Oil revenues ‘could drop to £500m’

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Scottish North Sea oil revenues could drop to £500 million next year, according to a new report from the Scottish Government.

Depending on the price of oil, production levels and the level of efficiency improvements that can be achieved, tax revenues from the sector are projected to be between £0.5 and £2.8 billion in 2016-17 - which the SNP had proposed as the first year of independence if there had been a Yes vote in the referendum.

While the Scottish Government’s latest oil and gas bulletin says receipts over the next four years could total up to £10.8bn, this higher total depends on oil prices returning to $100 a barrel (£63).

In its worst-case scenario, oil revenues could total £2.4bn over the period 2016-17 to 2019-20.

While industry figures have suggested the price of oil could remain at approximately $60 a barrel (£38) for some time, the Scottish Government said there “is no consensus” on price.

The report said that, as “an illustrative example, in its March 2015 Economic and Fiscal Outlook the OBR (Office for Budget Responsibility) considers a scenario where the oil price could return to $100 per barrel in 2015-16”.

It then suggested: “when combined with the production and operating cost improvements, tax receipts from the Scottish portion of the North Sea between 2016-17 and 2019-20 could be £10.8bn.”

But Deirdre Michie, the new CEO of Oil and Gas UK, said the North Sea must become sustainable in a world where long-term oil prices are about $60 a barrel.

Oil tycoon Sir Ian Wood, who led a review of the industry for the UK Government, has forecast that the price could stay at about the $65 (£41) a barrel level “for possibly quite a long time, maybe two to three years’’.