Scots ‘can cash in’ on £375bn oil bonanza

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.”