INCREASING production and prices have driven up the value of Scottish North Sea oil and gas, according to official figures. The statistics show that oil and gas production in Scotland totalled about 74.7 million tonnes of oil equivalent in 2016-17, up 2.9 per cent compared to the previous year – a figure that represents 82 per cent of total UK production and is at its highest level since 2011-12.
Approximate sales value was £17.5 billion, up by 15.2 per cent from £15.2bn in 2015-16.
Statisticians said the rise in production revenues could be attributed to the increase in production, but also a rise in prices towards the end of 2016 and in the first quarter of this year.
Operating expenditure, excluding the costs of decommissioning, was estimated to be £5.9bn, similar to the previous year despite the increase in production.
Capital expenditure was down from £10.1bn to around £8bn.
Energy Minister Paul Wheelhouse welcomed the news, but said it was still a difficult time for the industry.
“Scotland’s oil and gas industry has a bright future, and it is encouraging to see this continued increase in production which has risen by a total of 25 per cent over the last two years,” he said. “These figures show confidence is continuing to return to the sector after a number of challenging years.
“I do recognise that this remains a difficult time for the industry and its workforce, and the Programme for Government launched last week clearly outlines that even in the context of our low-carbon transition harnessing, the resources of the North Sea will be vital to the Scottish economy for decades to come.
“The Scottish Government will continue to do everything within its powers to support the industry and its workforce, while calling on the UK Government to improve the fiscal and regulatory regime to encourage ongoing investment to support jobs and export-led growth.”
However, industry expert Professor Alex Russell – chairman of the Oil Industry Finance Association, who has chaired a working group on North Sea decommissioning – was less enthusiastic about the figures.
He said: “The joyous reaction of key players in the UK oil and gas industry to a 2.9 per cent increase in production over the past year, sadly, has all the merit of a cartwheeling, air-punching celebration by a Scottish footballer scoring a goal again Paris Saint-Germain, if that were ever to happen.
“Yes, share values of fabulously rich oil companies might temporarily rise and bonuses of various oil-related executives might be triggered by the increased output. But at what cost? In the light of an estimated 150,000 North Sea-related job losses since the fall in the value of oil and in the knowledge that UK tax revenue from oil and gas production is less than the support given to the industry, these ‘we have turned the corner’ exaltations seem at best premature and at worst misleading.
“A robust analysis of what exactly is happening and has happened to Scotland’s oil and gas wealth is long overdue.”
The figures came in the week Norway’s sovereign wealth fund – the world’s biggest and largely fuelled by oil – reached $1 trillion for the first time. Booming international stock markets and a rising euro lifted the value of the fund on Tuesday, before markets settled down again.
The fund was established in 1998 to save oil and gas revenues for future generations, and is now worth about 2.5 times Norway’s annual gross domestic product (GDP), against original projections of a peak at 1.3 times GDP in the 2020s.
Oslo has become increasingly dependent on the fund for public spending. Its record value came a day after Erna Solberg won a historic second term as Norway’s prime minister. Solberg’s new government will now oversee a planned overhaul of the fund, and its governance and strategy.
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