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A warning from energy industry veteran Sir Ian Wood over declining oil and gas output has reignited fierce debate over how much an independent Scotland could expect to rely on revenues from the North Sea.
In an interview with an industry news website, Sir Ian, former head of Wood Group, the oil services supplier, said he opposed independence and that he was concerned North Sea reserves had been overstated by supporters of a Yes vote in next month’s referendum.
Sir Ian’s intervention was a particular setback for the Yes campaign given his recent leadership of a high profile UK-government commissioned report on how to maximise returns from the North Sea.
Sir Ian’s report cited the industry view that a further 12bn to 24bn barrels of oil equivalent could be produced from UK waters. The Scottish government has repeatedly quoted the 24bn figure for potential future output.
However, Sir Ian said it would be wrong to focus on the higher number.
“Even with a more sympathetic tax and regulation framework, the likely best outcome, without new hydrocarbon regions being discovered, is between 15bn and 16.5bn barrels,” he told Energy Voice.
The Scottish government said Sir Ian’s estimate was only one of a range of views on exploitable reserves. “There is a wealth of expert opinion on the huge scale of Scotland’s long-term oil and other energy reserves, and the opportunities which that will offer us as an independent country,” said Fergus Ewing, Scotland’s energy minister.
Sir Ian also said the Scottish government’s near-term estimates for oil and gas revenues were too optimistic, giving further ammunition to pro-union campaigners who say that independence would be followed quickly by a fiscal squeeze.
He said he had been prompted to enter the independence debate by what he called the “misinformation” around future energy revenues. “I just can’t stand by and let that happen,” he told the BBC on Thursday.
Independence would be a choice for generations, but in 30 or 35 years “offshore oil and gas will largely be depleted”, Sir Ian said.
Supporters of independence have accused the UK government of trying to play down future oil and gas revenues, a complaint supported by Sir Donald Mackay, former chair of Scottish Enterprise, who said this month that Office for Budget Responsibility estimates of likely tax receipts in the years to 2019 were “hopelessly at sea”.
About 42bn barrels of oil equivalent have been extracted from UK waters since the 1970s. Production peaked in 1999 and production efficiency has fallen sharply because ageing infrastructure – such as pipelines and platforms – requires increased maintenance, leading to more downtime and a higher risk of outages.
However, new technologies that can reduce the cost and maximise extraction from marginal fields could go some way to slowing the decline.
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