Scotland's oil and gas industry has generated well over £300billion for Treasury coffers and it employs over 375,000 people from across the UK. It is an important industry for the north east of Scotland and the national economy, and one that has benefited UK government expenditure for very many years.
With twenty billion barrels of oil still to be extracted from the North Sea basin, the long-term future of the industry can be bright - but if we want to keep the many thousands of skilled jobs that the sector provides, and if we want to carry on enjoying the billions of pounds of tax revenue generated, then the UK government must take action now to support the industry through what is a difficult but not insurmountable period.
The substantial challenges faced by the industry as a result of the current low oil price have already resulted in significant job losses, with the number of jobs supported by the sector falling by around 65,000 since 2014. Oil and Gas UK's 2016 Activity Survey found exploration levels remain at an historic low with just seven to ten exploration wells forecast to be drilled in 2016, down from fourteen in 2014, and capital investment is also down - expected to be less than £10billion in 2016, down from a record £14.8billion in 2014.
Without urgent action to support a recovery we could see further job losses, as well as the loss of critical hub infrastructure and the premature cessation of production of viable fields.
For our part, the SNP is absolutely committed to supporting the long-term future of the industry and protecting the jobs, skills and talent that Scotland's internationally competitive energy sector boasts.
The SNP Scottish Government is taking the action it can with the limited powers available to it to support the industry, workers and the local economy - establishing the Energy Jobs Taskforce and investing £379million to support Aberdeen as one of the world's leading cities for investment and business. At the beginning of February, the Scottish Government announced two further funding packages - a new £12million Transition Training Fund, to financially support individuals to retrain for specialist roles in the sector and £12.5million of funding for innovation projects, research and development.
The SNP will continue to do all it can to support the sector, but the Scottish Government does not have control over the fiscal and regulatory powers needed to maximise the economic recovery - the UK government does. Yet, despite pressure from SNP MPs, the Scottish Government, Oil and Gas UK, Trade Unions, and other industry experts, Chancellor George Osborne failed to deliver new fiscal support for the industry in his Autumn Statement and has remained unwilling to make any commitment since then.
With the urgent need for action it is time for the Chancellor to stop sitting on his hands and instead heed the SNP's calls to use next week's Budget to deliver the essential fiscal and regulatory reform that the industry needs to protect jobs and secure its long-term future.
Most immediately we need to see a substantial reduction in the headline rate of tax and a review to create an internationally competitive tax regime in the North Sea with fiscal stability and predictability at its core. The Chancellor should also use the budget to remove the fiscal barriers for exploration and enhanced oil recovery (EOR), and to introduce fiscal reforms to improve access to decommissioning tax relief and encourage late life asset transfers - in order to reduce costs and help prevent premature cessation of production. Finally, the UK government should urgently consider additional non-fiscal support, such as government loan guarantees, to sustain investment in the sector.
It is crucial that the UK government's tax policies do not act as a barrier to activity and investment, and that policy is reformed to ensure that projects which are commercially acceptable before tax remain commercially acceptable after tax. It is also vital that any reforms made are developed in consultation with the industry to ensure the most appropriate options for lowering the tax burden and sustaining investment are delivered - this means immediate discussions must take place with the industry and the Oil and Gas Authority.
George Osborne has the power to help mitigate the effects of the current oil price shock by making these urgent fiscal and regulatory reforms in his Budget next week. The financial support of the SNP Scottish Government, and the efforts of the oil and gas industry to improve efficiency, reduce operating costs and increase production must now be matched by UK government action to create a competitive tax regime that stimulates exploration and development, attracts investment and protects jobs - so that we can make the most of the North Sea basin's continued potential.
Given that successive UK governments since the 1970s have mishandled the huge income generated from Scotland's oil and gas sector - not least by failing to emulate Norway in creating an oil wealth fund - it is now imperative that the Chancellor listens to the experts, stops the excuses, and steps up to the mark by taking the urgent action needed at this Budget to secure the future of our oil and gas industry.
This article first appeared in The Press and Journal