Top academic contradicts rosy picture painted by government
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.