Claim that the best days for North Sea oil are over is a myth, says Tory energy minister

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  By a Newsnet reporter

The announcement on Thursday of the winners of the latest licensing round for the North Sea oil and gas sector which sees 167 new licences covering 330 North Sea blocks is a clear demonstration of the vibrancy of the sector, according to the UK government’s Department of Energy and Climate Change.  The statement from the UK government’s own energy ministry is a direct challenge to the claim by anti-independence parties that the best days for Scottish oil are over.    

This latest licensing round saw more interest from investors than ever before, with 224 applications, and comes in a week that has seen several major investments in the sector announced by oil and gas companies.  The latest of those announcements came today, with the news that Shell is set to buy Hess Corporation’s stake in 12 fields and the Scottish Area Gas Evacuation System in a £338 million deal.

Earlier this week, the Canadian oil company Talisman announced that it would be investing £1.6bn in a project to redevelop the Montrose field.  Meanwhile Shell announced that it had been given the go-ahead to develop the Fram field, 135 miles east of Aberdeen, which will produce 2% of the UK’s entire output of oil and gas.  

As well as licences in the North Sea, the new licensing round also saw licences issued for new blocks to the west of Coll and Tiree.  It expected that oil production in the waters off the west coast of Scotland will grow in importance over the coming decades.

The UK energy minister, Conservative MP John Hayes, confirmed that the oil and gas sector had a long productive life still ahead of it, and described claims that the oil would soon run out as a “myth”, saying:

“This has been a great week for the oil and gas industry.  There’s this myth around that the North Sea has seen its best days – but this shows there is still a lot of opportunity there.”

The UK government estimates there are up to 24 billion barrels of oil and gas remaining to be produced in UK waters.  It is thought that over 90% of this lies in waters which would be considered Scottish under international law.

Welcoming the news, Mike Tholen, Economics and Commercial Director at Oil & Gas UK said:

“The record number of applications for licences in this 27th Round shows that investor confidence is returning following 18 months of constructive engagement with the Treasury and the announcement of several measures aimed at boosting activity. However, last year saw the lowest exploration for many decades so we must do everything we can to ensure that the award of licences translates into actual exploration for the billions of barrels of so far undiscovered oil and gas.”

Commenting, SNP MSP Maureen Watt said:

“The oil and gas sector is one of the brightest spots in Scotland’s economy, so it is little wonder that there has been such overwhelming interest in the industry.

“As the Westminster Government’s own press release makes clear the industry is boosting the UK’s balance of trade by £40 billion, demonstrating the important contribution Scotland makes and would continue to make to a Sterling area.

“With an estimated 24 billion barrels of oil still to be extracted, it is clear that the North Sea oil & gas sector will continue to have a strong future ahead of it for many years to come.

“However, what is essential is that the industry is no longer treated as a cash-cow to prop up the books at the Treasury and is instead managed well for the long-term.

“An independent Scotland would rightly manage our resources in a way that secures a sustainable legacy for future generations, including the establishment of an oil fund.

“That is the responsible thing to do and it is clear that it will only be possible following a Yes vote in 2014.”