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Business gas: North Sea revenue at a record low


Scottish Government tax earnings from North Sea oil and gas dropped 75% to a record low in 1Q15, according to the latest figures. What does this mean for you?

Much of the current pain is due to low oil prices, which “will continue to have a material bearing on economic conditions in Scotland”, in the words of the latest State of the Economy report. As doubts over the Chinese economy have contributed to global economic fears, oil prices (which are closely related to gas prices) have slipped to around $40 a barrel.

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For Scotland, low prices have both positive and negative impacts, as the report explains: “lower oil prices boost consumption as well as production in energy-intensive sectors, but squeeze investment and profitability in the oil and gas sector and the wider supply chain.”

Despite this attempt at a positive spin and the growing contribution of renewable energy, the importance of North Sea oil and gas to the Scottish economy (more pronounced if the country had voted to become independent) means the country will suffer in the short term unless commercial gas prices rebound.

A big part of the problem is the dwindling output of ageing North Sea oil and gas fields, squeezing earnings of business gas suppliers, just as expensive infrastructure reaches the end of its life.

Cost cutting, consolidation within the industry and a more collaborative approach championed by the new industry regulator, the Oil and Gas Authority (OGA), is helping. Indeed, a “particularly strong performance in the construction sector underpinned by infrastructure investment” is noted in the Government report.

That may already be bearing fruit: the report notes that the ONS Index of Production reports that UK oil and gas production in 2Q15 was up by 9% year-on-year: “Several factors were behind this, including production in some fields coming back online after closure for maintenance, and the high levels of North Sea investment in recent years resulting in new fields coming on-stream or ramping up production.”

Yet, as the Scottish Government themselves admit, “at this stage any specific impacts are difficult to quantify and will depend on this trend being maintained”.

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Business gas prices could be on a downward trend. But, with so much instability – including in important gas producing areas such as Russia and the Middle East – prices could quickly increase. Now is the time to lock in current low prices or at the very least see if a better deal is available.

This doesn’t have to be onerous: just 20 minutes is enough for us to quickly compare business gas suppliers and switch you to a new deal (with us taking care of the paperwork). Give us a call on 0330 0100 251 (or request a call back using our form).

Find out more about business gas at our dedicated page.

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