Wood Mackenzie: Scottish Independence and Oil & Gas Industry

Wood Mackenzie Scottish Independence and Oil & Gas Sector

Wood Mackenzie has assessed the key issues for the UK North Sea oil and gas sector in the event of constitutional change in Scotland. The Scottish electorate will vote on independence before the end of 2014, with the division of North Sea resources and future of the oil and gas sector a central issue in the debate.

Wood Mackenzie says that should Scotland gain independence, engagement between the industry and the Scottish Government will be vital – especially while the Scottish Government gains experience of administering an oil and gas regime for the first time.

At this early stage of the debate, Wood Mackenzie’s assessment points to four key issues for the industry and government to consider:

• Fiscal certainty – oil and gas companies will want assurances that the tax regime will remain stable, not just the tax rate imposed but also the tax relief available on decommissioning spend. The share of the tax relief liability on decommissioning spend, estimated at £17 billion, is likely to be a contentious issue for the two governments. Key for investors is not which government funds the tax relief, but that the rate of relief is guaranteed. Companies will also want to ensure they can recover any outstanding tax loss positions if their assets are transferred to a new regime.

• The offshore boundary – a border for oil and gas activities would need to be negotiated. A prolonged dispute could cause uncertainty and negatively impact the investment plans of companies active in the disputed area.

• Regulatory change – In the event that responsibility for the majority of UK oil and gas assets passes to the Scottish Government, a new regulatory body would need to be established. Upstream companies will want consistency and a seamless transition to ensure that delays, and an additional administrative burden, do not creep into the approvals process for upcoming projects and existing developments.

• Maintaining levels of government take – Government take forecasts for an independent Scotland should be treated with caution as a number of material aspects are still to be resolved. It is likely that the Scottish Government would be faced with declining production which needs to be managed carefully to preserve future tax revenues.

Wood Mackenzie forecasts that the bulk of UK oil and gas reserves (circa 85%) lie in Scottish waters, and an independent Scotland would control the vast majority of production as well as the most prospective acreage.

However, a mature province with declining production would present a number of new challenges to the Scottish Government. It would need to balance a desire to maximise precious revenues from its prize asset whilst ensuring the longevity of the industry. This longevity depends on continued investment from oil and gas companies, who in return will demand fiscal certainty, regulatory stability and appropriate fiscal incentives.

Press Release, October 16, 2012

Share this article

Follow Offshore Energy Today

Events>

<< Dec 2019 >>
MTWTFSS
25 26 27 28 29 30 1
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31 1 2 3 4 5

Africa Oil Week 2020

For over 25 years Africa Oil Week has been the meeting place for Africa’s most senior E&P stakeholders.

read more >

CERAWeek 2020

 Each year, CERA clients gathered for a few days in Houston…

read more >

Offshore Technology Conference (OTC) 2020

The Offshore Technology Conference (OTC) showcases leading-edge technology for offshore drilling, exploration…

read more >

2020 EXPLORATION AND PRODUCTION STANDARDS CONFERENCE ON OILFIELD EQUIPMENT AND MATERIALS

The development of consensus standards is one of API’s oldest and most successful programs.

read more >

Jobs>

Looking to fill a job opening?

By advertising your job here, on the homepage of OffshoreEnergyToday.com, you'll reach countless professionals in the sector. For more information, click below...

apply

Looking to fill a job opening?

By advertising your job here, on the homepage of OffshoreEnergyToday.com, you'll reach countless professionals in the sector. For more information, click below...

apply