Bad times ahead for the North Sea oil sector despite government measures

North Sea oil revenues to be �9.6bn lower

North Sea oil revenues in the next five years will probably be £9.6bn lower than previously thought due to the falling price of oil in international markets, the Office for Budget Responsibility has said. 

The advisory body providing independent economic forecasts and analysis of public finances has downgraded its projections for oil receipts in 2016-17 from £2.4bn in December to £600m, with its forecasts for each of the five years to 2019-20 now less than £1bn.

The figures were published as Chancellor George Osborne announced a £1.3bn package of measures to help the North Sea industry as part of the new Budget.

The latest figures are in sharp contrast to what the Scottish Government was presenting in the run-up to the independence referendum.

The SNP administration's white paper on independence predicted that between £6.8bn and £7.9bn in oil revenues would be generated in 2016-17.

"We knew the SNP's oil projections were fanciful. But today's forecasts show even its most pessimistic prediction was out by more than 10 times,” said Scottish Conservative energy spokesman Murdo Fraser MSP.

Pro-union politicians have pointed to the fact that had Scotland opted for independence, the dramatically revised prediction would cause the new country considerable financial difficulties.

"These figures show the scale of the crisis in the North Sea oil industry, which puts the jobs of thousands of workers at risk,” Scottish Labour finance spokeswoman Jackie Baillie MSP said.

"The figures also expose the devastating consequences of the SNP's general election plan for full fiscal autonomy. Scrapping the security of the higher public spending we get through Barnett for over-reliance on volatile oil prices would mean only one thing - austerity max from the SNP."

A Scottish Government spokesman expressed confidence the measures introduced in the new Budget will help the industry pull through the lean years

"These measures will help to ensure that North Sea activity rebounds in the medium and longer term,” the spokesman said. “For example, Oil & Gas UK estimates that these measures could incentivise an additional £4bn of capital investment over the next few years and enable the development of 500m barrels of oil equivalent, which at today's prices are worth £20bn.”

The spokesman also pointed out that the previous Scottish Government oil price projections were in line with international estimates at the time, saying the UK Energy Department expected oil prices to reach around $130 per barrel in 2018.

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