North Sea oil faces challenges despite production rise

The fall was due to “sustained low prices” and came despite an increase in production to 70 million tonnes of oil equivalent (mtoe).

Scottish production increased by 21.4 per cent compared with 2014/15, accounting for 81 per cent of the UK total.

The Scottish Government claimed the increased production was “encouraging”, but the falling sales value illustrated the scale of the challenge facing the sector that has been decimated by the dramatic fall in the oil price.

Oil price has plunged to below $50 per barrel and now stands at around $44. Following the 23.5 per cent fall in sales values the approximate value of sales in 2015/16 was estimated at £13.4 billion.

The perilous state of the industry was further illustrated by the fact that operating expenditure (excluding decommissioning) on oil and gas production in Scotland is estimated to be £6.8 billion, down 6.7 per cent compared to the previous year.

In addition capital expenditure on oil and gas fields in Scottish waters this year is estimated to be £10.2 billion, down 17.6 per cent compared to the previous year.

The Cabinet Secretary for the Economy, Jobs and Fair Work Keith Brown said: “Although this remains a difficult time for the industry and its workforce, it is encouraging to note this increase in production as the industry adapts to the current period of low prices. Capital investment on oil and gas fields in Scottish waters was £10.2 billion and the approximate sales value of oil and gas produced in Scotland is estimated to be £13.4 billion. “The UK Government retains control of the main economic and tax levers affecting the North Sea oil industry, though the Scottish Government continues to do all that it can to support the industry, including setting up the Energy Jobs Taskforce that meets today for the 11th time in Aberdeen.”

DOWNLOAD THE SCOTSMAN APP ON ITUNES OR GOOGLE PLAY