SCOTLAND'S oil and gas sector has a current value of around £44billion but with another potential independence referendum looming "the outlook is not encouraging", a global energy group has warned.
but faces tens of billions worth of decommissioning obligations in the coming years
Leading consultancy specialists Wood Mackenzie has warned the industry is facing a halving of investment in the next three years but faces tens of billions worth of decommissioning obligations over the longer term.
It said that despite the North Sea sector making progress on costs and efficiency since the last independence referendum in 2014, the political uncertainty following the push for a new poll could deter investors from committing to new projects.
But the body which represents the sector said it was currently in the best position for investment than it had been for a couple of years but that fresh cash was needed for new explorations, particularly west of Sheltand.
The report comes days after the chairman of the SNP's Growth Commission, which is updating the party’s independence offer, admitted oil revenues were wrongly described as a “bonus” in the 2014 referendum, instead of a “basis” of the economy, supplying around 12 per cent of national income.
Wood Mackenzie's report states that new challenges had emerged over the past 30 months including weaker oil prices and a lack of new discoveries and development projects.
It said: "It is clear that oil and gas tax revenue will play a smaller part in the economic case for independence should a second referendum be held.
"Companies will be looking for reassurances that, should Scotland vote for independence, they will continue to have access to the decommissioning tax relief they currently receive.
"But the outlook is not encouraging. Critically, political uncertainty could deter investors from committing to new projects."
Wood Mackenzie estimated the value of Scottish oil and gas fields, including a 10 per cent discount, at £44bn. But its states that the volume of the UK's commercial oil and gas reserves had dropped 30 per cent since the vote in 2014, mainly because reserves totalling 1.6 billion 'barrels of oil equivalent' (boe) have been tapped, compared with total discoveries of just 100 million boe.
In addition, the report states that 1.3bn boe of UK resources have been removed from consideration as commercial reserves due to lower oil prices.
As of the start of 2017 the UK was home to 6 billion boe in reserves, of which 88 per cent lay in Scottish waters.
The note highlighted a Wood Mackenzie estimate that the UK faces a total bill of £52bn for the eventual decommissioning of North Sea facilities, 80 per cent of this being attributable to Scotland.
It also said the industry was counting on rebates of past taxes paid to the UK Treasury to help it meet these expenses, which could throw up major financial burdens for any post-independence Scots government.
Deirdre Michie, chief executive of Oil and Gas UK, said: “We published our own business outlook report last week which showed that the UK offshore oil and gas industry is now in better shape to compete for investment after a tough two years as a result of industry working hard to increase its efficiency and improve its costs.
"Confidence is slowly returning to parts of the industry, and industry needs to maintain its focus on ensuring its competitiveness while commodity prices hold. We do need fresh investment to stimulate new activity into the basin where there are still up to 20 billion barrels of oil and gas to go after.
"Such investment will help realise that potential, whether its from frontier areas, such as West of Shetland, or from enhanced recovery from existing fields.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules hereLast Updated:
Report this comment Cancel