Top aca­demic con­tra­dicts rosy pic­ture painted by gov­ern­ment

The Press and Journal (Aberdeen and Aberdeenshire) - - NEWS -

Scrap­ping the jobs task­force risks re­mov­ing the down­turn from the spot­light and deny­ing the sec­tor the help it des­per­ately needs, Aberdeen City Coun­cil’s co-leader warned.

Jenny Laing in­sisted that there was still “con­sid­er­able work to be done” to over­come the chal­lenges the north-east faces and the move could be coun­ter­pro­duc­tive.

She said: “We were ob­vi­ously de­lighted when the Scottish Gov­ern­ment agreed to set up the task­force and have worked with them to try to pro­vide sup­port to in­di­vid­u­als and busi­ness af­fected by the down­turn.

“How­ever we be­lieve there is still con­sid­er­able work to be done in this area given fig­ures re­leased by Oil and Gas UK in­di­cat­ing the in­dus­try con­tin­ues to face se­vere chal­lenges and fur­ther sig­nif­i­cant job losses over the next year.

“This, cou­pled with the prob­lems caused by the dis­pro­por­tion­ate busi­ness rates in­creases in Aberdeen and the north-east, means the lo­cal econ­omy will still re­quire sig­nif­i­cant and tar­geted sup­port from Scottish Gov­ern­ment.

“It is clearly a mat­ter for the first min­is­ter and the Scottish Gov­ern­ment to de­ter­mine how on­go­ing sup­port for the oil and gas in­dus­try is de­liv­ered but we are con­cerned that to­day’s an­nounce­ment may mean that this is­sue is re­moved from the spot­light and we fear the vi­tal sup­port the in­dus­try still re­quires will not be forth­com­ing.” A top Aberdeen petro-econ­o­mist has warned that oil pro­duc­tion in­creases in Scot­land will not be sus­tain­able for much longer.

Alex Kemp, pro­fes­sor of pe­tro­leum eco­nom­ics at Aberdeen Univer­sity, said out­put could in­crease “a bit more” next year as ma­jor North Sea fields come on stream.

But a lack of new devel­op­ments and de­clin­ing in­vest­ment mean pro­duc­tion will soon slip back, Prof Kemp said. He was speak­ing af­ter new fig­ures were pub­lished show­ing Scottish pro­duc­tion went up 2.9% to 74.7mil­lion tonnes of oil equiv­a­lent in the fi­nan­cial year 2016-17.

Pro­duc­tion in Scot­land ac­counted for 82% of the UK to­tal, com­pared to 80% in 2015-16.

The sales value of oil and gas pro­duced in Scot­land climbed 15.2% to £17.5bil­lion, while cap­i­tal ex­pen­di­ture dropped to £8bil­lion from £10.1bil­lion.

Scottish En­ergy Min­is­ter Paul Wheel­house said the fig­ures demon­strated Scot­land’s oil and gas in­dus­try had a “bright fu­ture” and that con­fi­dence was “con­tin­u­ing to re­turn to the sec­tor af­ter a num­ber of chal­leng­ing years”. Asked whether he agreed with Mr Wheel­house’s pos­i­tive out­look, Prof Kemp said: “It de­pends what time pe­riod you have in mind and what you mean by bright fu­ture.”

Prof Kemp said out­put had risen in re­cent years thanks to a num­ber of new fields start­ing up, while op­er­a­tors lifted their pro­duc­tion ef­fi­ciency to 73% in 2016, up 2% on the pre­vi­ous year.

Dur­ing the cur­rent fi­nan­cial year, first oil has been achieved on ma­jor projects in­clud­ing BP’s Quad 204 de­vel­op­ment west of Shet­land and EnQuest’s Kraken field.

BP’s Clair Ridge project is on course to pro­duce first oil next year, which should in­crease out­put fur­ther.

But Prof Kemp pre­dicted that pro­duc­tion would soon peak be­fore go­ing into re­verse.

“Our mod­el­ling sug­gests that pro­duc­tion could in­crease a bit more next year and the bulk of that would be in the Scottish sec­tor (of the North Sea),” he said.

“How­ever, af­ter that, it will start go­ing down again. There will be longterm de­cline.

“One of the rea­sons is that there are not so many new fields lined up to come on stream in fu­ture and they are not so big. Also, in­vest­ment in new field devel­op­ments is likely to con­tinue to fall.

“We had a big boom from 2009 to 2014 and we’ve got some of the fruits of that and there will be one fur­ther fruit next year. Clair Ridge will come on stream and it will be very big.

“But when we add ev­ery­thing to­gether, in a cou­ple of years, pro­duc­tion will ac­tu­ally start com­ing down again and in­vest­ment will also be de­clin­ing so it’s a mixed pic­ture at the mo­ment.”

Last week at Off­shore Europe, Oil and Gas UK’s mar­ket in­tel­li­gence man­ager, Adam Davey, warned that the North Sea “ur­gently” needed more cap­i­tal ex­pen­di­ture.

Mr Davey said there was a risk that sup­pli­ers would move away from the basin as not enough new projects were be­ing sanc­tioned.

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