The North Sea ’ A New Hope

After Chancellor George Osborne’s Autumn Statement left some of us feeling a bit like a flat half- shandy at the end of a Christmas party, it was up to Chief Secretary to the Treasury Danny Alexander to provide the sparkle on a visit to Aberdeen today.

Mr Osborne announced in the House of Commons on Wednesday that the rate of the corporation tax Supplementary Charge for the oil industry, which was increased to prohibitive levels amid general outcry from the industry in 2011, would be reduced from 32% to 30%.

He also announced an expansion of the ring-fenced expenditure supplement from six to 10 years, thereby allowing greater payback time on investment, and a new cluster area allowance for the United Kingdom Continental Shelf (UKCS).

And he left us with the teaser that more would be revealed by Mr Alexander the following day.

Thankfully, Mr Alexander was able to add more perspective and hope for an industry which has seen exploration reach worryingly low levels in recent times, amid concerns surrounding a rising cost base and – in recent months - an alarming global drop in oil price.

In answer to widespread industry calls for significant tax cuts, he said the 2% reduction in the Supplementary Charge was the first of many as part of a move towards a lower tax burden, with the caveat that such reductions would be introduced as and when affordable.

He also announced a generic UKCS-wide investment allowance to replace the current field allowances, which would also include exploration costs and incentives for brownfield developments  and enhanced oil recovery.

Exploration was given a further boost with the news that government money would be made available for seismic survey activity in partnership with the industry and the new Oil and Gas Authority.

And there was also good news for the decommissioning sector with a suggested review of the tax framework to encourage new players to benefit from decommissioning relief and attract investment into the North Sea.

Of course, the devil is in the detail and there was little of that in today’s announcement, but there were significantly more crumbs of comfort than those offered by Mr Osborne a day earlier.

Hope springs eternal: North Sea oil won’t. We have to believe this government and those that follow it will put such talk into action, because the fate of the industry depends on it.