Scottish independence: Report claims UK oil forecasts 'too pessimistic'

The Scottish and UK governments have repeatedly clashed over the future of the oil and gas industry

Future North Sea oil and gas revenues could be six times higher than a UK economic watchdog has forecast, according to a report.

The claim was made by N-56, which describes itself as an "apolitical business organisation".

The UK Office for Budget Responsibility (OBR) has forecast North Sea revenues of £61.6bn between 2013/14 and 2040/41.

But N-56 said the figure could be as high as £365bn, if a series of recommendations were implemented.

N-56 was founded by Dan Macdonald, who is a member of the advisory board for Yes Scotland, which is campaigning for independence.

The Scottish and UK governments have repeatedly clashed over the future of the oil and gas industry, particularly around forecasts from the OBR on the amount of cash it expects to be raised from the North Sea.

Scottish ministers have argued that the OBR forecasts are based on a "very low estimate of future total production", while its own figures have been criticised by opponents who claim they are overly optimistic.

N-56 recommendations

Among N-56's recommendations, some of which were highlighted by the Wood Review of the oil industry earlier this year, is that a more competitive tax regime is established for the North Sea.

It also calls for all policy and decision-makers responsible for taxation and regulation of the industry to be moved to Aberdeen, regardless of the independence referendum result.

An oil fund should also be established to ensure fiscal stability, it added.

Graeme Blackett, from N-56, said: "Since 1970 over £1 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.

"Scotland is a net contributor to the UK public finances, in part due to our geographic share of oil and gas revenues, and this ensures that our finances are typically healthier than the UK public finances as whole.

"The OBR puts forward incredibly pessimistic forecasts on both barrel price and reserves, largely discredited by industry experts.

"What is clear is these natural resources can be maximised through implementing the recommendations put forward both by ourselves and the Wood Review, delivering considerable surpluses that we would recommend are used to invest in an oil fund to benefit future generations."

A spokesman for the pro-Union Better Together campaign said: "It's not surprising that a report by an organisation founded by an adviser to Yes Scotland has reached this conclusion."

'Substantial report'

The N-56 report was welcomed by Scotland's First Minister Alex Salmond.

He said: "This substantial new report from a leading business organisation blows another huge hole in the credibility of the OBR's oil forecasts, especially as it comes just days after esteemed Scottish economist, Prof Sir Donald Mackay, said the OBR's calculations were 'precisely wrong' and 'hopelessly at sea'.

"The report also endorses the Scottish government's plans to set up an energy fund - something Westminster have consistently failed to do to the great detriment of current and future generations.

"Instead of continuing to talk down Scotland's oil and gas sector, the No campaign should acknowledge that the sector has a bright future ahead of it."

Responding to the report, a UK Treasury spokesman said: "The Scottish government's claim that Scotland's public finances will be boosted by separation are based on inflated oil and gas forecasts.

"Every independent expert agrees that North Sea oil and gas revenues are volatile and will ultimately decline.

"The Scottish government's own stats show that over the past two years, North Sea tax revenues were around £5bn less than the Scottish government's lowest estimate.

"The North Sea is a maturing basin and it needs valuable incentives from the Exchequer to sustain investment, which the UK, with its broad and diverse tax base, is able to provide.

"An independent Scotland would have to invest almost £3,800 per head - over 10 times more than when the costs are spread across the whole UK - to match the estimated £20bn the UK government has guaranteed to provide on decommissioning relief in the North Sea. This report takes no account of these costs.

"It is not credible for the Scottish government to say they would sustain current tax incentives for the oil industry and set up an oil fund, while cutting corporation tax below the UK level and increasing welfare benefits.

"How would they fund all these tax cuts, ensure increase public spending and put money aside for an oil fund?"