Confidence is building in the North Sea oil and gas industry, a new report has said – despite concerns a no-deal Brexit could double trade costs for the sector.
The latest quarterly report by Scottish Government chief economist Dr. Gary Gillespie said that looking ahead “conditions for growth in the oil and gas sector and its supply chain are more favourable now than they have been in recent times”. But he added:
“Brexit remains the key risk to Scotland’s economy with on-going uncertainty risking business investment and the depreciation in Sterling already feeding through to higher inflation.
The outlook for the Scottish economy is similar to that presented in June with independent forecasts indicating growth of around 1% in 2017 and 2018 – half of Scotland’s long run trend rate of 2%.
Oil and gas production in Scotland increased by 2.9% in 2016-17, the latest State of the Economy report said, with the latest quarterly sales revenues approaching pre-2014 levels.
Efficiency improvements in the sector means production costs have halved from $30-barrel to $15-barrel – with these expected to fall further still.
The cost savings made here have outpaced the global average and had ”contributed to positive revenue growth in 2016-17″, the report said.
In addition, Brent crude prices have risen in recent weeks and now stand at around $60-barrel – the highest level for two years
The report pointed to an estimate by industry body Oil and Gas UK that reverting to World Trade Organisation rules – which would have to be applied of no deal is reached between the European Union and UK – would more than double the cost of trade at 2016 levels to £1.2 billion a year in direct tariff payments.
The Scottish Government’s Draft Budget on 14 December 2017 will be accompanied by the first forecasts prepared by the Scottish Fiscal Commission, providing the official assessment of the outlook for key macroeconomic and fiscal indicators for Scotland.
See also: 11 Apr 2017
Brexit will cost N. Sea oil and gas supply chain an extra £200m a year to trade outside EU
13 Nov 2017
Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy