By Jonathan Davies
North Sea oil revenue could be six times higher than UK government forecasts, according to a politically neutral business organisation.
N-56, which describes itself as an “apolitical business organisation”, said the UK Office for Budget Responsibility (OBR)’s forecast is far too pessimistic.
The OBR’s forecast said that North Sea oil would generate revenues of £61.6bn between 2013/14 and 2040/41. But N-56’s report says those estimates are way off the mark, and it could be as high as £365bn, if a number of recommendations are implemented.
North Sea oil has been a big topic in the debate over Scottish independence. It would be a key source of income for the Scottish government, if the public were to vote for independence. But the OBR’s forecast suggests revenue would be limited.
Despite describing itself as “apolitical”, N-56 was founded by Dan Macdonald, a member of the advisory group for the ‘Yes’ campaign.
Graeme Blackett, from N-56, said: “Since 1970 over £1 trillion in oil and gas revenues have been produced by the North Sea and at least as much value remains to be produced as already has been, presenting a tremendous opportunity for the sector and for Scotland’s public finances.
“Scotland is a net contributor to the UK public finances, in part due to our geographic share of oil and gas revenues, and this ensures that our finances are typically healthier than the UK public finances as whole.
“The OBR puts forward incredibly pessimistic forecasts on both barrel price and reserves, largely discredited by industry experts.
“What is clear is these natural resources can be maximised through implementing the recommendations put forward both by ourselves and the Wood Review, delivering considerable surpluses that we would recommend are used to invest in an oil fund to benefit future generations.”
A spokesman for the pro-Union Better Together campaign said: “It’s not surprising that a report by an organisation founded by an adviser to Yes Scotland has reached this conclusion.”
Scotland’s First Minister Alex Salmond welcomed N-56’s report. He said: “This substantial new report from a leading business organisation blows another huge hole in the credibility of the OBR’s oil forecasts, especially as it comes just days after esteemed Scottish economist, Prof Sir Donald Mackay, said the OBR’s calculations were ‘precisely wrong’ and ‘hopelessly at sea’.
“The report also endorses the Scottish government’s plans to set up an energy fund – something Westminster have consistently failed to do to the great detriment of current and future generations.
“Instead of continuing to talk down Scotland’s oil and gas sector, the No campaign should acknowledge that the sector has a bright future ahead of it.”
Responding to the report, a UK Treasury spokesman said: “The Scottish government’s claim that Scotland’s public finances will be boosted by separation are based on inflated oil and gas forecasts.
“Every independent expert agrees that North Sea oil and gas revenues are volatile and will ultimately decline.
“The Scottish government’s own stats show that over the past two years, North Sea tax revenues were around £5bn less than the Scottish government’s lowest estimate.
“The North Sea is a maturing basin and it needs valuable incentives from the Exchequer to sustain investment, which the UK, with its broad and diverse tax base, is able to provide.
“An independent Scotland would have to invest almost £3,800 per head – over 10 times more than when the costs are spread across the whole UK – to match the estimated £20bn the UK government has guaranteed to provide on decommissioning relief in the North Sea. This report takes no account of these costs.
“It is not credible for the Scottish government to say they would sustain current tax incentives for the oil industry and set up an oil fund, while cutting corporation tax below the UK level and increasing welfare benefits.
“How would they fund all these tax cuts, ensure increase public spending and put money aside for an oil fund?”
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