Urgent government action is needed to prevent a decline in North Sea oil and gas revenue that could lead to the loss of 50,000 jobs, MPs warned last night.
The first report from the new Commons energy and climate change committee sounded the alarm over “a quadruple whammy” of high costs, low oil prices, lack of affordable credit from banks, and global recession.
MPs said: “The difficulties currently faced by oil and gas companies in accessing affordable lending and the bleak prospects this heralds for investment in the oil and gas industry pose an issue of grave concern.”
They called for more effective tax breaks, action over the credit crunch, and moves to ensure new developers can access existing platforms and pipeline to get oil ashore from fields too small to justify building their own facilities.
Committee chairman Paddy Tipping said: “We have learned a lack of affordable lending and bleak investment prospects could wipe out 50,000 jobs and lead to a significant fall in production. “If the government does not respond to this problem by giving better fiscal and regulatory signals then we may never recover anything like as much of our domestic reserve as would be desirable.”
The report follows demands over the weekend from the industry for urgent government action to help maintain vital exploration and development, following Department of Energy and Climate Change figures showing exploration work plunged by more than 75% in the first three months of this year.
Angus MP Mike Weir said one worry is that new operators are facing difficulties negotiating deals with larger companies to use their facilities to get oil from new finds ashore.
The SNP energy spokes-man said: “The danger is that the government is scrambling about to find money wherever it can instead of taking a long-term view, and if it makes another cash grab that will be disastrous for the future of the industry.”
West Aberdeenshire and Kincardine Lib Dem MP Sir Robert Smith, another committee member, said the report “is a wake-up call to the government to recognise how serious things have become in the North Sea”. He said the industry is “at a crossroads”.
Aberdeen Labour MP Frank Doran, however, denied the situation is that gloomy, adding: “I am particularly concerned at the suggestion of huge redundancies.”
He said operators had learned the lesson of past downturns, that it was difficult to attract back staff when the upturn comes.
Scottish Council for Development and Industry north-east manager Ian Armstrong called for a cut in the supplementary charge on corporation tax.
He said the “powerful report” required “bolder action” by the government.
Oil Industry Liaison Committee general secretary Jake Molloy said “an overhaul of the fiscal regime is long overdue” to attract investment.
By David Perry, Press and Journal
Published: 30/06/2009