Oil and gas reserves may be greater than forecast says industry chief

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Wednesday, 08 May 2013 23:15

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   By a Newsnet reporter

The bright future ahead of Scotland’s oil and gas sector has been highlighted this week as the CEO of Oil & Gas UK made clear that he personally expects North Sea reserves to be higher than current estimates of 24 billion barrels.

During a conference at the University of Aberdeen on the politics of the oil and gas sector, Malcolm Webb made clear his personal view that the estimated 24 billion Barrels of Oil Equivalent (BOE) remaining in the waters off Scotland’s coast is an “underestimate”.

Mr Webb also noted that oil and gas was “by far” the most highly taxed of all UK industries.  The tax revenues currently go in their entirety to the UK Treasury.

The industry head criticised the UK government’s “awful political decisions”, which he described as “capricious”, and which have had a negative effect of the industry.  This is believed to be a reference to the one-off tax imposed on the industry last year by Chancellor George Osborne at the instigation of Chief Secretary to the Treasury Danny Alexander.

However the chief of Oil & Gas UK praised the political consensus which has begun to emerge between the industry, the Scottish Government and the UK Government, and stressed that the industry should not become a “political football”.

On Scottish independence, Mr Webb said that he believed the oil and gas industry should adopt a “studied neutrality”, as the constitutional future of Scotland is a matter for the electorate, and said that the industry had a duty to live with whatever outcome results from next year’s independence referendum.

Contrary to the claims from anti-independence parties who have said that the independence debate is damaging to Scottish business, Mr Webb said that there is no evidence that the referendum campaign has had any negative effect on the oil and gas sector.

Mr Webb also confirmed the critical role that the oil and gas sector plays in the UK’s balance of payments and made clear that he does not believe that the reliance of an independent Scotland on oil and gas revenues would be “overwhelming”.

Commenting, SNP MSP Mark McDonald said:

“These measured and sensible comments from one of the key figures in the oil and gas sector could scarcely contrast more with the hyperbolic negativity towards the industry that has become the hallmark of the No campaign.

“The oil and gas industry clearly shares Malcolm Webb’s confidence in the future of the North Sea, with the sector investing a record £13 billion this year alone in improving production.

“With some £1.5 trillion in wholesale revenues remaining in these waters – and potentially much higher depending on oil prices – it is essential that Scotland gains the opportunity to use these resources to the benefit of people living here.

“With the powers of an independent Scotland we can use these resources to build a more prosperous Scotland, rather than squander the revenues to prop up the failures of Westminster Chancellors.

“Only a Yes vote in September 2014 will give us that opportunity to ensure that the benefits of the sector are felt in Scotland for generations to come.”

The comments from the CEO of Oil & Gas UK follows news this week that new estimates based on Economic Co-operation and Development (OECD) forecasts shows that the total revenue still to come from Scotland’s oil and gas sector could be as high as £4 trillion.

OECD economists at the Paris based Organisation have forecast  that the price of a barrel of oil will rise to between $150 and $270 throughout the coming decade.  The OECD envisages a baseline value for a barrel of oil of $190 which, the new report will say, will lead to an independent Scotland benefiting to the tune of between £2.25 trillion and £4 trillion.

The Scottish government’s own estimates, based on a more 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.