TO a greater or lesser degree, depending on your viewpoint, oil and gas production will be vital to the Scottish economy for many years to come.
For an asset that has apparently been moribund for decades, the North Sea continues to surprise and amaze oil and gas firms, politicians and the public alike with its continuing fruitfulness.
Yesterday’s announcement that Maersk Oil has been given permission to develop the giant Culzean field seemingly flies in the face of all the doomsayers who have predicted the imminent collapse of North Sea reserves.
That this one field will satisfy five per cent of the UK demand for gas when it reaches peak production, and that such production will last into the 2030s, perhaps engenders a reaction similar to that of Mark Twain when his obituary was mistakenly published, the great American author drily noting that reports of his demise were exaggerated.
So it also is with the “death” of North Sea oil and gas, and indeed the entire UK Continental Shelf (UKCS). We have been told so often that reserves in the UKCS are limited and depleting fast that we forget just how large those oil and gas fields actually are.
The key to a bright future for the UKCS is not about how much oil and gas lies under the seabed – there is plenty – but how much of it can be economically recovered. As Sir Ian Wood put it a year ago, there may be “only” 35 years of North Sea oil and gas production remaining – “unless new discoveries are made”.
He further qualified that statement in February with a point that needs to be re-emphasised. Against a background of a colossal fall in the price of oil, Wood argued cogently for getting “the fiscal regime fit for a quite highly mature area.”
He said: “The biggest loser by far in the current situation is UK plc and the government because fields will be decommissioned early, companies will leave the North Sea and we will not achieve maximum economic recovery.”
That warning came from someone who strongly opposed independence in last year’s referendum.
This newspaper is diametrically opposed to Sir Ian’s views on the political make-up of Scotland, but we have no hesitation in joining his call to Chancellor George Osborne to get the tax regime right for investment in North Sea oil and gas.
To do so, the Westminster Government must consult the Scottish Government and all those with an interest in a prosperous UKCS.
Get the tax and investment regime correct and there could be plenty more Culzeans to come. Getting it wrong is not an option.
Culzean green light is massive boost for the North Sea oil and gas industry
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