UK Chancellor’s comments provoke row with oil industry experts


By a Newsnet reporter
UK Chancellor George Osborne has walked into a row with the oil and gas industry after accusing leaders of making ‘apocalyptic’ predictions about the sector’s future after his £10 billion tax raid.
Mr Osborne made the comments whilst on a visit to the north east of Scotland.  The Chancellor claimed that the tax increase was correct and that he had “got the balance right”.

However industry experts have responded by claiming the Tory minister should acknowledge that the tax-grab resulted in investment worth billions being mothballed.  They also say and that the real impact of the tax hike will not be evident until a few years from now.

In today’s Press and Journal, Alex Kemp, Professor of petroleum economics at Aberdeen University, claimed that the Chancellor had “not taken the full picture into account”.  Professor Kemp added that: “Investment will still go ahead, but I do not agree with Mr Osborne at all – it is a few years down the line where the danger lies.”

The row with the Chancellor comes as the Norwegian Oil Industry Association’s business trend report for 2011 predicts optimism in the Norwegian petroleum industry and paints a buoyant outlook for the country’s oil sector.

Commenting on the row, SNP MSP Mark McDonald said it just showed how out of touch the Chancellor was with an important sector of the Scottish economy.

Mr McDonald, SNP MSP for North East Scotland, who led a member’s debate in the Scottish Parliament on North Sea taxation, said:

“These reports just underline how Scotland’s oil and gas industry is far too important to Scotland to be left in the hands of the UK government.

“George Osborne clearly doesn’t understand the industry’s concerns about his tax raid and its negative impact, not just in the west coast frontier area but in the marginal and brownfield places hardest hit by the tax hike.

“Whilst firms like BP are investing and a report last week showed there was still £376billion of value left in the North Sea this row shows there could be much more.”

Mr McDonald claimed that, but for the tax increase, the North Sea would be emulating Norway and be in the middle of a jobs and investment boom.

He added:

“The oil and gas operators clearly disagree with the Chancellor which just shows how out of touch he is with what is happening and affecting the Scottish oil industry.

“It also strengthens the First Minister’s call to establish a procedure for a statutory consultation period of a year before applying changes to oil and gas taxation.

“This would restore confidence in the sector – something that is clearly desperately needed.

“The SNP is working hard to attract investment in North Sea Oil but Westminster interference risks some fields being left underdeveloped.  After 40 years of inept management by the UK Government, it is time Scotland was given a chance to control these natural resources.”