Scottish North Sea oil revenues could slump to £500m next year, SNP report admits

According to the 20 page oil and gas bulletin, Scottish North Sea oil revenues could drop to £500 million next year, a fraction of £7.8bn in tax that was projected for 2016/17 when the last prediction on oil and gas revenues was published in May last year.

The latest report says that the figure will now be, at best, £2.8bn or as low as £0.5bn, while predictions for total revenue from 2016/17 to 2019/20 now range from £2.4bn to £10.8bn.

The May 2014 bulletin, drawn up before the dramatic slump in the price of oil over the past 12 months, put the best case scenario between 2014/15 and 2018/19 at £38.7bn, with the worst being £15.8bn.

This week’s report says that its higher, £10.8 billion projection, for the next four years depends on oil prices returning to 100 US dollars a barrel (£63).

While leading industry figures have suggested the price of oil could remain at approximately 60 US dollars a barrel (£38) for some time, the Scottish Government said there “is no consensus” on price.

Its report said that, as “an illustrative example, in its March 2015 Economic and Fiscal Outlook the OBR (Office for Budget Responsibility) considers a scenario where the oil price could return to 100 US dollars per barrel in 2015-16″.

It then suggested: “In this case, when combined with the production and operating cost improvements, tax receipts from the Scottish portion of the North Sea between 2016-17 and 2019-20 could be £10.8 billion.”

But Deirdre Michie, the new chief executive of the industry body Oil and Gas UK, has said the North Sea must become sustainable in a world where long-term oil prices are about 60 US dollars a barrel.

Aberdeen oil tycoon Sir Ian Wood, who carried out a review of the industry for the UK Government, has forecast that the price could stay at about the 65 US dollars (£41) a barrel level ”for possibly quite a long time, maybe two to three years”.

Oil prices reached a peak of more than 130 US dollars (£82) a barrel in July 2008, and were over 100 US dollars a barrel for most of the period, or most of the period from 2011 until the summer of 2014, when they started to fall back.

Prices dipped below 50 US dollars (£31) a barrel in January this year, before starting to increase slowly.

The publication of the bulletin, on the day before Holyrood starts its summer recess, sparked angry calls from Labour.

James Kelly raised the issue at the end of First Minister’s Questions, saying: “This bulletin has been asked for months across the chamber and has now been released in the last day of the session.

“It’s got profound implications for the Scottish economy with North Sea oil tax receipts at £40 billions less than the White Paper (on independence).”

But a spokesman for First Minister Nicola Sturgeon dismissed the comments as “utterly pathetic”, insisting the bulletin was “published today because it was ready to be published today, it’s as simple as that”.

The spokesman said: “It was published a full two hours before First Minister’s Questions, a document that runs to no more than 20 pages, plenty of detail in it but no more than 20 pages to digest.

“If Labour and the rest of the opposition can’t fully digest a 20-page document in two hours on an issue that is already well rehearsed, then I would question their competence or how seriously they take the issue.”