Uncertainty caused by UK policy, not independence, says oil industry


By Andrew Barr
A report by Aberdeen Grampian Chamber of Commerce has found that UK Government policy has created uncertainty in the North Sea Oil industry, whilst the prospect of Scottish independence has not caused any widespread concern.
The report has revealed oil industry contractors and operators have had serious concerns over the UK fiscal regime, suggesting that tax policy has weakened competitiveness.

However, despite the negative impact of the Chancellor’s 2011 Budget on North Sea Oil which “lingers” over the industry, the report does express a degree of optimism with an increase in activity and demand for employment remaining strong.

Robert Collier, Chief Executive of Aberdeen & Grampian Chamber of Commerce, said: “Optimism in the sector is strong and the overall outlook is good, but this will only be realised if the right environment is put in place to allow the sector to flourish by removing the barriers to growth and building policy stability.”

The business survey for the first time included a question on the possible consequences of the 2014 independence referendum, with just over one third of participants indicating it was a factor in future planning.

Maureen Watt, SNP MSP for Aberdeen South and North Kincardine, said that responsibility for offshore taxation should be transferred to Scotland.

She said: “This is an informative report that highlights the holes in the anti-independence parties’ claims about uncertainty caused by the independence referendum.

“The majority of companies polled said the referendum was of no concern – highlighting the extent of the scaremongering from opposition parties.

“In fact the opposite is true. It is the anti-independence parties’ damaging tax regime that is creating uncertainty and the taxation policies of successive Westminster Governments – Tory-Lib Dem and Labour – that have damaged the sector.

“This fiscal instability is the only uncertainty causing harm to the industry, not the independence referendum, as the AGCC report makes clear.

“This country has had three massive tax hits in the last nine years which is why Scotland needs the full powers of independence.

“This would allow us to tailor the North Sea tax and regulatory framework that will ensure extraction levels are maximised and support the industry fully – and to make the most of a trillion pound asset base, including the setting up of an oil fund.

“Investing a share of the returns from oil and gas production into an oil fund will continue to provide for future generations – instead of being squandered, as successive UK governments have done with Scotland’s North Sea dividend.”

Mr Collier, of Chambers, added: “You’ve got 40 per cent saying they are uncertain about what’s going to happen and 55 per cent saying they don’t care because they are managing uncertainty all the time in global markets.

“I would suspect that those who are most concerned are the ones that are Aberdeen-based and UK-policy dependent.  The larger international companies are managing uncertainty across all their different assets and are likely to be less concerned because they know how to manage it.”

Gavin Brown, the Scottish Conservative’s finance spokesman, said: “The Scottish Government needs to listen to the industry on this issue because it is critical to the economic well-being of Scotland and the UK.

“It adds more weight to the argument that this referendum should be held sooner rather than later. That is the view of the majority of people and businesses, and now the oil and gas sector too.”

The report found the North Sea Oil industry outperforming the rest of the Scottish economy, with all proceeds from the vast natural resources bypassing Scotland and flowing directly into the UK Treasury.