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  By Martin Kelly
 
The Oil and Gas industry looks set to enjoy a second boom period from the largest amount of investment ever with £13.5bn set to be targeted at the sector.
 
Today Oil and Gas UK have highlighted the amount of revenue generated for the UK economy through production of oil and gas and the exporting of key technology to other countries.

According to Oil & Gas UK’s chief executive, Malcolm Webb the sector is worth £40bn to the UK Treasury and supporting hundreds of thousands of jobs.

In a report out today, Mr Webb says: “The offshore oil and gas industry generates almost £40 billion a year for the economy by producing oil and gas worth £32 billion and by exporting oilfield technology and expertise worth £7 billion.”

He highlighted the renewed focus from the UK Government and the industry as one of the reasons for the more positive business environment which has led to the development of new and older fields and added:

“This is heightening the business opportunities for the UK’s world-renowned supply chain and is boosting employment to 450,000 jobs across Britain.”

According to the report the industry’s UK supply chain now generates sales of £27 billion a year, including £7 billion in exports.  It is considered a world leader in subsea engineering which is worth £9 billion a year and holds 45 per cent of that global market, and well services companies are generating revenues of almost £2 billion a year, the highest since records began.

Oil and gas extraction has provided the UK Exchequer with more than £300 billion (2012 money) in production tax over the past 45 years.  In time, the current unprecedented investment will lift production, bringing with it significant funds for the public purse.

In 2012-13, £6.5 billion was paid in tax on production, representing over 15 per cent of the Exchequer’s total receipts of corporate tax.

In addition, the oil and gas supply chain is estimated to have paid an additional £5 billion in corporate and payroll taxes, taking the total industry contribution to almost £12 billion.

Mr Webb added: “The industry is the UK’s largest industrial investor and contributor to gross value added. With 15 to 24 billion barrels of oil equivalent (boe) still remaining to be developed, the UKCS possesses great potential for contributing to economic growth for decades to come.”

The report also contained warnings, adding that although the UK remained the third largest producer of gas and second largest producer of oil in Europe in 2012, annual production declined by 14.5 per cent to 567 million boe, or 1.54 million boe per day.

Oil and Gas UK said that although 2012 saw only nine new fields with total reserves of 146 million boe begin producing it anticipated that 15 fields, with combined reserves of 470 million boe, will come onstream in 2013.  It cited the Banff, Gryphon and Elgin fields as due to come back onstream, but despite this over the year, production is now forecast to fall to a range of 1.2 to 1.4 million boe per day.

Mr Webb addressed the continued decline in production, stating: “Despite impressive investment in new developments, the production efficiency of existing assets remains in worrying decline.  DECC and the industry are working to tackle this serious concern through a joint task group.  The Wood Review, which is currently examining how to maximise UKCS recovery, is also very timely and we very much look forward to seeing the recommendations early in 2014.”

Concluding, Mr Webb said: “The industrial strategies launched by both the British and Scottish governments provide a clear framework for increased investment, innovation, growth in exports and British job creation.  Unlocking the total economic potential of the UKCS [continental shelf] will require both the industry and government to play their respective parts to the full.”

Responding, Finance Secretary Mr Swinney called the record investment in the sector “a major vote of confidence for the industry”

He added: “In time, the record levels of investment that we are currently seeing will raise production, which will see the sector continue to make a significant contribution to the public finances.

“With up to 24 billion recoverable barrels with a potential wholesale value of £1.5 trillion, more than half of the resources in the North Sea, by value, still to be extracted, it is clear that the industry will make an important contribution to the Scottish economy for decades to come. This latest report suggests that the industry will be active beyond 2050.

“The positive evidence on employment and the supply chain is also welcome, with the sector now estimated to support 450,000 jobs across the UK, of which around 50% are in Scotland.

“Scotland’s industry-led Oil and Gas strategy has helped implement a range of measures to support the industry. We are already working constructively with the UK government as part of PILOT and the Industry Council, and we look forward to working closely with the Wood Review to ensure that the review best reflects the challenges and opportunities facing the North Sea sector.”

However, responding for the Labour party, its energy spokesman MP Tom Greatrex said an independent Scotland would be exposed to the volatility of oil prices.

 “Oil and gas are an important part of the Scottish economy, but being part of the UK means we are better placed to manage the volatility in tax revenue we get from the industry.

“A separate Scotland’s over-reliance on such a volatile commodity would put our economy at risk.

“There are significant challenges for the North Sea ahead, and the importance of stability in fiscal and safety regimes cannot be overestimated. Sir Ian Wood’s forthcoming report is vital in ensuring a sustained and sustainable way forward for the industry”.

Comments  

 
#
neoloon
2013-08-21 07:54

Didn’t stop BBC “Scotland” this morning gleefully reporting a short-term drop in output of North Sea oil production.
 
 
#
springster
2013-08-21 08:22

Yes, I read the BBC online version of this story and heard the radio also.

The BBC’s role is to provide damage limitation for areas harmful to the Union argument. It plays down benefits and highlights concerns. It is the ols Soviet broadcaster Tass in reverse. Tass would always highlight the new ‘tractor production’ record and downplay news damaging to the USSR.

Tonight Douglas Fraser will appear on Reporting Scotland gleefully reporting the ‘bad news’.
 
 
#
Muz
2013-08-21 10:45

Hold on, isn’t the short term drop down to “necessary maintenance and repair operations”. Why do the BBC have such scant care for workers’ safety? Lessons have been learned the hard way in the North Sea.
 
 
#
Virgil
2013-08-22 21:04

Quoting neoloon:

Didn’t stop BBC “Scotland” this morning gleefully reporting a short-term drop in output of North Sea oil production.


It’s not a short term drop, output has been declining steadily since 1999.

The current investment will raise production briefly but by 2021 production is forecast to be lower than it is today.

 

 
#
Marian
2013-08-21 07:59

The BBC In Scotland website comment on this report is predicting doom and gloom for Scotland’s oil and gas industry.

It would be helpful to readers of NNS if it could approach Malcolm Webb and other industry leaders such as Professor Alex Kemp, and ask them to comment on the BBC version of the report.
 
 
#
clootie
2013-08-21 08:08

Perhaps Tom Greatrex could look at the longer view in that the petroleum asset would fund the renewable energy growth. If we look at it from a long investment perspective it is very different.
As regards to the negative picture painted by the word “volatility”. It is interesting that market forces are so scary when we discuss hydrocarbon reserves but are to be ignored when discussing UK membership of Europe and the impact on the London finance market by tax changes.
However the real issue is not the money we have but how we chose to spend it. A fairer society with quality jobs is far more important to me than a seat at the nuclear table.

You can improve your life by increasing your income OR by spending more wisely. An independent Scotland will have the ability to do both.
 
 
#
Diabloandco
2013-08-21 08:12

The BBBC in Scotland never ceases in its task of depressing the good news.

Scots are drinking less they trumpeted BUT still more than the English.

How do they know this?

I have seen TV reality programmes with police in every major English city having to deal with the violent , the stupid and the pornographic Saturday night drunk.

It really is sickeningly obvious that they search for a BUT every time.

I am still waiting for a retraction of the FAT SCOTS programme – knowing the OECD put us 7th (UK) on the FAT monitor ,nothing of which to be proud but certainly not the FATTEST ,MARS BAR DEEP FRIED GOBBLERS PORTRAYED.
 
 
#
iggyb
2013-08-21 09:11

I listened to GMS on the BBC this morning and you definitly got an impression of doom. But when the Oil & Gas spokesman was interviewed the reason for the fall in output was the UK tax policy which raised the tax on oil.
 
 
#
src19
2013-08-21 17:24

Yep totally spin by the BBC and their MSM friends, You can hear O&G; spokes person here @1h:36m in :- bbc.co.uk/…/…
 

 
#
Davy
2013-08-21 09:27

Its brillent to see such investment in our oil industry and its even better to hear that 40 billion will be generated from that industry each year.

What is not so nice to hear is that the 40 billion is being generated for the treasury down at Westminster, and yet with a simple YES vote next year that 40 billion will be coming back to the country that generates it, Scotland.

Saor Alba.
 
 
#
bringiton
2013-08-21 10:17

1.
The Norwegians seemed to have handled the volatility quite easily without the need for a bigger economy to smooth out any shortfalls.
2.
The logical extension of the unionist argument would be to hand over revenue collection to Brussels in return for pocket money determined by Brussels.

Not for one second would Westminster agree to such arrangements.
 
 
#
proudscot
2013-08-21 10:40

So the “volatile” oil revenues, according to the Labour Party’s Tom Greatrex, would be a problem for an independent Scotland. Yesterday’s BBC news reported that HS2, which will stop well short of the border, is now set to top £72 BILLION, well over the original “estimated” budget!

Ach well, it’s good to know the volatile oil revenues are being so well spent by Westminster. After all, an independent Scotland would only waste them on silly things like more social housing, alleviating poverty, dualling the A9, refurbishing schools and hospitals, etc.
 
 
#
RTP
2013-08-21 10:58

Did I not hear Darling say with hindsight they should have set up an oil fund,all I can say there was a lot that the tory’s and Lab should have done for the benefit of Scotland.We still have many Scots who are very happy for Westminster to rule and we should be grateful for our pocket money from them.
 
 
#
Rafiki
2013-08-21 11:41

Interesting headline in the electronic Scotsman this morning: “North Sea oil bosses call for political unity”. When you actually read the article which many, many will skip, you find that the oil bosses are calling for the Westminster government and the Scottish Government to have a joint approach. Not what the headline implies.
 
 
#
clootie
2013-08-21 11:53

Now that is remarkable spin!
Journalism would have been nicer though.
 

 
#
ButeHouse
2013-08-21 12:20

Oil and gas extraction has provided the UK Exchequer with more than £300 billion (2012 money) in production tax over the past 45 years.

And boy have we made good use of that £300BILLION? I should coco.

Our share of the Channel Tunnel, the Approach Roads, High Speed Rail, Two spanking new Euro Terminals (as good as after meticulous refurbishments using the best materials (unlike Waverly…..Oh no, mustn’t laugh, M25, money made available to the chaps who have built those Wonderful Buildings in the City Gherkin, Shard etc, Thoroughly cleaning the Thames so that fish can live in it again, new £200+MILLION Parliamentary cloakrooms/offices at Westminster and so much more I can’t tell you – oh, brand new Westminster Underground Station of course and much more all the way up to Europe’s biggest project – London’s Crossrail – we even have plans for the next £300BILLION PLUS to come from the North Sea –

VOTE YES in 393 days
 
 
#
The_Duke
2013-08-21 12:34

Slightly O/T

I have move to the States recently. Before bed, (about 4am UK time) this story appeared on the BBC website as the second most important story. I woke up this morning to find that it was bumped into the most important slot.

Yesterday, the hacking story appeared in the same slot, as was quickly moved down the list as the day went by.

The BBC just can’t help themselves, but their day will come!
 
 
#
call me dave
2013-08-21 14:13

Yes I noted that too, but for us that is par for the course.

BBC Scotland radio and tv :
Murder polis + footie (glasgow only) cat stuck up tree / panda.

Call UKaye (absent last 3 or weeks ) but obviously on a project or hols and the dreadful Macaulay and pals to keep us cheery at the festival with new BBC pal Susan Calman (since her rant in July).

Thank God the cricket is on (I like cricket) But OOOHH! That’s BBC Radio too aach well!

Roll on 2014.
 

 
#
ButeHouse
2013-08-21 12:39

Now where was I….ran out of space earlier.

Oh forgot to mention Wimbledon’s new roof and the roof still to come for Court One – you have to laugh, the Scots making such a major contribution to English British tennis and they haven’t got a decent venue to play in, not that they have any decent tournaments either of course….but I digress.

West Coast Oil and Gas reserves:

memo to self:
1. Massive reserves here, must make sure this NEVER leaks like the North Sea reserves or even the Scots will get up and walk – no, run.

2. Upgrade the meagre stats on these reserves once we get this silly Referendum nonsense put to bed.

Meanwhile let’s see if there are a few projects we can get started in Scotland to make us look as if we are spreading the money around a bit – nothing too expensive of course – just enough to keep the Scots happy, they seem to be easily pleased.

VOTE YES in 393 days
 

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