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SNP predict North Sea oil boom

North Sea oil revenue could be almost three times higher than the value predicted by the UK's independent fiscal watchdog, according to the Scottish Government.

The Office for Budget Responsibility (OBR) predicts oil tax revenue will drop from £6.7 billion this year to £4.1 billion by 2017/18.

But a best-case scenario, outlined in a Scottish Government analytical bulletin today, predicts it could be as high as £11.8 billion - enough to fund a third of the Scottish Government's current annual spend.

The scenario heaps a number of "assumptions" and alternative scenarios on top of the OBR forecast.

These include the assumptions that production will rise in line with industry forecasts and that prices will rise in line with Department of Energy and Climate Change (DECC) forecasts, rather than the OBR's forecasts.

The bulletin states: "Irrespective of the specific assumptions used, Scottish oil and gas production is expected to remain a significant source of tax revenue in future years.

"Based on the OBR's methodology, production in Scottish waters could generate approximately £31 billion in tax revenue over the six years to 2017-18.

"Taking into account recent trends in investment and prices, and the methodologies outlined above, suggests that the industry could instead generate between £41 and £57 billion in tax revenue over this period.

"Taking the average of these new scenarios suggests that oil and gas production in Scottish waters could generate approximately £48 billion in tax revenue between 2012-13 and 2017-18.

"This is not dissimilar to the tax revenue estimated to have been generated in Scottish waters over the previous six years."

The bulletin follows the release of an internal Scottish Government document, produced a year ago but leaked by the pro-UK Better Together campaign last week, which warned about the volatility of oil.

The leaked paper stated: "This high level of volatility creates considerable uncertainty in projecting forward Scotland's fiscal position.

"The OBR forecasts set out alongside the UK's March budget have not been seriously challenged by the industry or by independent commentators.

"Such volatility also means that outturn North Sea receipts can also be higher than forecast."

It cited 2009/10 UK Government forecasts which undervalued the actual tax take by around a quarter.

It suggests an independent Scotland could create an oil fund to manage this volatility but warns: "This would, on present assumptions about on-shore tax revenues, require some downward revision in current spending."

Commenting on today`s analytical bulletin, First Minister Alex Salmond said: "This bulletin shows the impact that increases in investment could have on production and revenues, and examines a range of scenarios.

"It demonstrates that when the expected increase in production to two million barrels a day is taken into account, there can be little doubt that Scotland is moving into a second oil boom.

"It is also clear that a wide range of credible forecasters expect oil prices to remain close to present levels, or rise further in future years - with some organisations, such as the OECD, suggesting that prices could exceed $150-a-barrel by 2020.

"Even with a cautious estimate of prices remaining at $113 a barrel being used, it's clear that Scottish oil and gas could generate more revenues than has previously been assumed."

A Better Together spokesman said: "What if they are wrong? That's the entire Scottish schools budget and then some."

Labour infrastructure spokesman Richard Baker said: "Last week we found out that in private John Swinney thinks that oil revenues will fall in a separate Scotland, bringing into question the affordability of even the state pension.

"So, on Alex Salmond's orders, he has spent the weekend cooking the books to come up with an extra £26 billion out of thin air.

"The SNP really do think that they can treat the people of Scotland like fools.

"They have been embarrassed by what they agreed in private, so they manufacture figures to spout in public five days later.

"But the difference between these figures in just a single year is the equivalent of everything we spend on our schools, colleges and universities.

"Alex Salmond is asking the people of Scotland to gamble the nation's future on figures which didn't exist until he had a bad week in the press last week.

"Far from there being an oil boom, one of Alex Salmond's key arguments has just gone bust."

Liberal Democrat leader Willie Rennie said: "The SNP's oil predictions for the first year of independence are double that of the independent OBR's, but what if the SNP are wrong?

"The equivalent of the entire education budget would be written off in the blink of an eye. This rushed report should not be used to underwrite the SNP's gamble."

Green co-convener Patrick Harvie said: "It's shameless hypocrisy to set climate change targets but then to extract and burn every last drop of oil from the North Sea.

"If we're at all serious about setting a sustainable course for Scotland we must set about a more rapid transition away from fossil fuels, and use the remaining revenue to fund the creation of a publicly-owned renewable energy company, as other European countries have."

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