By Martin Kelly
The anti-independence campaign has today been described as a “laughing stock” after yet another pessimistic oil revenue forecast was published by a body, Better Together head Alistair Darling has already complained lacks credibility.
The latest predictions from the Office of Budget Responsibility [OBR] claims revenue from taxation on offshore oil and gas between 2018 and 2041 will be £56bn, which is £11bn lower than its previous estimate.
This pessimistic forecast by the body created by Chancellor George Osborne, follows a series of downgrades the OBR has made over the past couple of years that has seen its estimate of tax take reduce by over two thirds.
The latest figures are based on an OBR guess on what oil prices might be 28 years from now.
However, in an embarrassing blow to the No campaign, it has emerged that the credibility of the OBR has already been questioned by former Labour Chancellor Alistair Darling.
Speaking to the Financial Times in 2010 Mr Darling, who heads the anti-independence alliance Better Together, claimed the OBR had been politicised.
“Right from the start the Tories used the OBR not just as part of the government but as part of the Conservative Party. They have succeeded in strangling what could have been a good idea at its birth.”
The OBR was the brainchild of UK Chancellor George Osborne who set up the body after his party formed the government after the 2010 UK general election. Suspicions have been raised that the OBR is deliberately downplaying the true potential of north sea oil and gas in the run-up to the 2014 independence referendum.
Another former Labour Chancellor, Lord Healey, recently admitted that the Labour party deliberately hid the true value of north sea oil from Scots in the seventies in order to thwart the rise in support for the SNP.
The Labour peer also said he believed the current Westminster government were employing the same tactic.
The OBR, which has an appalling track record on predictions, has seen its previous estimates on oil and gas criticised by industry experts and academics alike.
Speaking to Newsnet Scotland last December, respected oil economist Professor Alex Kemp challenged the OBR forecasts and said: “The OBR’s combination of low production estimates with low price estimates is pessimistic compared with other predictions including our own.”
In March Professor Kemp describing the OBR’s revised forecasts as “contrary to the evidence from the industry.”
Others to challenge OBR predictions included Chief Executive of Oil and Gas UK, Malcolm Webb who said that tax revenues can now be confidently expected to rise over the coming years.
Speaking to energy magazine ‘Enterprising Energy’ earlier this year, he said:”…the projects approved in 2011 and 2012 alone will over time produce more than two billion barrels of oil and gas, generate £100 billion value for the economy and an additional £25 billion in production taxes for the Exchequer.”
Challenging claims that the sector is running down, Mr Webb added: “The North Sea oil and gas sector, contrary to what some sources say, still has a long productive life ahead of it; we estimate 50 years or more.”
Further evidence of the huge revenue still to be extracted from Scotland’s waters came in May when economists at the Paris based Organisation for Economic Co-operation and Development (OECD) forecast that the price of a barrel of oil will rise to between $150 and $270 throughout the coming decade.
The OECD envisaged a baseline value for a barrel of oil of $190 which, they said will lead to an independent Scotland benefiting to the tune of between £2.25 trillion and £4 trillion.
Despite the statements from industry experts to the contrary, the latest claims by the OBR have been trumpeted by pro-Union politicians as evidence that an independent Scotland would not benefit by as much as has been claimed.
Chief Secretary to the Treasury Danny Alexander said: “Scotland has a thriving oil industry that plays a key role in the UK economy.
“But independent forecasts like the OBR’s today consistently show that oil revenues are set to decline in the long term, a fact confirmed by John Swinney’s secret internal analysis.
“This would leave a massive gap in an independent Scotland’s finances.”
However, commenting on what he described as more scaremongering from Better Together’s Project Fear, SNP MSP Mark McDonald said:
“The No campaign’s Project Fear is fast becoming a laughing stock – it pretends that it would be really bad for Scotland to have access to our own oil and gas tax revenues, but really good for Westminster to grab them all.
“The reality is that an independent Scotland would be less reliant on North Sea revenues than highly-successful Norway, and more than half the value from Scotland’s oil and gas resources is still to come. Even without oil, Scotland’s GDP is the same as the UK average – it is an enormous bonus for Scotland, and we need a Yes vote next year to ensure that these resources work for Scotland in the long-term.
“The hypocrisy of the No campaign is further laid bare by Alistair Darling’s own description of the Office for Budget Responsibility, when he said: ‘Right from the start the Tories used the OBR not just as part of the government but as part of the Conservative Party.’
“The fact of the matter is that Mr Darling’s Project Fear will say anything to talk Scotland down, because they are incapable of saying anything good about Scotland.”
The Scottish government’s own estimates, based on a conservative price for a barrel of oil of $100, suggests that there is at least £1.5 trillion worth of oil and gas still to be extracted.
Despite hitting a low of $90 in June 2012, the price of a barrel of Brent Crude has remained comfortable above $100 since – averaging easily $110. Today’s closing price for the commodity was $109.40.