Scottish gas and oil exports reported as steady

SCOTTISH exports of gas and oil have been “steady” but “unspectacular”, new research says.

• 2010 results a ‘positive reflection’ of overall performance

• Oil firms continue to acquire new fields for exploration

• ’Fiscal stability’ will help UK continue to offer potential for supply chain

Scottish Enterprise and the Scottish Council for Development and Industry found there was “ongoing, albeit patchy, recovery” in 2010.

The report found International sales stood at £7.6 billion.

That accounts for a record 46.4 per cent of total Scottish supply chain sales, compared with 31 per cent in 2002.

The 2010 results are “a positive reflection” of overall performance amid a “sluggish global economic recovery”.

But the report found an “uneven” performance with overseas subsidiaries, largely autonomous operations which are owned by foreign companies but report back to a Scottish headquarters, performing much better than direct Scottish exports.

Subsidiary sales increased by 10.9 per cent while direct exports declined by 7.8 per cent.

The report stated: “The fall in direct sales and rise in subsidiary sales means that revenues derived from subsidiary companies is now more than twice that of direct exports. This trend will continue as the Scottish supply chain continues to globalise and grow in scale.”

It added: “The reduction in direct export activity is a concern should it become a pattern, but it is too early to tell and is perhaps not unexpected given the state of the global economy.”

International markets have been “driving growth overall” and it is “only a matter of time before total international sales from Scotland’s supply chain exceed that of domestic UKCS (UK continental shelf) sales”.

Oil firms continued to acquire new fields for exploration, known as acreage, but actual investment in exploration was “less positive”.

The report stated: “Given the fragile recovery from the global recession, this is perhaps not surprising but it would clearly be concerning if it were to continue.

“The initial data for 2011 indicates a further fall in exploration and appraisal drilling activity in the basin which, given the relatively stable and increasing oil price during the period, gives some cause for concern as to future prospects no matter how busy the industry currently is serving existing demand for projects.”

In relation to jobs, the industry “continued to take a long-term view in relation to retaining skills”, which “continued to help sustain the Scottish economy in its post-recession recovery phase”.

The survey said it “would appear likely that steady progress and growth” continued and may have accelerated into 2011. However, it said this is “difficult to predict”.

The International Energy Agency has predicted that global energy demand will rise 40% by 2035, with oil remaining the leading component.

It said “fiscal stability” would help the UK to continue to offer good medium/long-term potential for the supply chain.

However, today’s report stated: “Regrettably, the actions of the UK coalition Government in 2011 resulted in the opposite, i.e. UK fiscal instability, with a further rise on the rate of supplementary corporation tax levied on the oil companies.

“It is always difficult to prove and quantify investment loss following such a decision, but the fiscal instability in the UKCS caused by the actions of successive governments, of differing political persuasions, has not been helpful and can only serve to damage long-term investor confidence in the UKCS.”