In a letter to Chancellor Alistair Darling, who will submit the budget in the coming week, Webb warned that unless action was taken, capital investment could be halved to GBP2.5 billion ($3.75 billion) by next year, with serious negative implications for future UK energy security.
The government has tried to deal with industry fears.
In his pre-budget report November 2008, Darling revealed a new value allowance which would decrease the tax rate for small, technically challenging fields.
But Oil & Gas UK said this allowance should apply to all latest developments.
We’re saying – cut us some slack, without having to put your hand in your pocket, Webb said.
As the UK’s offshore fields have declined, many major players have shifted spotlight, with smaller companies striking the North Sea on the back of low-cost licenses.
Though, the credit crunch has hit smaller players hard, with access to financing becoming ever harder to secure.
Energy consultancy Hannon Westwood said that of the 176 companies that hold UK petroleum licenses, 105 have no producing reserves of oil or gas nor fields under development.
Without cash flow to finance operations, they will disappear, said Chris Bulley, a partner at Hannon Westwood.
Webb is also calling on the government to give about GBP250 million in tax reprieve on exploration costs that is now sitting on its books.
This cash is generally released once a well is brought in operations. Well is calling on the government to make that cash obtainable as the well is drilled.
Oil & Gas UK has also planned reducing companies’ exposure to the future costs of decommissioning infrastructure such as oil-production platforms after the oilfield stops production.
