The focus on innovation will help the Scottish oil and gas industry through the lean years, Scotland's government believes

Scotland calls for tax revamp to help oil and gas sector

Scotland urges the UK government to revamp the tax system for oil and gas industry to help the sector overcome the current oil price crisis.

Speaking at a briefing organised by Scottish Development International, Scotland’s Minister for Business, Energy and Tourism Fergus Ewing said he will call on the British government to introduce three strategic measures to help the Scottish energy sector through the lean years.

“First of all the government should introduce clear investment allowance instead of the currently existing schemes, it should introduce tax credits to reinvigorate exploration activity and it should scrap the 12 per cent tax rate increase introduced in 2011 that has proved detrimental to the industry,” Ewing said. “Especially the tax rate should be adjusted as soon as possible, preferably before March this year in time for the new fiscal year.”

Referring to Norway and its system of tax credits introduced in 2005, Ewing maintained that contrary to popular belief reducing taxes doesn’t mean less money for the government.

“Norway introduced tax credits in 2005 which led to a four-fold increase in exploration activity and many new discoveries,” he said, adding that the tax regime needs to be competitive in order to attract investors in times of crisis, which, he believes, it currently is not.

Despite the oil prices hitting a six-year low this week with a barrel of crude selling for less than $48, Ewing remains optimistic the Aberdeenshire oil and gas industry will pull through.

“All major analysts including OPEC are confident the price will recover,” he said. “Oscillation of oil prices has always been an integral feature of the sector. We have seen in the past and we survived and we are confident that with focus on innovation and technology development we will pull through this time as well.”

He further reinstated Scotland’s aim to become the world’s leader in renewable energy. The way forward, he believes, is to build on engineering know-how of the oil and gas sector to develop novel applications including floating off-shore wind, tidal power, and carbon capture and storage combined with enhanced oil recovery.

“Scotland has the most ambitious emission reduction targets in the world, we want to cover 50 per cent of our electricity consumption from renewable resources by the end of this year and 100 per cent by 2020,” he said. “But we are pragmatic. We know that the major emitter is electricity generation based on fossil fuels and without eliminating this carbon, we won’t achieve our CO2 targets. That’s why we are confident that carbon capture and storage is the way forward.”

Scotland is currently developing the world’s first full-scale gas carbon capture and storage (CCS) project, a joint venture between Shell and SSE. Located in Peterhead, the pilot facility will remove up to 10 million tonnes of carbon dioxide emissions from a local power station. The carbon captured at the facility will be transported via a pipeline to a long-term deep-sea storage facility.

Ewen Cameron, the Scottish Development International’s head for renewable energy and low-carbon technologies, asserted Scotland’s focus on research and innovation.

The world’s first floating offshore wind farm is expected to be launched in Scotland in 2016 and construction of MeyGen, the world’s largest tidal project, to be located in Pentland Firth, is about to commence

Renewable energy sector is currently employing 12,000 people in Scotland.

The oil and gas industry provides about 250,000 jobs and generates £300bn in tax revenue.

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