By Martin Kelly
Former oil tycoon Sir Ian Wood has called for the establishment of a new oil and gas regulator to replace what he described as the under resourced and under powered Department of Energy and Climate Change.
Sir Ian said a new approach is urgently needed in order to address declining production efficiency and exploration. The former head of the Wood group said the cost to the UK Treasury of the inefficiencies is estimated to be around £6 billion.
Speaking this morning, Sir Ian said: “Its actually a new style of regulator. It will be bigger it will have broader capabilities, it will have broader disciplines, it’s key to facilitate and catalyse and remove barriers and get operators to work much better together with the overall end result of recovering much more oil and gas in a win-win situation.”
Welcoming Sir Ian’s report into the future of oil and gas in Scotland, Finance Secretary John Swinney said:
“I very much welcome the publication of Sir Ian’s final report, and I look forward to considering his detailed proposals in full.
“I firmly agree with the recommendation for a new Regulator, and a shadow body should be set up without delay, this should be located in Europe’s Oil and Gas capital of Aberdeen.”
The new report follows on from an earlier report from Sir Ian which concluded the oil and gas sector has the potential recover an additional 3-4 billion barrels of oil equivalent which would boost the economy by as much as £200bn over the next twenty years.
In the November report Sir Ian Wood concluded that a new regulatory body, based on those from neighbouring oil producing countries such as Norway, should be set up in order to boost collaboration and increase efficiency.
Mr Swinney added: “The Scottish Government supports the full implementation of Sir Ian’s proposals for a stronger, more effective regulatory body, which if implemented quickly can bring enormous progress in the recovery of oil and gas in the North Sea. Time is of the essence.
“The North Sea has suffered from poor stewardship from the UK Government to date, and the time has come to address that. Sir Ian has confirmed that fiscal instability has been a significant factor in basin underperformance in the North Sea. The Scottish Government has outlined that stability and predictability are the principals which will govern the fiscal regime in an Independent Scotland.”
The issue of oil and gas is expected to dominate the news agenda today with a flying visit to Scotland of the UK Cabinet. Prime Minister David Cameron is expected to warn Scots that independence will put the economy of Scotland at risk due to the volatility of oil prices. Mr Cameron is also expectedd to say that only the “broad shoulders” of the UK can ensure the oil and gas sector flourishes.
However the Scottish Government will demand an apology from Mr Cameron for what they claim has been the manner in which successive UK Governments have squandered the revenue from oil and gas.
John Swinney added: “The decisions of successive Westminster governments to spend Scottish oil revenues rather than investing a proportion of them also represents a major lost opportunity. Therefore, Scotland’s Future proposes, as recommended by the Fiscal Commission Working Group, that an independent Scotland should establish a Scottish Energy Fund to stabilise revenues in the short-term and to ensure that a proportion of oil and gas tax receipts are invested for the long-term benefit of the people of Scotland.”
“The Scottish Government appointed an Independent Expert Commission on Oil and Gas in September 2013, chaired by Melfort Campbell, who will report in the Spring. In addition to the regulatory regime, the Commission will make specific proposals in relation to the North Sea fiscal regime with a view to providing long term stability and predictability for the industry. It will also consider Sir Ian’s recommendations in full.
“The oil and gas sector is an important part of Scotland’s economy and with the full powers of independence we could go further, providing industry with the necessary fiscal and regulatory stability and predictability for it to innovate and thrive in a globally competitive environment – maximising the benefits of our energy wealth to support employment and economic growth.”