David Cameron to announce North Sea oil production boost

Alex Salmond staging "rival" cabinet meeting over North Sea oil in Portlethen

City Staff
Monday 24 February 2014 10:10
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David Cameron is set to announce measures to boost North Sea oil production by up to £200bn this morning as the industry becomes the latest battleground in the Scottish independence campaign.

The Prime Minister, who will chair a meeting of the Cabinet in Aberdeen, has accepted the main recommendations in an expert review of the industry that could result in an extra four billion barrels of oil being recovered.

Cameron insisted that the "broad shoulders" of the UK Government were able to support investment in the industry, as Downing Street warned that volatility in the oil market could have a dramatic effect on Scottish finances in the event of independence, with the smaller economy less able to absorb the impact of a fall in revenue.

First Minister Alex Salmond will hold a separate meeting of his Cabinet in nearby Portlethen and has promised to base part of the Scottish energy ministry in Aberdeen if there is a Yes vote for independence on 18 September.

The two meetings have been timed to coincide with the publication of retired oil tycoon Sir Ian Wood's review of the industry, which recommends measures that could result in three to four billion more barrels being recovered, bringing in over £200 billion to the UK economy.

The measures in the review, which the UK Government will accept and fast-track for implementation, include the creation of a new independent regulator to supervise licensing and to ensure maximum collaboration between firms to explore and develop oil and gas fields.

There will also be a joint commitment between Government and the industry to ensure licences are awarded on the basis of recovering the maximum amount of petroleum from UK waters.

The report also recommends more sharing of infrastructure and geophysical information and a reduction in red tape for the industry.

Cameron said: "For many years the UK has supported the North Sea oil and gas industry and we have worked together to make this an economic success the whole country can be proud of.

"I promise we will continue to use the UK's broad shoulders to invest in this vital industry so we can attract businesses, create jobs, develop new skills in our young people and ensure we can compete in the global race."

The UK Government claims that the country's large consumer and tax base will allow it to support the industry and help exploit the increasingly hard-to-reach oil and gas reserves.

The Scottish Government has already put forward plans to establish two separate oil funds if there is a Yes vote in September's referendum - one short-term fund to help deal with fluctuations in oil and gas revenues, alongside a long-term savings fund.

But Downing Street highlighted the difficulties Scotland would face in coping with volatility in oil prices due to the greater dependence on the industry it would have after independence.

Tax revenues from oil and gas in 2012-13 were £4.7 billion lower than the year before - a drop of more than 40 per cent and a sum that equates to more than a third of Scotland's health budget or two-thirds of its spending on education.

Salmond said a new energy department for Scotland would be split between Glasgow and Aberdeen, while the North Sea oil capital would also host the regulator recommended by the Wood Review.

He said: "Independence presents an unrivalled opportunity to boost our energy wealth, support employment and grow our economy.

"Aberdeen is Europe's oil and gas capital and its importance in the global market is undisputed, making it the natural home for a new energy department. It is also a vital and growing centre for the development of marine energy."

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