North Sea oil to give George Osborne £25bn boost

Capital spending this year is forecast to race to its higher level in 30 years, with companies planning to spend at least £13bn, according to data collected by Oil & Gas UK, the industry trade body.

Overall, offshore operators are working on plans involving longer-term investment of almost £100bn that would create thousands of new jobs and extend Britain’s role as an oil producer to 2040-2050, the survey finds.

The assessment is the most optimistic produced by the industry in years and will be welcomed by George Osborne, the Chancellor, as an indication that his about-turn on tax increases for the sector is paying off. It also provides Alex Salmond, Scotland’s First Minister, with fresh economic ammunition to argue for his country’s economic independence. More than 45pc of the 440,000 jobs supported by the industry are in Scotland, reports The Telegraph.

The investment boost also raises the prospect of an increase in gas production. That could help reduce the need for the significant increase in imports thought necessary to help avoid an energy crunch, identified last week by Alistair Buchanan, chief executive of Ofgem.

Malcolm Webb, chief executive of Oil & Gas UK, said changes in government policy had proved to be the key factor in restoring confidence and creating a “new wave of investment.”

A series of policy changes by Labour and the Coalition to increase the tax take has damaged confidence and investment. Production has slumped 30pc over the past two years to 1.55m barrels a day with the result that the total tax take is down 35pc to £7.3bn in the period.

However, the review shows that projects approved over the past two years will produce more than 2bn barrels of oil, generate £100bn for the economy and £25bn in tax receipts for the Exchequer.

Mr Osborne has provided tax allowances and incentives to stimulate more investment and is promising to help the industry offset a £35bn bill for closing fields and removing installations when the oil and gas runs out.

Oil & Gas UK has been at pains to demonstrate how the industry is responding after a “decade of fiscal instability” from the Treasury. The two sides are said to have established a “new long-term approach to the oil and gas industry”.

The survey shows that, if all the exploration wells currently planned are drilled, the next three years will be the busiest for 15 years.

Over the past 12 months the number of projects approved by the Energy Department has doubled to 33, involving investment of £13.4bn. They include Statoil’s £4.3bn outlay and 700 new jobs in the Mariner heavy oil development; Talisman’s £1.6bn investment and more than 2,000 new jobs at its Montrose-Arbroath field and the GDF Suez plans to spend £1.4bn on the Cygnus gas project providing 1,200 new jobs.