Scots ‘can cash in’ on £375bn oil bonanza
Rising oil prices brought prosperity back to the busy port of Aberdeen. Picture: Getty Images
SCOTLAND’S North Sea oil and gas industry can deliver a £376 billion bonanza over the next 40 years and secure Aberdeen as “one of the global energy capitals” of the future, according to a report published today.
The PricewaterhouseCoopers (PwC) study said the oil boom was there for the taking if government and industry leaders can “grasp the many opportunities”.
But it warned that Scotland’s oil capital was at a crossroads and action was needed to ensure this “remarkable golden prize” did not slip away. The report called for fresh funding and investment, fiscal certainty and targeted incentives.
The study also said greater public and private-sector collaboration was needed, as well as a more co-ordinated approach by industry and education to turn the city into a “global talent magnet”.
The report comes just weeks after BP announced a multi-billion-pound offshore investment in the North Sea and proclaimed that reserves will last until at least 2050.
The SNP has seized on the renewed optimism in North Sea reserves to bolster its argument for separation, saying that an independent Scotland should have responsibility for its plentiful natural resources.
Mark Higginson, senior partner at PwC in Aberdeen, said: “We have a remarkable – and potentially unrepeatable – opportunity to position the city as an international energy centre of excellence for the next 40 years.
“However, this isn’t simply going to fall to Aberdeen by right. We need to shape our own destiny and the journey must start now, with everyone focused on a single, definitive strategy that embraces core objectives of maximising oil reserves, exploiting the new frontier areas west of Shetland and the Arctic, becoming a talent magnet and more effectively serving the needs of industry, and viewing clean energy not as a consolation prize but as a complement to oil and gas revenues.”
The study, titled Northern Lights: a strategic vision of Aberdeen as a world-class energy capital, advised stakeholders to collaborate more to build on the city’s long track record in oil and gas, without which there was a risk that the opportunities within reach may slip away.
It said this would leave the future prosperity of Aberdeen much less certain as oil and gas reserves inevitably decline.
The report highlighted that renewables were also an area of opportunity and urged the industry to move fast to be part of the developing field.
Industry leaders are now calling for investment in the skills needed and a stable tax regime offshore, while the Scottish Government said the North Sea will be a key provider of jobs and revenue for years to come.
The oil and gas industry is the main source of revenue in the years ahead for the city, but renewable energy will also be pivotal, as well as the looming “decommissioning” market for rigs and other platforms coming to the end of their working lives, the report states.
There is anything between 12 and 24 billion barrels of oil still under UK waters, the report finds, with the fields of the west of Shetland worth up to £376bn alone over the next 40 years.
That figure is based on a maximum yield of reserves of six billion barrels of oil equivalent at a potential average price of $100 per barrel over a period of up to 40 years.
The fledgling decommissioning market is worth about £19.5bn, while £75bn is set to be spent on offshore windfarms in the next decade.
Although the amount of oil being produced is falling, prices are spiralling meaning there is plenty of life left in the sector.
But confidence has been “jolted” by the recent supplementary tax which Chancellor George Osborne foisted on the industry, the report finds, despite already “eye watering” tax rates of up to 85 per cent or more.
A spokesman for First Minister Alex Salmond said last night that the offshore industry had a key role to play in generating jobs, skills and revenue “for decades to come”.
He added: “With up to 40 per cent of oil and gas reserves still to be extracted, and over half of the revenues still to be generated, the UK government should be giving more certainty to the industry and restore confidence that has been badly dented by the Treasury’s conduct this year.
“As this report demonstrates, there is plenty of life left in the industry. Indeed, if it had not been for the Budget blow, it would be at the centre of an unprecedented boom in jobs and investment.”
He added: “The Treasury has used the North Sea as a cash cow for too long and Scotland’s energy sector, and the jobs and wealth it supports, deserve better and fairer treatment from Westminster.”
Malcolm Webb, chief executive of Industry body Oil & Gas UK, said the report was a “comprehensive insight” into the potential for Aberdeen to sustain its position as a global energy capital.
But he added: “For the city to flourish as an energy industry hub, continued oil and gas production is required to anchor the expertise and technologies currently in the supply chain in the area.
“As the report states, maximising oil and gas recovery will require investment in the skills needed and importantly, fiscal predictability.”
The UK government is urged to treat the continental shelf as an “opportunity for investment, as opposed to a cash cow”.
And while renewables offer huge potential, they should not be seen as a “replacement” for oil and gas, but a “source of growth over and above these”, the report states.
Niall Stuart, chief executive of Scottish Renewables, said many firms are already diversifying into the field.
“Aberdeen is well placed to become a hub for manufacturing and development of renewable technologies, particularly offshore wind, which will play an ever-increasing role in Scotland’s energy mix,” he said.
“There remains a number of barriers to achieving our full potential with investment required in grid upgrades, reducing transmission charges, improving the planning process and removing uncertainty around market reform, but it’s clear from this report that there is a huge opportunity for Scotland to take hold of.”
Frank Doran, Labour MP for Aberdeen North, said the document was a “real vote of confidence” in Aberdeen. But he added: “I think the PwC report is at the more optimistic end of the scale and a more realistic view is taken by the industry itself who know that changes are essential.”
Labour leader Iain Gray said access to finance would be critical after a report by Citigroup yesterday warned against investing in the Scottish Renewables sector amid uncertainty over the independence issue.
“We need to see the Scottish Government put the right policies in place to develop this,” he said.
Tom Little, chairman of local economic development body Aberdeen City and Shire Economic Forum, said: “We have the potential to drive Scotland and the UK out of recession, creating new jobs and wealth.”
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Comments
There are 225 comments to this article
Page 1 of 15
Tartancult
Friday, November 4, 2011 at 04:58 PM#224 I really wish you would all wake up smell the Coffee and and go back to sleep" Whats the point of waking up if the purpose is just to go back to sleep? If you can't answer this simple question (and you cannot) you obviously can't answer any questions on oil. Dismissed.
Gibbo
Friday, November 4, 2011 at 11:29 AMWell well here we go again, poor wee Scotland in the news again, however I only wish someone would get their facts right, yesterday it was £465 BILLION today is £375 Billion nearly $100 BILLION missing somewhere but hell what does that wee sum of money matter in the scheme of things, according to some of you that would be gobbled up by the having to buy Electricity from Southern Britain, I really wish you would all wake up smell the Coffee and and go back to sleep, we will be free before the next Westminster elections comes round so all your arguement are meaningless, lets wait for the Council elections next MAY and we will get a real idea of whom the Scottish electorate wish to have running our ecomomy.
Tibially Challenged Douglas Bader
Friday, November 4, 2011 at 11:06 AM221 - "and the prospect of an energy-rich, prosperous Scotland"...Indeed. So energy rich that you may be importing electricity from England and Northern Ireland. Prosperous? Well that depends on how much the English and Northern Irish charge you for it.
Thursday 8th December 2011
Friday, November 4, 2011 at 10:07 AM219 Tibially Challenged Douglas Bader - Oh Douglas you are so naughty. You do like the 'Slaves & Masters' game. Yes master I will be nice to the English, infact I am going to be nice, very nice to everyone. You are a very nice man Douglas I do so enjoy reading your posts especially the ones about the RBS bailout. You certainly know your stuff. No Cynicus today. Cynicus is another very nice man I do hope he hasn't been arrested.
Broon Bairn
Friday, November 4, 2011 at 09:55 AMI think some folk here are deliberately muddying the waters and avoiding the main issue - ie, the fantastic wealth still off our shores, and the prospect of an energy-rich, prosperous Scotland having control over its own resources, for a change (just like any normal country) The question of bank ownership is a side issue
Tibially Challenged Douglas Bader
Friday, November 4, 2011 at 09:36 AM218 - Oh and the Northern Irish too. You will also be relying on them for your energy.
Tibially Challenged Douglas Bader
Friday, November 4, 2011 at 09:35 AM218 - You had better start being nice to the English. Scotland will be relying on the English for their energy going forward.
inoui
Friday, November 4, 2011 at 08:43 AMNot if the English have anything to do with it...............lol
paul o
Friday, November 4, 2011 at 08:22 AMThe report comes just weeks after BP announced a multi-billion-pound offshore investment in the North Sea and proclaimed that reserves will last until at least 2050. That's LESS than 30 years! BP will make enormous profits selling the stuff to 'other markets', Scotland won't benefit in the long term. Just recently in Austarlia the West Aust State Gov was given notice that it's natural gas contracts with some of the worlds biggest producers & suppliers (selling gas extracted from WA) won't be renewed when they expire (over the next 5 years). Shell, et al; make more money selling it on the international 'market'. WA looks like being the first Aust state to have to import natural gas from overseas suppliers, as the billions of cubic meters of gas reserves at 'home' is not for domestic consumption. Same fate is looming for Queensland. Trillions of cu meters of coal-seam gas reserves, however very little available for sale to the domestic market. Think about that as you pile on an extra doona this winter.
Ian Aberdon
Friday, November 4, 2011 at 07:55 AMKon, we get it. You & your ilk would like Scotland to stay shackled to the union because we're too wee, stupid & incompetent to run our own affairs. I - & many others - would beg to differ.
Tibially Challenged Douglas Bader
Friday, November 4, 2011 at 07:12 AM211 - "The HQ of a company is simply the HQ and in no way defines it as country of that company. EDF the energy supplier in the UK is a UK company, part of a global company with their HQ in France." Totally agree. The problem with your argument for you is that RBS Group plc which is the company with all the liabilities is registered and HQ'd in Edinburgh. RBS plc which is exposed to all the Credit Default swaps and interest rate swaps is also registered and HQ'd in Edinburgh.
Kon
Friday, November 4, 2011 at 01:02 AM213 andyglasgow, only a complete and utter whackjob would try to argue that The Royal Bank Of Scotland is not Scottish, for the last time its Scottish by law.
andyglasgow
Friday, November 4, 2011 at 12:54 AMGood ploy Kon. In the face of overwhelming evidence and facts, go for the old ' It just is, right! ' argument. The old 'Rainman' defence. It's got a royal charter because that used to be way to establish a company and it was part of the Equivalent Company deal between Scotland and England. This has no bearing on the current RBS global business paradigm. Anybody with an ounce of business knowledge would understand this. You are literally not in possession of a single fact on this subject. You are boring me now and I won't be responding to any more of your Forrest Gump style ramblings.
Kon
Friday, November 4, 2011 at 12:25 AM211 andyglasgow, you are just wrong, the Scottish banks are banks by both royal charter and acts of parliament, you dont get any more confirmed Scottish than that.
andyglasgow
Friday, November 4, 2011 at 12:17 AMTibially, firstly, repeating your nonsense doesn't make it any truer. The HQ of a company is simply the HQ and in no way defines it as country of that company. EDF the energy supplier in the UK is a UK company, part of a global company with their HQ in France. The HQ is just a function of the business and may even be where the company started but it doesn't define the entire global company as being from that particular country. Honestly what don't you get about that? Let's try this, don't believe me, read it for yourself. Go to Webcheck companies house. Look up company numbers FC006193 - RBS Holland 03220331 - RBS England NF002594 - RBS Northern Ireland To name but a few. See, NOT all of the RBS is Scottish!!!
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