry by failing to provide short term fiscal support, according to an industry analyst.
Without additional tax breaks the UK Government is closing the door early on much of the UK’s remaining offshore reserves, said Ian McLelland, of Edison Investment Research.
There were no new offers from the Chancellor in his Autumn Statement today, with industry experts expecting and receiving little in the way of additional support to the measure previously announced in the March Budget.
McLelland, said: “The Treasury is abandoning the UK’s struggling oil and gas industry.
“With the Chancellor’s autumn statement announcing OBR estimates that oil and gas revenues are dropping 94%, there is little here to provide broader support.
“Following the 2014 Wood Review, the Oil & Gas Authority (OGA) is doing an excellent job trying to encourage activity in the North Sea, but today’s statement offers no material support to combat the pain of sustained low oil prices or arrest the plummeting levels of investment we expect to see across the industry. ”
“Costs need to fall, investment encouraged and more cooperation is needed, but we fear that without short-term fiscal support the government is closing the door early on much of the UKs remaining offshore reserves, possibly never to be opened again.
“It is a dangerous game and one that will likely result in a growing number of oil and gas companies falling by the way, either through M&A or simply running out of room to stay in business.”
The Chancellor said the Government would give the OGA additional powers to scrutinise companies’ offshore decommissioning plans and take action to ensure they represent value for money.
Andrew Benitz, chief executive of UK independent company Jersey Oil and Gas, said he :
“It is encouraging to see active steps are being taken towards addressing decommissioning related issues which may encourage investment capital in the North Sea and particularly into mature fields”.