EXCLUSIVE

DONALD Dewar warned the Treasury that the Scottish oil industry would rebel over tax increases, it was confirmed last night.

The Scottish Secretary wrote to the Chancellor warning of the industry's strong hostility to the Treasury's fiscal review but last night it appeared Gordon Brown had not responded formally to the Scottish Office's warnings.

This development emerged after yesterday's Herald report that 2000 jobs could be lost because six major oil companies had shelved plans for the Clair oilfield development off Shetland amid uncertainty about the UK offshore tax regime.

Scottish Office officials last night dismissed talk in the industry of rising tension between Mr Dewar and the Treasury on the issue and reasoned: ''It is in the oil industry's interests to say this is a disaster waiting to happen. They would say that, wouldn't they?''

Officials also denied that Mr Dewar had lobbied the Chancellor to drop the idea of a major tax hike. ''The Secretary of State took no side - he merely passed on the views of the industry, as you would expect him to do,'' a spokesman said.

The whole question of oil taxation is under review as announced by Mr Brown in the Budget. The Scottish Office put out a formal statement last night arguing that the Government was right to review the tax regime. ''We need a balanced regime in the best interests of the oil companies and the taxpayer. We are aware of the Scottish implications and we have pointed these out to the Treasury. However, it is speculative at this time to talk of large-scale job losses.''

As revealed in The Herald yesterday, an estimated 2000 jobs would have been created during the construction phase of the development, which the six partners had planned to seek sanction for this year.

BP, which has the biggest share in the field, said it was the uncertainty over the fiscal regime that had made it difficult ''to maintain momentum'' and had led to the decision.

A consultation document outlining the Government's proposals for tax changes was due out in mid-April but it has still not appeared.

A Treasury spokesman said yesterday the consultation document would be published within the next few weeks. Asked why it was already several weeks late, he said: ''The important point is to get it right and we are still working on it but it will be out very soon.''

Mr John Wils, of the United Kingdom Offshore Operators' Association, described the situation as ''extremely serious''.

The industry has estimated that as many as 50,000 jobs throughout the UK could be put in jeopardy by a tax rise and has been lobbying the Government to reconsider and to encourage the development of the industry to gain a share of a ''larger pie'' rather than risk the acceleration of the decline of the industry.

''We have to get over the point that the oil industry is here because international oil companies choose to invest here,'' said Mr Wils. ''It is not because of Government subsidies or anything like that. We have to continue to encourage that investment and this is not the way to do it.''

The Conservatives accused the Government of mismanagement of the economy, the Liberal Democrats said that their dilly-dallying was having a profound impact on jobs, and the Scottish Nationalists said that Chancellor Gordon Brown might be Scottish but he was ''anti-Scottish'' in the way he was treating the oil industry and the jobs dependent on it.

Scottish Office Minister Brian Wilson said that he would have expected the oil industry to behave in the way it was doing and likened it to playing a game of poker.

He said no-one expected the industry, with a review of taxation under way, to say that they could accept a greater tax burden.

One positive piece of news yesterday for the industry was that Amerada Hess Flora Field development plan was given the go-ahead by the DTI.

The field is 215 miles south east of Aberdeen and was discovered in July last year. It has recoverable reserves of around 17 million barrels of oil and will be produced using the Uisge Gorm floating, production, storage, and offloading vessel which also serves the Fife and Fergus fields.

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