Warning over oil production drop
Published: 21st Jul 2012 02:43:06
An expert in the economics of Britain's oil and gas industry has warned of sharp falls in production over the next five years.
Tony Mackay said disputes over whether Edinburgh or Whitehall controls oil revenue is distracting attention from the challenge of slowing the decline.
He said a study he is preparing estimates the drop could run to 7% per year on average.
That follows a reduction in oil production of 8% during 2011.
Gas production fell 4%, taking the flow of oil and gas last year to only half of its peak, which occurred in 1999 for oil and two years later for gas.
In an update on the Scottish economy, Mr Mackay, who runs Mackay Consultants, said his preliminary estimates of falling production were based on forecasts for each oil and gas field in UK waters, including those under development and possible new fields.
"Such a decline, as in 2011, will have serious implications for the Scottish and UK economies," he wrote.
Higher oil prices in recent months have reduced the impact of the falling volume of oil and gas coming from North Sea fields.
Both the UK and Scottish governments should give serious consideration to the implications of the continuing decline in production”
Mr Mackay stated: "However, continuing high oil prices cannot be guaranteed. Capital and operating costs are also rising (in the UK sector), so the operating profit and government revenue per barrel are likely to decline in future."
The economist said it was welcome that oil industry firms in the Aberdeen area had done well at diversifying into overseas markets.
But he added: "Both the UK and Scottish governments should give serious consideration to the implications of the continuing decline in production.
"I believe that the arguments about the control of future oil revenues have become a distraction from sensible discussion about how to slow down that decline."
Earlier this month, the Office of Budget Responsibility issued a revised estimate of what government could expect to earn from UK oil and gas over the next 30 years, saying it would be about half of what the official advisers had projected last year.
This is due to changed assumptions about oil price, with lower prices making it less attractive to oil firms to extract from hard-to-reach reserves.
The UK government's official budget adviser also warned the Treasury will have to give up some of its oil tax revenue as companies write off the costs of decommissioning platforms and pipelines.
Mr Mackay has been criticised in the past for pessimistic forecasts on oil and gas production, but he claimed to have been more accurate than more upbeat projections from the industry itself, and from the UK government.
His comments came as the price of a barrel of crude oil has been volatile in recent weeks.
At 15:02:39 in SportNorth Ferriby manager Billy Heath has appealed to Gainsborough Trinity to act "professionally" in their Conference North decider against AFC Telford.
At 15:02:36 in HeadlinesRival Palestinian factions Fatah and Hamas have announced a reconciliation deal after a meeting in the Gaza Strip.
At 14:58:30 in EnglandA body supporting NHS groups in the eastern region has warned it could cease to operate in its "current form".
At 14:53:58 in EnglandSteven Gerrard's cousin, who died in the Hillsborough disaster, would have been "very proud" of the England captain, his mother told an inquest.
At 14:52:57 in EnglandA list of the schools Ofsted has been sent in to inspect over an alleged plot by Muslim hard-liners to seize control of governing bodies has been published.
At 14:52:04 in ScotlandControversial plans to end the need for evidence in Scottish criminal trials to come from two sources have been delayed by the government.
At 14:48:29 in ScotlandThe oil and gas industry is worth about £35bn to the UK economy, according to a new study.
At 14:46:07 in WalesA benefits cheat who claimed to have a fear of open spaces has been jailed for a year at Merthyr Crown court after being caught working as a tour guide in South America.
At 14:44:41 in EnglandJurors in the indecent assault trial of publicist Max Clifford have been told they can return a majority verdict.
At 14:42:23 in HeadlinesFor centuries, gardeners have put shards of pottery - "crocks" - at the bottom of plant pots to increase drainage. But a new study has debunked the tradition, writes Tom de Castella.
Harvard CitationBBC News, 2012. Warning over oil production drop [Online] (Updated 21st Jul 2012)
Available at: http://www.ukwirednews.com/news/1441837/Warning-over-oil-production-drop [Accessed 23rd Apr 2014]
News In Other Categories
Jurors in the indecent assault trial of publicist Max Clifford have been told they can return a majority verdict.
Three people have appeared in court charged in connection with an incident at a loyalist protest camp in north Belfast.
A body supporting NHS groups in the eastern region has warned it could cease to operate in its "current form".
An Israeli start-up plans to release a printer early next year that is small enough to fit inside its owner's pocket but works with any-sized paper.
Controversial plans to end the need for evidence in Scottish criminal trials to come from two sources have been delayed by the government.
Rival Palestinian factions Fatah and Hamas have announced a reconciliation deal after a meeting in the Gaza Strip.