UK government North Sea oil, gas revenue forecasts 'woefully pessimistic': think tank

London (Platts)--18Aug2014/728 am EDT/1128 GMT

Future North Sea oil and gas revenues could be as much as six times higher than the UK Office of Budget Responsibility has forecast due to a low estimate of future total production, a report from N-56 said Monday.

N-56, an apolitical business-led initiative which provides independent analysis of Scotland's current economic position, said in the report that oil and gas revenues from the North Sea could total GBP365 billion ($609 billion) by 2040, more than six times the amount forecast by the OBR of GBP57 billion, if a series of recommendations outlined in the report were implemented.

The report was prepared for N-56 by economics consultancy BiGGAR Economics and energy consultancy Tulloch Energy.

Commenting on the report, Graeme Blackett from BiGGAR Economics said "Since 1970 over GBP1 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."

The recommendations outlined in the report, some of which were included in the Wood Review earlier this year, include "a more competitive tax regime" which may involve tax incentives to boost production and revitalize exploration, as well as investment to prolong the life of existing infrastructure.

The report also recommends that decision makers for oil and gas taxation and regulation to be moved from London to Aberdeen, regardless of whether Scotland is independent or not, and an oil fund to be established to ensure fiscal stability.

Scotland's First Minister Alex Sammond said in a statement "This substantial new report from a leading business organization blows another huge hole in the credibility of the OBR's oil forecasts."

However, a UK Treasury spokesman said in a statement that the forecasts in the report were "based on inflated oil and gas forecasts" and that "oil and gas revenues are volatile and will ultimately decline."

--Gary Hornby, gary.hornby@platts.com
--Edited by Jonathan Dart, jonathan.dart@platts.com

http://www.platts.com/latest-news/oil/london/uk-govt-north-sea-oil-gas-revenue-forecasts-woefully-26861036