Today’s Budget saw, as expected, a strong focus on the immediate issues facing the oil and gas industry. If you were sitting in any other part of the energy sector however, you might be feeling a little underwhelmed, as there were slim pickings here.
George Osborne acknowledged the pressures and challenges facing the UK’s oil and gas industry by announcing a series of measures to try and shore up the investment exodus and give more confidence to the sector.
- The government has committed to spending £26m on completing seismic surveys of the unexplored areas of the UKCS (UK Continental Shelf) to encourage exploration in currently untapped areas of the region.
- A reduction in the supplementary charge from 30% to 20%, building on the 2% cut announced in the Autumn Statement.
- A reduction in the petroleum revenue tax from 50% to 35% to promote investment in incremental projects in older fields and extend the life of aging assets.
- Ensure that the Oil & Gas Authority has the powers it needs to challenge operators’ decommissioning programmes to ensure they are cost effective.
The industry itself has cautiously welcomed these changes – Oil and Gas UK commented: “Today’s announcement lays 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… Stability and predictability will be key for the industry to support British investment, jobs and energy security for decades to come.”
So there’s the headlines from the oil and gas sector – what about the rest of the industry? As anticipated, the planned Swansea Tidal Lagoon got the go ahead, as well as agreement that the government would start negotiations on a Contract for Difference for the programme.
This was welcomed by RenewableUK: “This is a significant step forward towards building the first tidal lagoon of its kind in the world. “By enabling this project to go ahead, the Government will also unlock the potential for other, larger tidal lagoons to be developed. Swansea Bay will generate the confidence needed to attract investors into those future schemes in the UK.
“As the funding will come from the Levy Control Framework, which is a finite pot, the Government should ensure that other renewable technologies such as wind, wave and tidal stream are also allocated sufficient financial support, through an application process appropriate to their stage of development, to continue to develop to their full potential.”
This was the only real positive for renewable or sustainable energy technologies in this year’s Budget announcement.
The Transmission Network was the only other energy area to come under the Budget spotlight – the Government also announced plans to bring forward plans to deliver a competitive tendering process for the onshore electricity transmission infrastructure in a move to drive down the costs in this area. So this was a Budget, as expected, with more than one eye on the general election. I guess we’ll have to wait until after May 2015 for any more clarity on where policy is headed.