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UK Could Agree On $1-Trillion Support Package For Oil Industry

North Sea rig

The UK government could be on its way on agreeing a massive support package—dubbed a sector deal—with the North Sea oil and gas industry, the Scottish Secretary of State David Mundell told local Press and Journal.

The package could be worth in excess of US$1.4 trillion (1 trillion pounds) over the next 17 years and, said Mundell, there was “every possibility” it will be agreed.

The sector deals are an important part of the UK government’s industrial strategy announced last November and the oil and gas industry in the North Sea has been eager to take part in this strategy. This year alone, the industry said when making its case for the package, is on track to attract investments of US$5 billion this year alone, which should tip the scales in its favor.

Another factor that would help the government make up its mind to provide financial support for the oil and gas industry is the UK’s growing dependence on natural gas imports, highlighted recently during a couple of unseasonal cold snaps that saw the UK resorting to Russian gas despite a political heat-up between the two countries.

Scotland is particularly interested in the longevity of the North Sea oil and gas industry as it is a major revenues source for the local budget, so the Scottish government has been very active in selling the sector deal to the central government.

Related: Russia Wants To Drop Dollar For Oil Payments

Preparations for a deal are under way in the industry with various proposals being drafted. The final package, if approved, would likely focus on prolonging the productive life of the North Sea oil and gas industry along with preparing for the long string of platform decommissioning deals ahead and what media are calling “transformational technology.”

So far, the government has provided sector deals to the construction, carmaking, life sciences, and artificial intelligence sector. There is a hint of urgency for the oil and gas sector since Labor leader Jeremy Corbyn has made a note of warning he would review the tax changes for oil and gas approved by the Conservatives if he became the next prime minister.

By Irina Slav for Oilprice.com

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