UK government remains fully committed in its support of the UK’s oil and gas industry, the Exchequer Secretary to the Treasury said on Tuesday at the industry’s conference in Aberdeen.
Andrew Jones, Exchequer Secretary to the Treasury, spoke on Tuesday at the oil and gas industry’s conference – Offshore Europe – which started in Aberdeen on the same day.
“Undoubtedly, this has been a challenging time for the industry – we all recognize that. And that’s not just been our experience here in the UK – though we of course have our own challenges with such a mature basin.”
However, Jones emphasized, the UK has responded strongly to those challenges.
“The government has taken unprecedented measures to back the UK’s industry – with over £2 billion of support in the last couple of years – boosted further by an already competitive tax and business environment.
“We’ve also been pleased to see the industry itself responding so effectively to difficult conditions. The progress you’ve achieved in terms of improving efficiency and competitiveness has been impressive as we’ve seen operating costs come tumbling down in this time. Over the last couple of years, the average cost for a barrel has almost halved – from around $30 to $15.”
Jones continued: “But as confidence returns, there is still no room for complacency – in industry, or indeed in government. That’s why I’ve come here today to confirm – once again – our commitment to this sector.”
Jones repeated the promise made by the government in the Spring Budget to investigate “whether we can make our tax system better to encourage investment in our older oil and gas assets. I am talking about transferable tax history here.”
“But it is worth pausing on the age of our basin in the UK, because that clearly brings challenges, as well as opportunities. There is, of course, still a lot of life left in the UK Continental Shelf. With up to 20 billion barrels still to be recovered, we still need to get new investment coming in,” he said.
Jones recognized that the UK is a mature basin, and decommissioning would feature much more heavily in its future.
“We’ve already seen around 10% of North Sea facilities decommissioned. Over the next decade we’re set to see another 100 offshore platforms fully or partially removed, and 1,800 wells plugged. And such a clean up mission will come at some cost. Earlier this year, the Oil and Gas Authority produced a new estimate of how much it might be in total – around £60 billion between now and the 2050s,” he said.
However, this amount won’t all need to be found by the industry. “We estimate about £24 billion will be met by the Exchequer through decommissioning tax relief.”
The Exchequer Secretary further said: “Right now we have a huge window of opportunity to become pioneers in decommissioning.
“We were the first to try new technologies and methods to overcome the inhospitable waters of the North Sea, so many decades ago. Now, as the North Sea becomes the first major production basin in the world to reach maturity and start large scale decommissioning, we have the chance to once again make ourselves the go-to global experts. That means thousands of highly-skilled job opportunities, it means export opportunities, and it means British businesses taking their place in a worldwide, world-class supply chain.
“The North Sea decommissioning industry is already worth £2 billion a year – I hope we’ll start to see that grow rapidly and I know that ideas about how we do that and make our mark on the global stage will be a big part of this conference.”
In conclusion, Jones reiterated the government’s support to the sector.