Scottish North Sea oil revenues could drop to £500 million next year, according to a new report from the Scottish Government.
Depending on the price of oil, production levels and the level of efficiency improvements that can be achieved, tax revenues from the sector are projected to be between £0.5 billion and £2.8 billion in 2016-17 – which the SNP had proposed as the first year of independence if there had been a Yes vote in the referendum.
While the Scottish Government’s latest oil and gas bulletin says receipts over the next four years could total up to £10.8 billion, this higher total depends on oil prices returning to 100 US dollars a barrel (£63).
In its worst-case scenario, Scottish North Sea oil revenues could total £2.4 billion over the period 2016-17 to 2019-20.
While leading industry figures have suggested the price of oil could remain at approximately 60 US dollars a barrel (£38) for some time, the Scottish Government said there ” is no consensus” on price.
The report said that, as “an illustrative example, in its March 2015 Economic and Fiscal Outlook the OBR (Office for Budget Responsibility) considers a scenario where the oil price could return to 100 US dollars per barrel in 2015-16″.
It then suggested: “In this case, when combined with the production and operating cost improvements, tax receipts from the Scottish portion of the North Sea between 2016-17 and 2019-20 could be £10.8 billion.”
But Deirdre Michie, the new chief executive of the industry body Oil and Gas UK, has said the North Sea must become sustainable in a world where long-term oil prices are about 60 US dollars a barrel.
Oil tycoon Sir Ian Wood, who carried out a review of the industry for the UK Government, has forecast that the price could stay at about the 65 US dollars (£41) a barrel level ”for possibly quite a long time, maybe two to three years”.
Oil prices reached a peak of more than 130 US dollars (£82) a barrel in July 2008, and were over 100 US dollars a barrel for most of the period, or most of the period from 2011 until the summer of 2014, when they started to fall back.
Prices dipped below 50 US dollars (£31) a barrel in January this year, before starting to increase slowly.
The publication of the bulletin, on the day before Holyrood starts its summer recess, sparked angry calls from Labour.
James Kelly raised the issue at the end of First Minister’s Questions, saying: ” This bulletin has been asked for for months across the chamber and has now been released in the last day of the session.
“It’s got profound implications for the Scottish economy with North Sea oil tax receipts at £40 billions less than the White Paper (on independence).”
But a spokesman for First Minister Nicola Sturgeon branded his comments ” utterly pathetic”, insisting the bulletin was “published today because it was ready to be published today, it’s as simple as that”.
The spokesman said: ” It was published a full two hours before First Minister’s Questions, a document that runs to no more than 20 pages, plenty of detail in it but no more than 20 pages to digest.
“If Labour and the rest of the opposition can’t fully digest a 20-page document in two hours on an issue that is already well rehearsed, then I would question their competence or how seriously they take the issue.”
Liberal Democrat energy spokesman Liam McArthur also hit out, saying: ” Issuing this report on the day Parliament rises for the summer recess either shows contempt for Parliament or contempt for the oil and gas industry. The strong suspicion is that it is both. Shame on them.”
He claimed that “t he SNP Government’s credibility on oil and gas is falling faster than their own massive downgrades to forecast receipts”, adding that the report ” blows a massive hole in their proposals for Scotland to scrap the Barnett formula and adopt full fiscal autonomy”.
But Deputy First Minster John Swinney said the report showed oil and gas production could rise in the coming years.
The report stated that the UK Continental Shelf (UKCS) “appears to be approaching a turning point where it could level off or improve over the medium term”.
Sector output for April was up by almost 10% on the last year, after maintenance work was completed on a number of fields, while 12 new field developments could begin production this year.
The latest production data shows output in April 2015 increased by 9.8% compared to the same month last year, as a number of large fields came back on stream following the completion of maintenance work. In addition, it is expected that 12 new field developments could begin production this year.
Mr Swinney said: ” There is no disputing that the industry has faced a very challenging year and we continue to work relentlessly to safeguard jobs and retain vital skills. That’s why we set up the Energy Jobs Taskforce in January, which is helping protect jobs by co-ordinating action between government, the wider public sector industry and industry bodies. This is making a positive difference at a difficult time.
“These figures show that considerable opportunities to extend production remain in the UKCS and that, properly supported, the industry can boost production over the next five years.”
But he added that ” stronger fiscal incentives” from the UK Government were needed to support exploration.
“It is not acceptable for the UK Government to sit back and accept low revenues.,” the Deputy First Minister said.
“Both governments and the industry must continue to work together to improve efficiency, production and deliver better results for the North Sea.
“The critical issue is that the UK Government needs to deliver on its commitment to consult on incentives to boost exploration in the North Sea, and this consultation must be launched urgently – so that firm proposals can be announced in the Autumn Statement.”
Labour finance spokeswoman Jackie Baillie said both “the SNP Government and the UK Government should explore all options to protect jobs that are directly affected and further down the supply chain”.
She hit out at the Scottish Government and said: ” It is ridiculous that the SNP tried to sneak this report out on the last day of Parliament. It’s clear that they have put their own political interests ahead of industry concerns.”
Ms Baillie added: ” These new figures blow the SNP’s policy of full fiscal autonomy out of the water. We know cutting ourselves off from UK wide taxes would blow a £7.6 billion hole in Scotland’s finances.
“Last week the SNP trooped through the lobbies with the extreme right wing of the Tory party to vote for full fiscal autonomy. It is as clear as day now that they knew the policy would be a disaster for Scotland – the SNP Government’s own figures prove it.”
Scottish Conservative enterprise spokesman Murdo Fraser stated: ” It’s clear to see we dodged a bullet when Scotland voted No last September.
“The SNP government were criticised at the time for making over-projected figures. Now it is confirmed. If Scotland was independent we’d now have a massive financial black hole to deal with.”
The Tory MSP added: ” The SNP attempted to keep the public in the dark and mislead on oil prices. When will the Scottish people get an apology?
“The figures published today, prove that we’d face the same challenge under full fiscal autonomy, with cuts in public services and tax rises. The SNP government are still intent on pushing for full fiscal autonomy but at what cost? When will they tell us how they would fill the gap?”