Scottish oil and gas production rises but value drops

New Scottish government statistics revealed that production increased by more than a fifth in 2015-16.

However, the sales value of oil and gas dropped by £4.1bn on the previous year, to £13.4bn.

The latest Oil and Gas Production Statistics showed that in financial year 2015-16, oil and gas production in Scotland (including Scottish adjacent waters) is estimated to have been 70.0 million tonnes of oil equivalent (mtoe).

This represented a production increased of 21.4 per cent compared to 2014-5, and accounted for 81 per cent of the UK total.

However, the approximate sales value decreased by 23.5 per cent compared to 2014-15 due to sustained low prices.

Prices have dropped to below US$50 (£37) a barrel, compared to the high point of US$147 (£111) in July 2008.

Total sales value of Scottish North Sea oil and gas has dropped £10bn since 2013-14, when sales income amounted to £23.8bn.

It compares to a high point of £29.5bn in 2008-09.

In 2015-16, oil and gas fields in Scotland accounted for 96 per cent of UK crude oil and natural gas liquids (NGL) production, and 60 per cent of UK natural gas production.

Over the period, the operating expenditure (excluding decommissioning) on oil and gas production in Scotland was estimated to be £6.8 billion, down 6.7 per cent compared to the previous year.

Capital expenditure on oil and gas fields in Scottish waters was also estimated to be £10.2 billion, down 17.6 per cent compared to the previous year.

Scotland’s economy secretary Keith Brown said the report showed the industry was adapting to low prices.

He said: “Although this remains a difficult time for the industry and its workforce, it is encouraging to note this increase in production as the industry adapts to the current period of low prices.”

Mr Brown said the government “continues to do all that it can” and explained that support includes “£24.5m for increased innovation and business-support measures and the £12m Transition Training Fund, which offers grants to individuals to support their redeployment through retraining or further education”.

Murdo Fraser, Scottish Conservatives’ finance spokesman, said the increase coincided with “significant” tax breaks introduced by the UK government last year.

“We are now seeing that tactic work, as production rose directly after the measures were introduced,” he said.

“Of course much more needs to be done, and these breaks ought to continue having a beneficial impact on the North Sea.

“However, with prices remaining low across the globe, it is an industry which remains under immense pressure. Fortunately, the strength of the UK economy is able to absorb this nosedive, meaning public spending can be protected.”

Mr Brown, though, said that Scotland’s SNP government “will also maintain pressure on the Treasury to honour promises made in last March’s budget to use the UK Guarantees Scheme for oil and gas infrastructure to help secure new investment in assets of strategic importance”.

He said:”The Scottish government strongly believes that the North Sea oil and gas sector can have a bright future for years to come. This, however, will continue to require a concerted effort from all stakeholders.”

Meanwhile, industry body Oil & Gas UK said the increase in production was down to “hard work” and a “massive boost” of investment.

Market and intelligence manager, Adam Davey, said: “While the efficiency drive by industry has helped to reduce the cost of doing business in the region, more needs to be done to ensure the UK Continental Shelf is an attractive investment proposition for those looking to undertake new exploration and develop assets.”