Date lodged: 18 April 2017
To ask the Scottish Government what its response is to the International Energy Agency’s recent analysis of the oil industry, which suggested that growth had slowed for a second year, and what impact this reduction in growth will have on Scotland's national deficit.
Answered by: Paul Wheelhouse 11 May 2017
Scotland does not have a 'national deficit' as Scotland is not, yet, an independent nation in its own right. Government Expenditure and Revenues Scotland (GERS) present estimates of both the income and expenditure of Scotland while still part of the UK and including contributions to UK spending priorities that would not necessarily be replicated in an Independent Scotland.
However, tax revenues from oil and gas production, which flow to the UK Treasury and which have exceeded over £330 billion in the period since first production in UKCS, ultimately depend on a range of interrelated factors including global production levels, demand, stock levels, prices, the cost of production and profitability.
The International Energy Agency’s (IEA) latest Oil Market Report, published on
13 April 2017, forecasts global demand to increase by 1.3 million barrels per day in 2017. The IEA also produce long term forecasts for energy demand under a number of policy scenarios, with global demand for oil and gas increasing under all but one scenario in the period to 2040.
The Scottish Government remains committed to maintaining domestic oil and gas exploration and production, and maximising economic recovery. Hydrocarbon production from the North Sea is a highly-regulated industry, with some of the most advanced and comparatively least polluting production methods in the world and this is a matter of great credit to the Scottish and UK sector's workforce. The Scottish Government’s draft Energy Strategy was published in January 2017, alongside the draft Climate Change Plan, and clearly articulates this within the context of Scotland’s ambitious climate change objectives and our drive for continued inclusive economic growth.
The North Sea has a bright future, and with the right fiscal and regulatory environment, there is potential for up to 20 billion barrels of oil equivalent remaining in the UK Continental Shelf. For this to happen, we need UK Ministers to heed our calls for a supportive fiscal regime for exploration, maintenance of critical infrastructure and to support late life assets and subsequent decommissioning. The Scottish Government will, for our part, focus our efforts on supporting the sector to protect employment, provide valuable primary energy supplies, develop its skills as part of the transition to a low carbon economy, and develop a greater international supply chain that is innovative and generate export led growth.
Scotland’s economic fundamentals are strong. Even without oil, GDP per head in Scotland is higher than the UK average excluding London.