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SNP to take on £20bn UK North Sea decommissioning promise

26 July 2013

On July 24, the Scottish National Party-led Scottish Government said it would take on the UK government's £20 billion pledge to help with the cost of decommissioning North Sea oil rigs. First Minister Alex Salmond said oil and gas revenues would offer Scotland a huge advantage as he announced the pledge.

Scotland's First Minister, Alex Salmond
Scotland's First Minister, Alex Salmond

The offer was made in a report aimed at reassuring the industry before the referendum on Independence in 2014.

The SNP said it would seek a contribution from the UK Government during negotiations if Scots vote Yes to independence next year, but said "the outcome of these negotiations will have no impact on the value of relief received by operators".

The Scottish Government report, unveiled by the First Minister in Aberdeen, added: "In order to provide long-term certainty for the industry the Scottish Government will assume responsibility for meeting all existing and future obligations stemming from the tax relief associated with decommissioning facilities in Scottish waters. It will guarantee to underwrite these costs."

The cost of cleaning up the North Sea is an estimated £36.7bn, at current prices, between now and 2050. The cost to Government in tax breaks will be £20bn.

According to the Scotsman, the Scottish Government's pledge marks a significant shift in policy. Energy Minister Fergus Ewing last year told the Commons energy committee the UK had a "moral and certainly a legal obligation to be responsible for decommissioning" as successive UK governments had spent the tax revenues from the North Sea.

However, the promise will avoid a potentially damaging row in the run-up to the poll over who should pay for decommissioning.

The Scottish Government's paper – Maximising the Return from Oil and Gas in an Independent Scotland – also stressed there were no plans to increase the overall tax burden on the industry and promised that changes would not be made without consultation.

The paper was welcomed by offshore industry association UK Oil and Gas, which claims neutrality in the referendum debate.

Chief executive Malcolm Webb said:  “Predictability and long-term planning are what the industry requires of any government, particularly in the fiscal regime and the licensing and regulatory framework.  

“The industry will also welcome government support in ensuring access to capital for growth for smaller companies, with developing the domestic and international supply chains, with innovation and the deployment of new technologies, as well as help in widening and deepening the skills pool.

“Oil & Gas UK is already working constructively with both the UK and Scottish governments on these important issues. We will look forward to seeing the work of the Scottish Government’s new Oil and Gas Expert Commission when it ultimately reports.”

An expert commission, to be chaired by Melfort Campbell, who co-chairs Scottish Enterprise's Oil and Gas Industry Advisory Group, will be set up next month to develop detailed policy on issues raised in the report.

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