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Oil tax "could cost industry £50bn"

A new windfall tax on oil from the North Sea could put billions of pounds of investment at risk over the next decade, industry leaders have warned.

Oil & Gas UK, the trade association representing the offshore sector, said the new tax could cost the industry £50bn over the next 10 years.

Chancellor George Osborne recently announced £2bn of new taxes on the windfall profits of oil companies.

Oil & Gas UK warned that the move could jeopardise tens of thousands of jobs.

A string of firms, including the Norwegian giant Statoil and Valiant Petroleum, have cancelled or delayed plans for North Sea exploration following the Chancellor’s announcement in last month’s Budget.

Mike Tholen, Oil & Gas UK’s economic director, said: “Oil & Gas UK’s activity survey, launched in February 2011, had identified £50bn of potential capital investment in oil and gas projects around the UK continental shelf over the next decade and longer.

“It is undoubtedly the case that investors will be reappraising all these opportunities in light of the tax increase announced in the Budget.

“We are currently working with industry to establish the full impact of the Budget on investment and activity and intend to publish the results of this insight by the end of April.”

A spokesman for the group also said up to £40 billion worth of investment had been identified over the next five years.

Labour’s Aberdeen Central candidate Lewis Macdonald said the warning was “a profoundly concerning development”.

He said: “This tax has been hugely ill-thought out and introduced without proper consideration.

“We cannot afford to see jobs being put at risk for a policy that will at best reduce petrol prices by a fraction of what Labour’s plans to scrap the VAT increase would have.”

SNP leader Alex Salmond blamed successive Westminster governments for the “incompetent and shabby fashion” in which they had treated Scotland’s oil wealth.

He said: “The Tory Chancellor’s ill-thought through tax changes run the risk of diverting vital investment away from the North Sea, threatening jobs, and only now are we discovering that this could run into tens of billions of pounds.

“There is nothing wrong with making taxation responsive to profitability and high oil prices, but it has to be done in a planned fashion with appropriate incentives for marginal fields and infrastructure development. That is what must be done.

“The Treasury’s only interest was mounting a smash and grab raid on Scotland’s resources to bankroll Westminster.

“It’s also incredibly hypocritical of Labour to now complain about these changes when they failed to support SNP moves in Westminster to vote down these damaging tax changes last week.”

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