From Aberdeen (IF): The UK government has finally unveiled a package of measures to help the country’s ailing offshore industry which it says will encourage more than £4bn of additional investment over the next five years.

The move has been widely welcomed, although industry watchers feel it could be too little too late for a mature sector which has given a massive boost to the British economy over several decades, paying to date over £330bn to the country in production taxes alone.

Thousands of jobs are currently being cut by the North Sea industry as firms desperately look to cut costs due to the double whammy of a plunging oil price and soaring costs. There are major doubts if these changes will be enough to turn things around.

One industry figure said the changes may only benefit a handful of tax-paying North Sea producers and will not address much larger, structural issues facing the industry.

The long-awaited announcements in last week’s Budget include a new, simpler investment allowance. In addition, supplementary corporation tax is being cut from 30% to 20%, although this simply returns it to the level prior to the hike by this government two years ago. Petroleum Revenue Tax (PRT) on older fields is being reduced from 50% to 35%.

Meanwhile, exploration will get a boost from £20mn of funding for seismic surveys in under-explored areas of British waters.

Also last week, the government said the new Oil & Gas Authority (OGA) will be given a range of powers. It will have the ability to issue fines of up to £1mn; to revoke licences where necessary; as well as having the right to attend meetings; and have access to data to enable it to spot and resolve issues at an early stage.

Energy Secretary Ed Davey said, ‘We have worked hard along with industry to establish this new regulator as part of the government’s commitment to the North Sea and the hundreds of thousands of jobs it supports. We’ve moved quickly to get the OGA up and running to help the industry with the challenges it is facing, but it’s also vital that we give it the powers it needs to be an effective regulator.

‘It was important for us to work with industry to get that right,’ Davey said, ‘and I think what we have developed together will enable the OGA to be very effective.’

Malcolm Webb, CEO of Oil & Gas UK, said the budget announcement laid the foundations for the regeneration of the UK North Sea.

‘The industry itself must now build on this by delivering the cost and efficiency improvements required to secure its competitiveness,’ Webb said.

But Robert Collier, chief executive of Aberdeen & Grampian Chamber of Commerce, said only time will tell whether the measures will provide a sufficient incentive.

Jon Fitzpatrick, president of the Scottish Oil Club, said the concessions will likely only benefit the handful of tax-paying North Sea producers and will not address the much larger, structural issues facing the industry here.

Fitzpatrick said it was impossible to predict when the oil price will recover and added: ‘There are a vast number of projects that are unfunded and unsustainable at current oil prices and many companies may not stay in the basin or business long enough to see the dawn of the oil price rising again.

He added that ‘critical North Sea infrastructure’ will likely be decommissioned leaving existing discovered resources at risk of never being developed.

‘To address the underlying issues and attract substantive third-party investment, the industry and UK Government need to work more closely to encourage a more aggressive drilling and production programme and protect employment and economic opportunities over the longer term,’ he said.