Huge benefits of maximising oil and gas recovery


Increasing the rate of successful oil and gas recovery in the North Sea by just 1 per cent would deliver £22 billion of extra tax revenue, Energy Minister Fergus Ewing has told the Scottish Parliament.

Maximising the amount of oil and gas recovered from existing oil wells would have enormous benefits for the Scottish economy, increasing the level of tax, ensuring that this precious asset is available for future generations, and creating further opportunities for innovation and job creation in our world-leading oil and gas sector.

Average rates of recovery are relatively low, with around 40% of resources recovered from oil and gas fields in the North Sea, compared with 48% in Norwegian territory.

The Oil and Gas strategy, developed by the Scottish Government and its agencies in conjunction with the sector and launched last year by the First Minister, focuses on the importance of maximising recovery.

In a debate on Oil and Gas at the Scottish Parliament, Mr Ewing will explain the importance of the industry’s continuing success to Scotland’s future.

Oil and gas currently meets more than two thirds of the UK’s energy needs, and is set to remain a vital part of our energy mix for decades to come.

There are 24 billion barrels of oil still to be recovered in the North Sea, with a wholesale value of £1.5 trillion. The industry supports around 196,000 jobs in Scotland and North Sea revenue is forecast to raise £34 billion in tax revenue over the next six years. Capital investment in the industry has risen, from £8.5 billion in 2011 to a predicted £11.5 billion in 2012.

Energy Minister Fergus Ewing said:

“No sector delivers more for our economy than oil and gas, and maximising the percentage of the oil and gas recovered should be a priority for everyone involved in the industry.

“If we increased the amount of oil and gas recovered from each of Scotland’s wells by just 1 per cent, it would increase tax revenue by £22 billion. This money could put towards creating the Scotland we all want to live in – a fairer society for everyone.

“Just imagine the benefits if we were able to use the enormous skills, innovation and creativeness that is present in the sector to increase recovery rates by 10 per cent.

“Maximising recovery is at the heart of this Government’s plan for the sector – a plan outlined in the strategy we developed with the sector – and the benefits are not just financial.

“I firmly believe that oil and gas is too precious an asset to fritter away. If we are able to increase the percentage we recover, then not only will we deliver huge economic benefits – we will also prolong the length of time this valuable asset is available. Maximising recovery is about prudent stewardship of limited resources. When oil and gas was first discovered off the North Sea we were told it would last a decade – four decades on, I am determined to hand on this precious legacy to generations to come.

“The oil and gas sector is one of Scotland’s biggest success stories and is one of the bedrocks of Scotland’s economy – the sector accounts for more than 90% of total UK oil and gas tax receipts and supporting 440,000 jobs across the UK, and the whole UK stands to benefit from maximising recovery. The innovation this will require will only benefit Scottish Oil and Gas businesses, and help us build upon our world-leading position in the sector. Our 10 million pound innovation fund will assist innovative companies to develop their products and services which will assist in increasing technology and thereby maximising recovery.”

“The Scottish Government understands the vital significance of our oil and gas sector, and has a track record of giving the sector the stability and security it needs. With independence, we would be able to do yet more to build on the successes of this vital sector – and to ensure that everyone in Scotland shares in the benefits it brings.”

Recent jobs and investment announcements in the oil and gas sector include:

  • 24 October 2012 – Talisman’s £1.6bn investment to prolong North Sea oil fields.
  • 23 October 2012 –Shell’s announcement on the development of the Frame Field – one of its biggest Scottish North Sea energy projects in the past decade and will pump 5 per cent of Britain’s gas needs at peak production.
  • 17 December 2012 – Dana Petroleum’s £1 billion development announcement for nine wells in the already discovered Harris and Barra fields, about 100 miles East of Shetland – they aim to double their production to 100,000 barrels a day by 2016.
  • 20 December 2012 Global Energy Group, which in October 2011 bought the Nigg yard by the Cromarty Firth in Ross-shire, is launching a Highlands-wide recruitment drive for an additional 400 skilled personnel to start work at Nigg and the neighbouring Invergordon Service Base. The jobs will focus on the oil and gas side of Global Energy’s operations.