AT a crucial time for the North Sea oil and gas industry hopes that firms may invest in the area again are being threatened by the Scottish Government.

After facing incredibly tough conditions amid the pandemic those oil and gas firms that have survived can look forward with renewed confidence amid the recovery fuelled by the rollout of vaccines.

However, comments by Nicola Sturgeon are creating uncertainty even though oil and gas prices have risen to levels that should allow firms to start to recover some of the losses sustained over the last 18 months.

Sector watchers at Bank of America Merrill Lynch this week declared: “ We continue to project that oil prices will remain range-bound in 2H21 and maintain our average Brent crude oil forecast of $70 per barrel for this period … although we now target Brent to be at $75/bbl by year end as we see growing upside risks.”

Brent crude fell to an 18-year low of less than $20/bbl in April last year, when prices turned negative briefly in the US as storage facilities filled up.

Yet days before the US bank released its bullish forecasts experts based in Scotland sounded a warning about the outlook for investment in the North Sea.

READ MORE: Warning on gas supplies outlook amid North Sea project uncertainty 

“The recent call of the Scottish First Minister on the UK government to reassess licences already issued for future oil and gas developments is already creating uncertainty for greenfield projects,” said Wood Mackenzie.

The remark refers to the controversy about the proposed Cambo oil field development West of Shetland, which environmental campaigners are determined to block.

The SNP based its 2014 campaign for Scotland to be separated from the rest of the UK on the claim that the North Sea industry would guarantee a prosperous future for the country, only to see crude prices plunge as supplies ran ahead of demand.

Ms Sturgeon is anxious to keep the Scottish Green party onside without alienating the SNP’s supporters in the North East of Scotland. After calling for the UK Government to reassess the original Cambo licence, she has gone weeks without answering the key question of whether she thinks the development of the field should now be allowed to go ahead.

The North Sea regulator, the Oil and Gas Authority, decides whether developments can go ahead. However, the Scottish Government can put obstacles in the way of projects. Through her stance on Cambo, Ms Sturgeon has clearly signalled that an independent Scotland under her leadership would be unlikely to allow developments to go ahead.

But the scale of the risk highlighted by Edinburgh-based Wood Mackenzie has been underlined in recent days by North Sea firms that have made clear they are ready to invest in new developments if given the right encouragement.

READ MORE: Oil and gas exploration star buys into North Sea prospects

A relative minnow in the industry, Deltic Energy, turned heads last month when it announced that one of the Scottish industry’s biggest names had bought into its exploration acreage.

Cairn Energy acquired stakes in five licences off England covering an area in which Deltic decided there was potential that bigger fish had overlooked. Cairn made its name by making bumper finds in India and Senegal, in areas in which there had been relatively little drilling. It has a market capitalisation of around £900m, compared with Deltic’s £32m.

Deltic Energy chief executive, Graham Swindells, said on Tuesday that the partnership formed with Cairn is committed to immediate activity. He noted the firms have already started shooting new 3D seismic survey over one of the licences concerned.

Cairn made its move two years after supermajor Shell bought into other North Sea licences held by Deltic.

Aim market-listed Deltic yesterday held out the prospect that the support provided by Cairn and Shell would allow it to accelerate the development of a conveyor belt of UK gas assets

Asked recently why the company decided to do the deal with Deltic despite calls for North Sea production to be curbed, Cairn chief executive Simon Thomson made clear that he believed gas developments could make commercial and environmental sense.

READ MORE: Cairn agrees compromise to end $1bn Indian tax saga

“I think as part of an overall solution there’s still very much a role for the North Sea,” he told reporters.

Mr Thomson said production from the North Sea could help ensure the security of supplies for the UK and could also provide support on an “industrial scale” for the required energy transition.

For example, Mr Thomson noted that Deltic is working on prospects that could provide gas for use in the production of hydrogen at Bacton, where carbon capture and storage facilities are planned.

Another small player working on gas projects in the area, IOG, has also noted the potential to use output from North Sea fields as feedstock for hydrogen production operations that would be linked to CCS facilities. IOG is working with a firm owned by famed US billionaire Warren Buffett, which bought into its acreage.

Shell bosses have also underlined the value of gas as a transition fuel, which can be used to reduce reliance on coal.

READ MORE: North Sea cash engine motoring for Shell as giant cuts Aberdeen jobs

On a call with journalists last month, chief executive Ben van Beurden hammered home the point that unless demand for gas falls cutting UK production would only increase the country’s reliance on imports.

He said: “To just import oil and gas, which would be the alternative, from around the world, would obviously not serve the climate at all.”

Developments in European gas markets continue to raise questions about the wisdom of limiting production of gas when demand is booming and is expected to remain strong for years.

Gas prices have risen to record levels in a development which has caused difficulties for consumers and corporations alike.

The UK energy regulator approved an increase in the cap applied to the bills paid by around 15 million people on variable tariffs, in response to the increase in wholesale gas prices. The change, which takes effect from next month, will cost people up to £153 per year. Experts reckon the cap could be increased again within months.

In Spain the government is so concerned about rises in gas prices that it plans to cut the taxes paid by consumers by €1.4 billion (£1.2bn). It also raised the prospect of clawing back what it sees as excess profits made by firms that have benefited from rising electricity prices.

Closer to home, the increase in wholesale prices has taken a toll on some of the independent energy firms that the energy regulator, Ofgem, hopes will provide competition to the giants that dominate the retail market.

READ MORE: ScottishPower grows profits as pandemic impact eases

On Tuesday Ofgem said Edinburgh-based People’s Energy had announced it was ceasing to trade. The company had around 350,000 domestic customers and around 1,000 non-domestic customers.

People’s Energy was launched in 2017 with the ambition to have over one million customers, claiming that it would put people before profit.

Just a year ago the company said it planned to create 100 jobs at the former Selkirk office of SSE in the Borders. Ovo decided to close that office after it bought SSE’s retail business last year.

On its website People’s Energy said: “We are truly sad that we weren’t able to make this community focused approach to energy supply work. ”