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Scots base for oil, gas watchdog

UK ministers are set to formally support a proposal for a new Scottish-based regulator of the oil and gas sector to oversee greater collaboration between investors in the North Sea that could provide the UK economy with a "huge prize" - £200 billion over the next 20 years.

Oil could be worth £200billion over next 20 years.

It is expected the full report of Sir Ian Wood, the retired oil tycoon, into the future of Britain's oil and gas industry will be published to coincide with the first meeting, next Monday morning, of the UK Cabinet in Scotland.

While ministers will visit different sites in Scotland to fit in with their various portfolios, David Cameron will chair a meeting of the full Cabinet in Aberdeen, the nation's oil capital. Other announcements are expected.

Speculation is mounting that Monday's Cabinet gathering could be picketed by pro-independence campaigners, angry that the Prime Minister has failed to accept a challenge from Alex Salmond to a live television head-to-head debate. The First Minister will be chairing his Cabinet seven miles down the road at the same time on Monday.

Asked about Sir Ian's report, UK Energy Secretary Ed Davey said: "When I asked Sir Ian to do this report and commissioned him, there was a very good reason: that was the output from the North Sea in oil and gas was falling significantly but, worse, the exploration rates were falling and, worse still, the productive efficiency from the existing oil and gas fields was also falling. So there is not a good picture."

Mr Davey pointed out how there had just been the most successful licensing round to date, which, coupled with some very positive movement on tax allowances, had resulted in a "major investment boom" in the North Sea.

"But in our analysis that was not solving the problem. So we knew we had to do something strategic. We knew it might involve changing the regulatory framework and I wanted someone who was independent from one of the oil majors, highly respected by everybody to come and do this work.

"Sir Ian has been talking to everyone in the industry and looked at other jurisdictions to see how they do it; his interim report is very detailed and persuasive. He says the potential benefit is £200bn, which is a huge prize.

"It might change the debate a little on oil and gas; there has been a lot of attention on shale gas. I am not saying that that is not important, but there is an earlier and bigger prize that is more certain and that is the prize the Wood review offers the United Kingdom."

Asked if he would make a firm announcement on Monday on the way forward, Mr Davey said no date had been fixed but added: "I hope it's not too far away."

Scottish Energy Minister Fergus Ewing has already made clear the Scottish Government is "fully behind Sir Ian Wood's report".

The retired oil tycoon claimed the present regulator, based within Mr Davey's department, was now "significantly under-resourced and far too thinly spread" to manage the increasingly complex business and operating environment of the North Sea effectively.

He pointed to the rapid fall in production efficiency as a sign of poor stewardship by the industry, which the current regulator had not been able to confront.

Sir Ian wants a "step change" in the industry by creating an arm's length regulatory body to achieve greater co-ordination and collaboration. He believes "full and rapid implementation" of his recommendations would deliver the equivalent of at least three or four billion more barrels of oil than would otherwise be recovered over the next 20 years; in monetary terms this amounts to £200bn.

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