There is no doubt these are worrying times for the North East of Scotland. Not just for those in the industry but also for the businesses and jobs that rely on what the oil industry does for the local economy.
But the North East of Scotland has seen many a storm before, and weathered them all. With the support of the new Oil and Gas Authority, and the UK Government – particularly the tax breaks which I have implemented at the Treasury – we can certainly weather this one, and even emerge stronger and more resilient.
That’s not to say that the fall in oil price to below $60 a barrel is not troubling. Oil and Gas UK’s figures suggest that only about 10% of projects are unprofitable at this level, but that’s still 10% of an industry that employs around 240,000 people across the supply chain. I know that a lot of people reading this today are genuinely worried about the future.
But the advantage of the oil industry is that its long-term projects depend on a longer-term forecast for the oil price. With many experts thinking that the oil price will recover to some extent, the industry can continue to invest with the full support of the UK Government.
Investment is the key to weathering this storm. That’s why the Treasury has recently announced major reforms in how we manage the North Sea: not as a source of tax income, but as a source of jobs and growth. The oil industry is one of the most important employers not just here in the North East, not just in Scotland but actually across the UK – and we’re determined to keep it that way.
Just a couple of weeks ago I visited Aberdeen to announce a plan for further support for the North Sea, which some people in the industry described as a game changer. Not only have we reducing the headline rate of tax, but are have also going to introduce a new investment allowance and provide support for exploration and seismic which is expected to drive around £7 billion of investment. The broad shoulders of the UK Government can afford to make these decisions.
We’re working hand in hand with the industry to send out a message to investors across the world that the North Sea is open for business.
It’s a great place to invest – unlike many oil-producing countries, we’ve got an open investment regime and a robust financial industry, for a start – and there are huge opportunities on the UK Continental Shelf just waiting to be explored.
That’s why we’re going to invest government money into supporting seismic survey work in the relatively unexplored areas of the North Sea, precisely to give companies more data before they make these big and expensive decisions.
None of this is a magic bullet. We cannot control the global oil price. But I can reassure people across the North East that as someone knows how important the oil and gas industry for the UK and particularly in the North East of Scotland, I will do everything I can to help us weather this storm.
Danny Alexander is Chief Secretary to the Treasury and an MP for the Inverness, Nairn, Badentoch and Strathspey constituency