Election 2015: What are the SNP plans for North Sea Oil?

The United Kingdom oil and gas industry plays a major role in UK society. A report from PwC states that the UK oil and gas industry contributed over £30.1bn in UK tax contributions in 2011 — over 5% of the total UK tax revenue comes directly from the industry: with a higher contribution if all the supply chains were included. In 2011, the industry was the largest corporation tax payer in the UK.

With the general election just around the corner, and the recent debate about devolution, the topic of North Sea oil is in the news. Read our article for more information about this topic: Is This The End For North Sea Oil?. One party particularly concerned about the North Sea oil industry are the Scottish Nationalist Party (SNP). But what would they like to do to ensure the industry is resilient in these times of changing oil prices?

High tax costs on oil production

In recent years the government has altered the tax regime to significantly increase the amount of tax paid by North Sea oil companies: including the supplementary charge, an additional payment from profits paid by companies producing oil in the UK or on the UK continental shelf. In the March 2015 budget statement George Osbourne reduced the supplementary charge from 30% to 20%, having increased it to 32% from 20% in March 2011 (Have the North Sea Tax Cuts Worked?). The increase in the supplementary charge in 2011 has been criticised by many in the industry as reducing the funds available to further develop and invest in North Sea oil.

Prior to the UK government’s reversal of the supplementary increase, the SNP appealed to the UK parliament to reduce the 2011 increase. The North Sea oil industry is particularly important to Scotland as much of the infrastructure to support North Sea oil production is based there — with many jobs based directly and indirectly on the health of North Sea oil production.

What does the SNP think?

A report published in February 2014 by Sir Ian Wood (The Wood Review) highlighted some of the issues facing the industry that could lead to over six billion barrels of oil being left under the sea due to the relatively high economic costs.

The SNP responded by asking the UK government to help the industry by introducing an exploration tax credit to allow companies to explore and develop new fields and an investment allowance in recognition that the North Sea fields are mature fields.

As part of their election rhetoric, Alex Salmond recently called for a ‘community of interest’ to ensure that the North Sea oil fields prosper for the next 50 years and help keep North East Scotland at the forefront of the global oil industry.

“While the SNP in government is investing in this region in infrastructure and skills development, fiscal predictability is vital to ensure exploration, development and innovation thrive for many years to come.”

 With many issues to consider — does the rest of the UK have time to consider the SNP’s requests?