The Scottish government has bitterly dismissed the UK’s forecasts of future oil and gas revenues from North Sea, saying they are “incredibly pessimistic”.
The forecasts, which were revealed by the Office for Budget Responsibility (OBR) in July, were based on “very low estimates of future total production”, according to the government. They predicted that the North Sea would be able to generate £6.1 billion in revenue between 2013-14 and 2040-41 – significantly less than Scotland’s original prediction of £82.2 billion.
The think tank N-56 published a report, which said that revenues could be as high as £356 billion if certain recommendations were implemented.
These involved a more competitive tax regime for the North Sea; moving all policy and decision makers of the industry to Aberdeen; the introduction of a hydrocarbon investment bank to boost investment and oil recovery, and the establishment of an oil fund to ensure fiscal stability.
N-56’s Graeme Blackett said:
Scotland is a net contributor to the UK public finances, in part due to our geographic share of oil and gas revenues, and this ensures that our finances are typically healthier than the UK public finances as a whole.
The OBR puts forward incredibly pessimistic forecasts on both barrel price and reserves, which have been largely discredited by industry experts. It is clear that these natural resources can be maximised through implementing the recommendations put forward by both ourselves and the Wood Review, delivering surpluses that we would recommend are used to invest in an oil fund to benefit future generations.”
The UK’s forecasts were also dismissed by the highly esteemed Scottish economist Sir Donald MacKay, who said the OBR’s calculations were ‘hopelessly at sea’.
The Scottish and UK governments have been at loggerheads over the future of the Scottish gas and oil market ever since the country announced it would be issuing a UK in-out referendum in its next general election.
In response to the report by N-56, Scotland’s first minister Alex Salmond said:
This substantial new report from leading organisation blows another huge hole in the credibility of the OBR’S oil forecasts, especially as it comes just days after esteemed Scottish economist Professor Sir Donald MacKay said the OBR’s calculations were ‘precisely wrong’ and ‘hopelessly at sea’.
The report also endorses the Scottish government’s plans to set up an energy fund – something Westminster have consistently failed to do. Instead of continuing to talk down Scotland’s oil and gas sector, the No campaign should acknowledge that the sector has a bright future ahead of it.”