Nicola Sturgeon pledged to discuss extra support for the North Sea oil industry but failed to outline specific measures when asked about the impact of the plummeting oil price.
The first minister said she was looking at what action to take and would be raising the issue with the UK Government as well as the industry itself following the collapse of the market caused by the coronavirus pandemic.
After US oil prices fell to below zero for the first time on record, the Scottish Government’s chief economist, Gary Gillespie, said the situation was “volatile” but “with support” the Scottish oil industry would get through the crisis.
But when asked at her daily coronavirus briefing to detail support the Scottish Government would be offering, Ms Sturgeon confined herself to saying she was “considering” what action to take and would be raising the issue with the Westminster Government.
The plight of the oil industry was raised at the briefing as a report by Mr Gillespie predicted a dire outlook for the Scottish economy with growth forecast to fall by as much of a third as a result of Covid-19.
The chief economist’s document warned of an “unprecedented” fall of 33% in GDP and rising unemployment.
I absolutely understand why the oil and gas sector is the source of many of these questions today given what we are seeing around the oil price.”
Nicola Sturgeon
When asked about help for Scotland’s offshore sector, Ms Sturgeon pointed out that most of the economic levers – such as taxation powers – that can be used to help the oil and gas industry were held at Westminster.
“These are discussions we will be having,” the first minister said. “I absolutely understand why the oil and gas sector is the source of many of these questions today given what we are seeing around the oil price.”
Ms Sturgeon said talks were being held with various sectors, including oil and gas, to “make sure we are using all of the resources and levers we have at our disposal”.
She pointed out that the Scottish Government had offered support during the last oil downturn and said possible measures would be part of discussions with Westminster.
In the past the Scottish Government has set up a decommissioning fund to help the oil industry.
Oil and Gas UK has described the descent of the oil price as a “body blow” to the sector and called on “governments” to help.
West Texas Intermediate (WTI) plunged to below zero this week due to the collapse in demand caused by the Covid-19 lockdown and concerns over dwindling storage space.
The Brent crude price, which relates to the North Sea, has also fallen by almost 15% to about $22 per barrel. At the start of the year the price was above $60 per barrel. The fall has been triggered by a combination of high levels of oil production and a drop off in demand due to the Covid-19 lockdown.
We have seen a massive fall in demand, supply reducing to some extent and real issues around storage.”
Gary Gillespie, Scotland’s chief economist
Mr Gillespie warned that the oil markets would remain volatile until a way could be seen through the coronavirus pandemic. But he suggested support was needed to negotiate the crisis.
“What I would say about the sector in general is the oil and gas sector is resilient in Scotland and has been through these types of cycles before and the market will remain volatile until a path to recovery is clear,” Mr Gillespie said.
“We have seen a massive fall in demand, supply reducing to some extent and real issues around storage. Finally, the benchmark for the UK is the crude Brent oil and, again, that’s stabilising a little, but albeit at low levels.
“I think we have seen forward contracts for June around $20 per barrel, which is really challenging for the sector. But the sector in Scotland is more productive and more profitable and, with some support, can see through this.”
