Salmond: Scotland’s ‘oil boom’ to bring billions
TAX revenues from Scotland’s oil and gas industry could soar to three times more than official estimates – to almost £12 billion by 2018 – according to the Scottish Government.
First Minister Alex Salmond unveiled the government’s first Oil and Gas Analytical Bulletin, predicting that production in Scottish waters could generate up to £57bn in tax revenue over the next six years, compared with an estimate of £31bn by the independent Office for Budget Responsibility (OBR).
However, political opponents accused the SNP of “cooking the books” after it emerged last week that a Scottish
Government document warned of a bleak economic future under independence, because of falling amounts of cash generated from the North Sea.
The report, which was presented to the Scottish Cabinet by finance secretary John Swinney, was based on OBR figures. After the report was leaked, the Scottish Government said the OBR figures were out of date and wrong, and revealed it would come up with its own figures.
The Scottish Government figures suggest that the year after Scotland becomes independent, 2017-18, the nation could see oil tax revenues of £11.8bn, compared with the OBR estimate of only £4.1bn.
The First Minister said oil production was set to rise to two million barrels a day, taking Scotland into a “second oil boom”, as he met industry leaders in Aberdeen yesterday.
He said: “It is also clear that a wide range of credible forecasters expect oil prices to remain close to present levels, or to rise further in future years – with some organisations, such as the Organisation for Economic Co-operation and Development (OECD), suggesting prices could exceed $150 a barrel by 2020.
“Even with a cautious estimate of prices remaining at $113 a barrel being used, it’s clear that Scottish oil and gas could generate more revenues than has previously been assumed.”
Four scenarios are set out for the North Sea in the years ahead, predicting tax revenues ranging from £41bn and £57bn generated between 2012-13 and 2017-18.
Mr Salmond added: “Taking an average, that would be £48bn coming from the North Sea during that period – revenues that with independence could have been put to use in Scotland, supporting our public services and investing in our future.”
This compares with £31.3bn estimated by the OBR over the same period. The London-based OBR is an independent watchdog providing authoritative advice on the UK’s public finances. Scottish ministers have frequently quoted it during attacks on the coalition’s economic policy.
The SNP government’s figures are based on an oil price of at least $113 a barrel. However, bodies such as the International Monetary Fund (IMF) and the Norwegian Central Bank, with all the Scandinavian country’s oil reserves, have set out scenarios predicting oil prices of below $100 in future years.
Recent investment in the North Sea could push up the amount of oil being produced. But despite the prospect of up 24 billion barrels remaining, industry leaders yesterday warned this would become increasingly hard to free up.
Writing in The Scotsman, John McLaren and Jo Armstrong, professors at Glasgow University’s Centre for Public Policy for Regions, said the Scottish Government’s most optimistic prediction was “very much a top-of-the-range one”.
They added: “Neither is it mirrored by an equally pessimistic scenario.”
The oil and gas sector is a key part of the Scottish economy and is estimated to contribute around £25bn to GDP, about 17 per cent of the total in 2011.
Richard Spilsbury, oil and gas partner in PwC’s Aberdeen office, said the gulf between the Scottish Government figures and the OBR estimates reflected the volatility of the industry.
He said: “All this does is back up John Swinney’s memo last week about the nature of volatility. It shows a table with the OBR’s figure of around £30bn tax revenues at the low end and another one showing nearly £60bn. That’s a 100 per cent difference, which shows just how volatile it can be to predict.”
Mr Spilsbury said the Scottish Government would be best assuming the lowest possible figure for oil reserves in its forward planning.
A Treasury spokesman said: “The OBR’s forecasts are widely seen as robust and credible. It will be up to others to decide whether they believe the Scottish Government’s new, much higher forecasts are as credible.
Professor Alex Kemp, an oil economist at Aberdeen University, said the OBR figures were based on “pessimistic” assumptions in the short term, both about the falling price of oil and the levels of production.
In a recent paper, he highlighted the “substantial remaining potential” from the UK Continental Shelf. But there was a need for fresh government action to maximise the recovery of oil over the longer term.
His report found that at $90 a barrel, “oil production could increase over the next few years and thereafter decline at a fairly brisk pace”.
Former chancellor Alistair Darling, who now heads the Better Together campaign, said the Nationalists had traded the country’s long-term future for “short-term political headlines”.
“John Swinney’s Cabinet paper made clear there was a private understanding at the heart of the Scottish Government that oil is volatile and cannot always be relied upon,” he said.
“That understanding has been cast aside. Even Norway would never do something as reckless as this.”
Labour’s Richard Baker said last week’s leaked governemnt paper warned of falling oil revenues. He added: “So on Alex Salmond’s orders, he has spent the weekend cooking the books to come up with an extra £26bn out of thin air.”
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Wednesday 22 May 2013
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