The Office for Budget Responsibility (OBR), the Treasury’s official economic forecaster, has reduced its estimate of how much tax revenue will flow from North Sea oil and gas production by 25% over the past year.
In its fiscal sustainability report, the OBR said the North Sea would produce £40 billion in revenues between 2019-20 and 2040-41, 25% less than the £52 billion project in last year’s forecast.
As noted by the Independent, the downward revision comes at an ‘awkward time’ for the Scottish National Party ahead of September’s independence referendum. First Minister Alex Salmond dismissed the forecast as ‘stuff and nonsense’, arguing that the OBR figures are based on a ‘very low estimate of future total production’, which resulted in them being more pessimistic than other estimates.
The SNP has been arguing that strong oil tax revenues would help an independent Scotland fund higher levels of public services spending relative to the UK. This announcement therefore comes as yet another blow to the SNP campaign, just over two months before the referendum on 18 September.
When asked about the potential impact of the OBR report on the Scottish independence debate, Salmond told BBC Scotland: “The OBR are suggesting 10 billion barrels of oil and gas remaining. Oil and Gas UK say up to 24 billion barrels. Sir Ian Wood, who did the report just last year, says up to 24 billion barrels. The Professor of Geology at Aberdeen University says it is more like over 30 billion barrels.
“Now, all of these people know infinitely more about the extent of the reserves remaining in the North Sea that the Office of Budget Responsibility in London does. I think they should start talking to the experts.”
Oil production forecasts for 2017-18 have been revised down on last year by 11% to 29.2 million tonnes and gas production by 8% to 12.7 billion therms. The OBR expects annual revenues between 2019-20 and 2040-41 to average 0.06% of GDP.
Edited from various sources by Katie Woodward
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