A think-tank focused on boosting Scotland’s economy has called for the new oil and gas regulator and industry taxation decision-makers to be based in Aberdeen, not London or Edinburgh.
Ahead of a referendum on Scottish independence, N-56 says having both regulators and tax officials closer to industry would be more reflective of the situation in Norway and would help maximize North Sea resources, made whatever the result of the Scottish independence referendum in September.
N-56 has also backed calls for a more competitive North Sea tax regime, the creation of a Hydrocarbon Investment Bank to boost investment in the sector, and a long-term oil and gas industrial development plan to foster economic growth.
N-56’s comments are based on a report it commissioned, which echoes many recommendations by industry veteran Sir Ian Wood, in his Maximizing Recovery report. Sir Ian’s report was commissioned by the then UK energy Minister Ed Davey. It recommended a review of the UK taxation regime and the creation of a new regulator. The new body is to be called the Oil and Gas Authority and will be based in Aberdeen. Read more: £15 million funding for new regulator
The UK Government has already announced a review of the North Sea tax regime, following the Wood Review and an independent commission, which said a review was critical to ensure that the remaining hydrocarbons on the UK Continental Shelf are fully exploited. Read more: North Sea tax review welcomed
The UK Government last year also published an oil and gas industrial strategy. But, N-56 says am all-encompassing plan, exceeding the scope, scale and ambition of existing strategies, business plans and similar initiatives, is needed.
The N-56 report includes additional ideas to boost the industry, specifically in Scotland, says Martyn Tulloch of Tulloch Energy, one of the report’s co-authors alongside policy and economics consultancies DAMVAD (Norway, Sweden and Denmark) and BiGGAR Economics (Scotland). The report, Scotland Means Business report; Oil and Gas – A Pivotal Moment, was published today (4 August).
Tulloch said: “Implementing the recommendations of the Wood Review promptly and in full is essential to ensure that the remaining potential of Scotland’s offshore oil and gas reserves is maximized. The recommendations in this report are proposed as additional actions to help secure the greatest benefit for the wider Scottish supply chain.”
The report says that decentralizing the government departments responsible for taxation and regulation in Aberdeen, either under independence or under the control of the Scottish Government or as an arm of the UK Government, will make them more responsive. This would reflect the situation in Norway, where policy makers in the petroleum directorate (Om Oljedirektoratet) are co-located with the industry in the Norwegian oil capital, Stavanger.
N-56 also calls for consideration of ways to better incentivize, at a corporate level, the development and deployment of new and existing technologies to enhance recovery, extend asset life and increase production in a mature basin.
The report says a percentage of taxation receipts from oil and gas production should be ring-fenced and used to fund research and development, skills development, international business expansion support and other activities designed to foster economic growth.
The report suggests forming a Hydrocarbon Investment Bank, tasked with both a domestic and an international remit and able to support exploration companies, operators and the wider supply chain.
Should the referendum call for independence, the report suggests incentivizing international operators and service companies to relocate their corporate headquarters to Scotland through lower levels of corporation tax.
It says greater effort is needed between government, industry and the education sector to develop and implement an industry-led long term national skills development program in order to tackle skills shortages.
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