By Martin Kelly
Newly published analysis released by the Scottish government predicts that a “renewed oil boom” will lead to an average of £48bn of revenue over the next six years.
With over half the wholesale value of the nation’s oil reserves estimated still to be extracted, the Oil and Gas Analytical Bulletin reaffirms Scotland’s position as Europe’s energy capital, the Scottish government has said.
According to the bulletin, the first in a series of analysis by the Scottish Government, Scotland is estimated to be the largest producer of hydrocarbons in the EU, accounting in 2010 for nearly two-thirds (64 per cent) of EU oil production.
Among the main points of the bulletin, it shows that:
- The oil and gas sector is a key part of the Scottish economy. It is estimated to contribute around £25 billion to Scottish GDP (onshore and offshore), approximately 17 per cent of the total in 2011. The North Sea oil and gas sector is also a major exporter, boosting the UK balance of payments by £40 billion in 2011.
- Oil and Gas UK – the industry body – estimate that up to 24 billion barrels of oil and gas equivalent could still be recovered. These reserves are estimated by the Scottish Government to have a potential wholesale value of up to £1.5 trillion. This implies that, by wholesale value, more than half of the oil and gas reserves in the UK Continental Shelf (UKCS) could still be extracted.
- It is estimated that Scotland accounted for 78 per cent of total UK hydrocarbon production in 2011-12. On an internationally comparable basis Scotland is estimated to have the largest oil reserves in the EU, accounting for nearly 60 per cent of total EU reserves.
- The latest Oil and Gas UK Activity Survey reports record levels of North Sea investment. Investment in 2012 was worth £11.4 billion, the highest level for 30 years. Investment is expected to increase to £13 billion in 2013, while total investment in companies’ plans is estimated to now be worth almost £100 billion.
- It is estimated that approximately 85 per cent of remaining UK hydrocarbon reserves lie in Scottish waters. Scotland’s share of estimated oil reserves is thought to be higher still, with in excess of 90 per cent of UK oil reserves believed to be located in Scotland’s share of the UKCS.
Commenting, SNP MSP for Aberdeen South and North Kincardine Maureen Watt said:
“This bulletin, which has been welcomed by Oil and Gas UK, shows that Scotland is projected to see an average £48 billion oil boom in the next six years – a direct result of the record levels of investment in North Sea oil and gas.
“Projected investment will reach £13billion in 2013, whilst total investment in companies’ plans is worth around £100billion.
“There is little doubt that Scotland in moving into a second oil boom, and it will remain an enormous economic resource for many decades to come.
“Scotland’s oil and gas industry has a hugely positive future, which is why we must ensure that its tax revenues are used properly for Scotland’s long-term benefit – not sent straight into the pockets of the UK Treasury, which has wasted them over the last 40 years.
“Scotland’s finances are consistently stronger than the UK’s, over half of the North Sea tax revenues are still to come, and our oil and gas assets are worth up to £1.5 trillion.
“The No campaign is becoming a laughing stock by trying to con Scots into thinking it’s better for a Tory Treasury at Westminster to control Scotland’s oil tax revenues rather than the people of Scotland ourselves.
“With a Yes vote for independence in 2014 we will have the powers to put future oil revenues to good work in Scotland, and secure our future as Europe’s energy capital.”
The bulletin follows claims by leading Unionist politicians that the analysis over-estimated the amount of revenue that could be generated.
Speaking earlier today before the analysis was published, head of Better Together campaign, Alistair Darling attacked the Scottish government and said: “Their own fiscal commission told them not to over-estimate the value of oil in the long term, yet that is exactly what they are going to do. What happens if Alex Salmond is wrong? What happens if the price does fall?
“Oil is great for Scotland. However, we know that oil prices go up and down and that one day it will surely run out.”
However Mr Darling’s claim that the analysis over-estimated revenue appeared to be contradicted by industry body Oil and Gas UK who today released a statement in which it said:
“The document supports our view that the offshore oil and gas industry is an industry with a future and one worth working hard for. It occupies an important place in the economy, not just because of the revenues it generates – as highlighted by this document – but also for the jobs it provides, the security of primary energy supply and the business opportunities it presents for companies in the supply chain across the country.”
Commenting this morning, Oil & Gas UK communications director Trisha O’Reilly said: “We welcome the First Minister and Finance Secretary to Aberdeen, the engine of the UK’s oil and gas industry. While here, they will meet members of the Oil & Gas UK Board to discuss the findings of our own exploration, investment and production survey published at the end of February. We are currently seeing record investment which should result in oil and gas production rising from 2014 out to 2017, safeguarding hundreds of thousands of jobs, revenues and valuable supplies of primary energy.
“There is a substantial prize still to be won, with up to 24 billion barrels of oil and gas to recover. These barrels will be difficult and expensive to develop and operate, but with cooperation with and between the Scottish and UK governments, and continued innovation and strong stewardship by the industry, we believe it can be done.”
However, other Unionist politicians echoed Mr Darling’s sentiments and attacked the analysis.
Scottish Labour’s Richard Baker added: “Last week we found out that in private John Swinney thinks that oil revenues will fall in a separate Scotland, bringing into question the affordability of even the state pension.
“So on Alex Salmond’s orders he has spent the weekend cooking the books to come up with an extra £26bn out of thin air.
“The SNP really do think that they can treat the people of Scotland like fools.”
The latest forecasts by Oil and Gas UK suggest that production could reach the equivalent of 2 million barrels a day by 2017. This would represent a 30% increase on current production levels. Analysis published by Professor Alex Kemp in November 2012 also projected that production could rise in the years to 2017 under a number of different scenarios
In contrast, the Office for Budget Responsibility (OBR) forecast that production will decline by 4% between 2012 and 2017 The analysis by DECC upon which the OBR forecasts are based notes that they incorporate “very significant negative contingencies to the aggregate figures” based on DECC officials’ judgement and past forecast deviations
Such contingencies may explain some of the divergence in the forecasts of production in future years.