Salmond says oil and gas sector needs 'tax stability'

The oil and gas sector has brought in an estimated £500bn of investment over the last 40 years

Scotland's First Minister Alex Salmond believes the country's offshore oil and gas industry needs a stable tax regime.

He was speaking at a conference in Edinburgh looking at the next 40 years of the energy sector.

Mr Salmond used his speech to criticise the UK Chancellor George Osborne's £2bn oil tax increase.

The SNP leader also called for stable tax incentives for decommissioning the 470 installations in UK waters over the next 20 years.

Mr Salmond, who was speaking to members of the Scottish Council for Development and Industry (SCDI), said a new oil and gas sector strategy would be published in the spring.

It promises to outline how the Scottish government and its agencies will help the industry;

• to maximise extraction rates

• secure its skills base

• and develop the supply chain in Scotland and further afield

Mr Salmond said: "The industry is a huge success story, and the key message from this year's conference is that there is still much more to come.

"The public sector in Scotland will continue to support innovative companies to make their products a success, but for innovation to flourish, we also need a stable investment environment.

"The Chancellor's decision last March to increase the supplementary charge paid by North Sea operators on their profits has been damaging to the prospects in more challenging and mature fields.

"The lack of consultation about the increase also undermined business confidence. With more than half of the value of North Sea oil and gas reserves yet to be extracted - representing an asset with a wholesale value of a trillion pounds - it is vital that the industry sees long-term stability in the tax regime."

The first minister added: "As around 470 installations are due to be decommissioned over the next 20 years, at a cost of between £24bn and £30bn, the Treasury must also provide the industry with assurances that decommissioning relief will not be restricted or withdrawn in the future."

Mr Salmond went on to welcome the fact that the UK government was working with the industry to look at reforms.

He told the gathering: "It is in everyone's interests for the oil taxation system to be incentivising, stable and fair and I urge the chancellor to ensure that next month's Budget delivers long-term stability, certainty and confidence across the industry."

The Edinburgh conference mirrors one held almost exactly 40 years ago in Aviemore.

It was credited with setting the course for what would become a massive part of Scotland's economy.

Oil and gas has brought in an estimated £500bn of investment over the decades.

With up to 24 billion barrels of oil and gas still under the seabed, and prices surging this month above $121 per barrel, the technical challenge is how to extract that from hard-to-reach reservoirs.

Skilled workforce

The SCDI conference will also hear from UK Energy Minister Charles Hendry and the UK chiefs of BP, Shell and Total exploration and production division.

Ian Armstrong, regional director of SCDI, said the conference was being held in Edinburgh rather than Aberdeen to take the message of the sector's importance beyond its north-east heartland.

He said: "Over the last 40 years, the oil and gas industry has become one of Scotland's most important and the supply chain is one of our largest exporters, with a global footprint.

"Forty years on, with increasing investment and technological innovation opening new frontiers at home and abroad, Scotland needs to refocus on how it will maximise the long-term opportunities offered by its natural business and skills assets in oil and gas.

"Sustained investment, leadership and entrepreneurship, technological innovation, a highly-skilled workforce, global connectivity and sustainability will all be essential."