Oil sector being let down by ‘out of date’ tax regime says Enquest boss

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  By Chris Rumbles
 
The UK’s largest independent oil producer in the North Sea has welcomed Scottish Government regime alternatives to the current “out of date” system which it warned could reduce production prematurely.
 
EnQuest plc, whose gross profits fell by 2.8% in 2013 despite significant increases in revenues and production, released its annual results for 2013 in which it said the current fiscal and regulatory regime was “no longer fit for purpose”.

On the current UK government stewardship of the system, the report said: “It provides existing operators little incentive to accommodate third parties through their infrastructure and, without action, UK North Sea oil production will decline prematurely.”

The annual results make it clear that EnQuest is engaging with both the UK and Scottish Governments in discussing the industry’s future development.  EnQuest highlight incentivising investment in the report as being integral to success and for that reason the company said it was reassured by the Scottish Government’s plan for a “stable and predictable fiscal and regulatory regime” in an independent Scotland.

Speaking in the Press and Journal, EnQuest Chief Executive Amjad Bseisu said that “either an independent Scotland or a Scotland within the UK will be good for our business…”.

A more “rigorous stewardship” of the UK’s oil and gas resources would be required according to EnQuest, who support the recommendations made in the Wood review earlier this year.

The Wood Report, commissioned by the UK Government to assess the state of offshore oil and gas, was published last month with author Sir Ian Wood calling for a new regulatory body and greater government and industry collaboration to maximise economic recovery.

SNP MSP for Aberdeen South and North Kincardine, Maureen Watt, joined Scottish Finance Secretary John Swinney in welcoming the comments of Mr Bseisu which they both described as a ‘vote of confidence’.

She added: “Successful fiscal management of the vast resources in the North Sea is vital for the best interests of Scotland’s future – and an independent Scotland can succeed where Westminster has failed.

“More than half the value of North Sea oil remains – up to 24 billion barrels with a potential wholesale value of up to £1.5 trillion. We must not let Westminster continue to squander the remainder of this hugely valuable resource and deter further investment; instead we must work with the industry and ensure that oil and gas revenues are used to benefit all of the people of Scotland.”

Scottish and UK cabinet meetings held in the North East last month saw both administrations commit to new funding arrangements for the oil and gas industry in Aberdeen and Peterhead.

The Scottish Government announced £10.6 million in funding for a new Oil and Gas Innovation Centre in Aberdeen while Shell’s gas-fired power station at Peterhead will receive UK Government funding of £50 million to install new carbon capture and storage equipment.