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 paper by Scottish Government chief economist 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".
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, going from 30 US dollars a barrel to 15 US dollars, 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 US dollars a barrel - the highest level since spring 2015.
The report added however that "significant challenges remain and Brexit is a key issue for the sector".
It 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.
Looking at the Scottish economy overall, the report said GDP growth in the first six months of 2017 had been "broadly in line with the UK as a whole".
Scotland's services sector was the main source of this but the report said the production sector had grown for the first time since the start of 2015, partly because the low value of sterling had boosted exports.
Economy Secretary Keith Brown said: "It is encouraging to see further evidence that the foundations of Scotland's economy remain strong, with positive forecasts on growth.
"However, growth is slower than we would like to see and the UK Government's stance on Brexit continues to present a huge threat to jobs and prosperity in Scotland.
"We will continue to do all we can to support growth in our economy."
ends
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