In May 2012 the UK government announced that 224 applications were handed out in the latest licensing round for oil and gas, the highest since licensing began in 1964 and 37 more than the previous high. In January 2012, Wood MacKenzie published a report showing that in 2011 capital investment in the UK oil industry was £7.5 billion, the highest ever, with these high levels of investment continuing for the next few years. What this tells us, is that there are many more years of oil & gas production - and revenues - left in Scottish waters.
More than half of the value of the North Sea's oil and gas reserves have yet to be extracted – that’s 24 billion barrels with a wholesale value of well over £1 trillion.
Over the 30 years from 2010/11 to 2040/41, based on the UK's independent Office for Budget Responsibility (OBR) forecast, cumulative North Sea revenues would be around £108 billion (2010/11 prices). This represents approximately £3.6 billion a year.
In the most recent Government Expenditure and Revenue accounts, 90.5% of oil & gas revenues came from Scottish waters. At a 90% level, Scottish revenues over the next thirty years would be approximately £97 billion or £3.2 billion a year. This would be equivalent to over £1,300 on average a year per Scottish household or approximately £40,000 for every Scottish household between now and 2040/41.
However, these figures do not take into account the recent increase in investment, which promises to increase anticipated production levels in Scottish waters. As Professor Alex Kemp, from Aberdeen University, said in the Press & Journal on 13th July 2012:
"The North Sea is doing very well at the moment, there is a lot of new investment," he said. "I am not sure the OBR has factored in what we have found in our modelling - the fruits of this investment. In the short term it means tax revenues will be reduced because they have got more allowances which reduces the amount they have to pay. But in the longer term we are finding that the effect of all the investment now will be that the tax revenues in the long term will be rather higher than might otherwise have been anticipated."
For many years opponents of independence have been saying that oil & gas are running out. Indeed, in the 1980's they were telling us that they would run out 12 years ago! Of course, revenues from oil & gas will slowly diminish, however, just as we receive less from one offshore energy bonanza, we will start to enjoy revenues and jobs from our second energy windfall - Scotland's vast offshore wind and tidal energy. You can find out more about Scotland's offshore renewable potential here.