Learning From Norway

The First Minister claims the UK Government has failed to encourage new oil exploration in the North Sea.

Nicola Sturgeon has renewed calls for swift action from ministers.

Around 40% of production in the North Sea is expected to come from new field developments by 2018.

Ms Sturgeon says we must learn from the Norwegian model.

In January, the Scottish Government published Oil and Gas Discussion Paper - Challenges, Opportunities, and Future Policy which set out proposals for fiscal change, including a call for the introduction of an exploration tax credit by the March 2015 Budget. The Scottish Government has called for the UK Government to:

• Introduce an exploration tax credit
• Reduce the headline rate of tax in the North Sea
• Introduce an investment allowance

While in Aberdeen, the First Minister and Deputy First Minister visited Pipelines 2 Data, an Aberdeen-based pipeline support service provider which has worked with several major oil and gas pipeline operators and related industry service providers.

Speaking from the company premises, the First Minister said:

"I believe that North Sea oil is a fantastic asset for Scotland and will continue to be so be for decades to come. There are up to 24 billion barrels of oil and gas equivalent remaining, and it is essential that we have a stable and proportionate fiscal regime which encourages the investment, innovation and exploration required.

"But we need action now from the UK Government to help ensure we maximise future production and economic recovery. Quite frankly, the UK Government has failed to address the exploration problem in the North Sea.

"It cannot be clearer that urgent fiscal stimulus is required to improve the exploration outlook. Around 40% of production is expected to come from new field developments by 2018: that's only three years away. Fiscal measures to incentivise exploration, coupled with the appropriate regulatory expertise, have the potential to drive forward a resurgence in exploration in the North Sea.

"We only have to look at the situation in Norway in 2005 to see that simple steps can be taken to restore a decline in exploration. In the course of three years, the introduction of the exploration tax credit saw the number of exploration wells increase an incredible fourfold.

"We have also called for the reduction in the headline rate of tax in the North Sea and the introduction of an investment allowance, all of which have the potential to provide an important signal to investors, increase the attractiveness of North Sea exploration projects and enhance the competitiveness of the sector.

"The UK Government cannot continue to ignore calls from the Scottish Government and the industry themselves. Sir Ian Wood has recently stated that up to six billion barrels of oil reserves could be lost unless radical measures are taken by the UK Government. We will continue to call on the UK Government to maintain the momentum for fiscal and regulatory change in the oil and gas sector, both of which are critical to prolonging the life of the industry beyond 2050 and maximising the total value generated in the economy."