Keen to keep Scotland, UK unveils boost to oil and gas sector

Sun Feb 23, 2014 7:01pm EST

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By Andrew Osborn

LONDON, Feb 24 (Reuters) - The British government said on Monday it would enact sweeping measures to make it easier to unlock hard-to-extract North Sea gas and billions of barrels of oil as it tries to persuade Scotland to remain part of the United Kingdom.

The announcement, timed to coincide with Prime Minister David Cameron's first full cabinet meeting in Scotland, had multiple aims: to boost the oil and gas industry, to shore up tax revenues, to cut dependence on energy imports, and to persuade Scots to stay in the UK.

Scots will vote on whether to end their 307-year-old union with England on Sept. 18 and the future of the small country's oil and gas industry has featured heavily in a campaign in which pro-independence nationalists are trailing.

The North Sea is thought to contain billions of barrels of hard-to-reach oil, but with many platforms and pipelines coming to the end of their working lives, time is running out to get at them.

The measures the government said it would adopt and fast-track were all recommended in a report drawn up by Ian Wood, former chairman of oil services company Wood Group, , on maximising recovery of oil and gas from Britain's North Sea.

The government said the changes could be worth up to 200 billion pounds ($333.74 billion)in the next two decades and allow the industry to recover 3-4 billion more barrels of oil than would otherwise have been produced.

Measures to be adopted include the creation of a new independent industry regulator and a decision to award production licences on the basis of recovering the maximum amount of oil from UK waters as a whole rather than just each individual licence block.

The government also pledged to cut red tape and better share infrastructure and geophysical information.

"BROAD SHOULDERS"

Cameron, who is due on Monday to hold his first full cabinet meeting in Scotland in Aberdeen, the heart of the UK oil industry, said Britain's unity enabled it to maximise the benefits of Scotland's North Sea oil and gas.

"I promise we will continue to use the UK's broad shoulders to invest in this vital industry so we can attract businesses, create jobs, develop new skills in our young people and ensure we can compete in the global race," he said in a statement.

Ed Davey, the energy minister, said the measures were designed to address what he called "unprecedented challenges", noting that tax revenues for 2012/13 were over 40 percent lower than the year before.

But he said Scotland, as part of the UK, was protected from such revenue falls and shielded from oil price volatility that he said could dramatically affect a small country's budget.

Despite the official government forecaster predicting lower revenues in the next three years, he said:

"Instead of needing to cut spending the Scottish Government will see its budget rise by more than 300 million pounds. Scotland benefits as part of the UK from being able to pool resources."

The oil and gas industry employed 450,000 people in the UK and should do so for years to come, he added.

Angus Robertson, a pro-independence lawmaker from the Scottish National Party, said his expectations ahead of the government's Scottish cabinet meeting were low.

"Think that after first UK Cabinet visit to north of Scotland since the 1920s there'll be a thank you for the oil and whisky tax billions?" he asked on Twitter.

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