North Sea oil industry calls for urgent rescue package ahead of Chancellor George Osborne's Budget

Jessica Morris
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Cabinets From Both UK And Scottish Governments Meet In North East Scotland
Oil prices are recently bounced to around $40 (Source: Getty)

The North Sea oil industry today called on the chancellor to deliver an "urgent" rescue package in next week's Budget, a move which will safeguard its increasingly uncertain future in the face of tumbling crude prices.

Trade body Oil & Gas UK warned some 14bn barrels of an estimated 20bn barrels of oil located around the UK's shores won't be extracted unless the North Sea is able to attract more investment.

It added that the government's failure to act could threaten thousands of skilled jobs, billions of pounds of tax revenues and the UK's energy security.

Oil & Gas UK wants the standard 50 per cent tax on production profits to be chopped by 20 percentage points, and the petroleum revenue tax of 35 per cent on older oil fields to be removed entirely.

It also called for the government to enable decommissioning tax relief to transfer with the sale of an asset, and ensure tax relief can be accessed by the vendor. This would stop a dreaded "domino effect" among the North Sea's highly interconnected oil fields forcing operators to halt production early.

Scrapping special taxes from discoveries made over the next five years should galvanise exploration, it said. Meanwhile, making the Investment Allowance more effective would help activity in the short-term and boost new investment.

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