Click & Close Ads
Click & Close Ads
The Scottish government has lowered its estimates for how much revenue will be generated from North Sea oil and gas.
When it last projected oil and gas revenues, in May last year, it estimated up to £7.8bn in tax could flow from the North Sea in 2016/17.
Its oil and gas bulletin has now predicted the figure will be, at best, £2.8bn and could be as low as £0.5bn.
The bulletin's predictions for total revenue from 2016/17 to 2019/20 range from £2.4bn to £10.8bn.
The May 2014 bulletin put the best case scenario between 2014/15 and 2018/19 at £38.7bn, with the worst being £15.8bn.
The latest bulletin, which is the first to be published in more than a year, takes into account the drop in oil prices since last year.
'No consensus'
Oil prices fell from about $110 a barrel in June of last year to about $48 in January 2015. It has since risen to its current price of about $60.
In order for its best-case predictions to be met, the bulletin said oil prices would need to return to $100 a barrel.
Earlier this month Deirdre Michie, the new chief executive of the industry body Oil and Gas UK, said the North Sea must become sustainable in a world where long-term oil prices are about $60 dollars a barrel.The Scottish government's bulletin is impossible to compare directly with last year's edition, as the scenarios were constructed differently.
Click & Close Ads
Click & Close Ads
One of them foresaw rising production but also rising costs, a price of $110, and tax take in 2016-17 of £4.5bn.
Another scenario assumes investment would pick up and production would hit the top end of the industry's own forecasts, leading to production of 2m barrels of oil per day (it's now around 1.4m). That would give Holyrood £7.5bn next financial year - rather close, as it happens, to the IFS figure about the Scottish deficit.
So this is uncomfortable for Scottish government ministers, but unsurprisingly so. It was a reckoning they had to reach some time.
Does this suggest they got things wrong last year? Well, the bulletin goes into some detail about how others were getting it just as wrong, with none of the leading forecasts factoring in the sharp fall in the oil price since last summer.
It also reminds us that there are billions of barrels yet to be extracted. But for all the referendum campaign talk of 24 billion barrels, it's clear from this bulletin how much that lies at the top end of possibilities.
A year on, and many barrels having flowed, we're now talking about 23 billion barrels. Of those, 3.5 billion are not currently viable, for either technical or financial reasons, and 9 billion of those barrels are in the 'yet-to-find' category.
Read more from Douglas
null
Commenting on the new Scottish government figures, Scotland's Finance Secretary John Swinney said: "There is no disputing that the industry has faced a very challenging year and we continue to work relentlessly to safeguard jobs and retain vital skills."
He added: "It is not acceptable for the UK government to sit back and accept low revenues. Both governments and the industry must continue to work together to improve efficiency, production and deliver better results for the North Sea.
"The critical issue is that the UK government needs to deliver on its commitment to consult on incentives to boost exploration in the North Sea, and this consultation must be launched urgently - so that firm proposals can be announced in the Autumn Statement."
Scottish Secretary David Mundell questioned the timing of the release of the oil and gas bulletin.
He said: "To have the latest Scottish government oil figures published 15 months after their last update, and on the last day before the summer recess, leads to suspicion that these figures aren't meant to be fully scrutinised by the Scottish Parliament.
"For such an important industry to Scotland in terms of jobs, skills and our wider economy, this is disappointing. The Scottish government's central estimates on oil revenues published today are over 80% lower than those they published before the referendum.
"This makes their current policy of full fiscal autonomy for Scotland all the more of a full fiscal shambles."
'Explore all options'Click & Close Ads
Click & Close Ads
Scottish Labour's finance spokeswoman Jackie Baillie said the figures had "blown the SNP's policy of full fiscal autonomy out of the water" and accused the Scottish government of trying to "sneak the report out on the last day of parliament".
She added: "These projections are bad news for the oil industry, and both the SNP government and the UK government should explore all options to protect jobs that are directly affected and further down the supply chain.Click & Close Ads
Click & Close Ads
"Last week the SNP trooped through the lobbies with the extreme right wing of the Tory party to vote for full fiscal autonomy. It is as clear as day now that they knew the policy would be a disaster for Scotland - the SNP government's own figures prove it."
Liberal Democrat energy spokesman Liam McArthur also hit out, saying: "Issuing this report on the day parliament rises for the summer recess either shows contempt for parliament or contempt for the oil and gas industry. The strong suspicion is that it is both. Shame on them."
He also claimed that "the SNP government's credibility on oil and gas is falling faster than their own massive downgrades to forecast receipts", adding that the report "blows a massive hole in their proposals for Scotland to scrap the Barnett formula and adopt full fiscal autonomy".Click & Close Ads
Click & Close Ads
Sunday, June 28, 2015
