UK Revenues Fall as Independence Debates Continue

Published at 02:30PM - 15/09/14

The Chief Secretary of the Treasury, Danny Alexander, has attacked Alex Salmond, the SNP leader, for overstating his forecasts on Scottish oil income and Scotland’s economic prospects as a whole when the country’s income from oil has slumped.

Salmond has continued to state that an independent Scotland would be supported by oil revenues from the UK North Sea. However, this statement continues to be attacked by the No group.

Official figures from the HMRC showed that UK North Sea oil and gas revenues dropped from £6.1 billion in 2012-13 to £4.7 billion in 2013-14. Mr Alexander said that Scotland would be able to afford high-quality public services if it remained within the UK. He added that Scotland’s Yes party had over-estimated future revenues for oil and gas by up to £5 billion over the last two years, adding that their plans for independence were predicated on exceeding UK North Sea tax incomes by over 200pc of what the Office for Budget Responsibility had forecast.

The latest government data follows research by Deloitte that showed how exploratory oil drilling across the UK’s continental shelf dropped by nearly 60pc within quarter two. Only seven new wells were sunk in the period, compared with a total of seventeen new wells sunk in the same quarter for the previous year.

Figures in February showed that North Sea oil and gas production could drop in the current year to levels last seen in the early seventies.

A report published by OPEC suggested that the UK North Sea’s total output could diminish to just 800,000 barrels of crude daily.

Both Shell and BP have spoken out about a Yes vote, saying that Scotland’s fortunes will remain stronger if they stay within the UK and warning that predictions by Sir Ian Wood that Scottish oil revenues will dry up by 2050 are correct.

Sir Ian Wood has been praised by the leaders of both sides of the referendum as a leading authority in the oil industry. He has urged Scots to carefully weigh up the finances involved in a potential separation and has accused Alex Salmond of using misleading statistics about potential North Sea revenues for Scotland.

Mr Salmond has denied the claims, saying that his figures are correct, but the CEOs of Shell and BP have now both spoken out to support Sir Ian Wood’s predictions, saying that new opportunities will be both more challenging and smaller in the UK North Sea, with the costs of decommissioning and of managing existing assets productively both additional challenges facing the industry.

Ben van Beurden, CEO of Shell, joined BP in speaking out in favour of the No vote. He said that the amount of oil and gas remaining in the UK North Sea that could be extracted at profit would be a function of both cost and price. With existing assets and their supporting infrastructure rapidly ageing, and production falling, tax receipts would decline as costs grew. He added too that remaining reserves in the UK North Sea, yet to be found and subsequently developed, would be in difficult-to-reach or isolated areas which potentially could be still uneconomic to drill unless tax regimes changed.