Scotland Oil stock depletion ‘felt by 2030’

Depleting oil and gas production will begin to be felt by 2030 and will have serious implications for the economy, jobs and balance of payments in an independent Scotland, according to Sir Ian Wood.

Sir Ian, an authority on the sector, has warned that an independent Scotland without new hydrocarbon regions being discovered will have no more than 35 years of depleting offshore oil and gas production left, and this must be taken into account in the economics of independence.

The industry, therefore, cannot figure significantly in Scotland’s medium-term economic calculations, he said.

During an interview with EnergyVoice.com, Sir Ian contradicted the Scottish Government’s own figures for remaining North Sea resources and tax income.

He said that even with further tax breaks and less complex regulation in the North Sea, only a further 15-16.5 billion barrels of oil equivalent (boe) are likely to be recovered.

The Scottish Government has been using 24 billion boe as its central prediction, which is 45-60% above Sir Ian’s estimate.

Sir Ian also believes the Scottish Government’s central prediction of £7 billion per annum tax income from oil and gas over the next five years is £2 billion per annum too high. This difference represents £370 less for every person in Scotland every year.

He says that offshore oil and gas reserves will have largely been produced by 2050 with production down to less than 250,000 barrels per day, around a sixth of current production.

Sir Ian, who expanded the Wood Group to become a multi-billion pound global company, recently led, on behalf of the UK Government, a major review on Maximising Economic Recovery of the UK’s Oil & Gas Reserves.

He said: “The offshore oil and gas industry cannot figure significantly in Scotland’s medium-term economic calculations.

“Young voters in the referendum will only be in their 40s when they will see the significant rundown in the Scottish offshore oil and gas sector, and the serious implications for our economy, jobs and public services.

“Indeed, the rundown impact will begin to be felt by 2030, which is only 15 years from now.”

Sir Ian has also highlighted the recent report from the official British Geological Survey which suggests Scotland is unlikely to have significant alternative onshore supplies of hydrocarbons after offshore oil and gas runs out.

He said: “Ironically, having contributed significantly to UK energy reserves over the last 40 years, Scotland could be leaving the UK just at a time when very significant reserves have been discovered in England, from whom we could be forced to buy our energy at significant cost to our balance of payments.

“The UK is currently heavily subsidising our renewable energy pricing – we receive 30% of the support but account for only 10% of electricity sales – and the rest of the UK is also the key market for our renewable exports.

“An independent Scotland will lose the very significant pricing subsidy and there’s a danger the rest of the UK will opt to import cheaper electricity from continental Europe.”

He added: “The loss of significant offshore oil and gas tax revenues as the North Sea runs down will have a big impact on our economy, jobs and balance of payments, with significant increases in household energy bills – and a very adverse impact on the legacy for future generations in an independent Scotland.”

Sir Ian’s remarks come after oil economist and North Sea energy expert Professor Sir Donald Mackay endorsed the Scottish Government’s plans for independence.

He has described the proposals in the SNP administration’s white paper on independence as “perfectly sensible” and would help “strengthen our economic base”.

The academic has also criticised oil and gas revenue projections from the Office for Budget Responsibility, stating the UK Government advisory body is “hopelessly at sea when it comes to forecasting the price of oil”.

Energy Minister Fergus Ewing said: “Sir Ian is of course entitled to his views in the debate on Scotland’s future – but there is a wealth of expert opinion on the huge scale of Scotland’s long-term oil and other energy reserves, and the opportunities which that will offer us as an independent country.

“This is ultimately a debate about exactly how big Scotland’s remaining oil reserves are, and most countries are not nearly lucky enough to be in that fortunate position.”

Mr Ewing said the estimate of up to 24 billion barrels of oil remaining is the oil and gas industry’s own projection, while Sir Ian’s own recent report also referenced the remaining resource as being up to 24 billion barrels.

He added: “Sir Ian’s estimates would appear to be based on projections which only go as far as the year 2050, but which are themselves substantially higher than those of the OBR.

“And Professor John Howell, the chair of petroleum geology at Aberdeen University, has said that there are at least 40 years of oil production in the pipeline, not even counting fields which may yet be discovered.

“Oil is a bonus for an independent Scotland’s economy, and not the basis – our onshore tax revenues, excluding oil and gas, are roughly the same as those in the rest of the UK.”

Unionist leaders said Sir Ian’s report “fatally undermined” the Scottish Government’s assertions on oil.

Better Together leader Alistair Darling said: “Coming from such a respected internationally renowned expert on North Sea oil, this news fatally undermines what Alex Salmond has been saying about oil and completely vindicates our analysis.

“Sir Ian Wood’s comments blow apart Alex Salmond’s plans for funding schools and hospitals. It is devastating for his ridiculous claims on pensions and on jobs.

“Alex Salmond has acknowledged that Sir Ian Wood must be listened to when he is talking about North Sea oil. Now Alex Salmond must listen to him and tell us his Plan B for Scotland.”

Scottish Conservative leader Ruth Davidson said: “Scotland benefits from thousands of jobs linked directly and indirectly to the North Sea.

“Sir Ian is right to point out that oil is a declining resource that needs managed, and to criticise nationalists for misleading the Scottish public by over-inflating its future worth.”

Chief Secretary to the Treasury Danny Alexander said: ” This is a powerful analysis from the most respected figure in the oil and gas industry. In common with other independent forecasts, Sir Ian’s analysis shows that the Scottish Government’s oil projections are over optimistic and wrong.

“This is yet more evidence that we are stronger with the UK’s broad shoulders on our side.”

Scottish Labour’s spokesman for finance, Iain Gray, said: “For an authority like Sir Ian to use such forceful terms about Alex Salmond’s claims clearly tells us that something is very wrong with the SNP’s estimates and assumptions. Alex Salmond now stands alone in his claims that current levels of Scottish spending can be paid for by the North Sea.”

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