Salmond gives Osborne North Sea options

Scottish First Minister Alex Salmond today urged UK Chancellor George Osbourne to follow advice on how to reduce the negative impacts from the recent North Sea tax hikes. Economists have […]

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By Tom Gibson

Scottish First Minister Alex Salmond today urged UK Chancellor George Osbourne to follow advice on how to reduce the negative impacts from the recent North Sea tax hikes.

Economists have warned that the increase could damage investment and could reduce expected jobs by 15,000.

The UK government says it raised the supplementary charge in March from 20% to 32% to help consumers.

The paper, ‘UK Continental Shelf Tax Regime – Options for Reform’ suggests three options to avoid damaging the industry:

-Investment Rate of Return Allowance: The Scottish Government’s preferred option, this guarantees companies a minimum rate of return on their investment before the tax is levied.


-Investment Uplift Allowance: Similar to the above, although the company’s investment costs are up-rated by a fixed proportion.


-Extended Field Allowances: Indirectly linked to a field’s investment costs, these reduce the amount of tax a company has to pay on its profits but are less flexible than the other options.

Mr Salmond said: “North Sea oil and gas makes a huge contribution to the Scottish and UK economies- providing jobs, investment and the majority of these islands’ oil and gas needs. With some 30-40% of oil and gas reserves still to be extracted, it is essential that companies who are investing in the more marginal fields, where exploration and extraction is technically more difficult, are not penalised.”

In recent weeks, it has been reported that a number of key projects have already been put on hold, including Statoil’s development of the new Mariner and Bressay fields to the south-east of Shetland.