PM to lay out oil production plans

David Cameron will today set out measures to boost oil production as the North Sea becomes the latest battleground in the Scottish independence campaign.

The Prime Minister, who will chair a meeting of the Cabinet in Aberdeen, has accepted the main recommendations in an expert review of the industry that could result in an extra four billion barrels of oil being recovered.

Mr Cameron insisted that the "broad shoulders" of the UK Government were able to support investment in the industry, as Downing Street warned that volatility in the oil market could have a dramatic effect on Scottish finances in the event of independence, with the smaller economy less able to absorb the impact of a fall in revenue.

First Minister Alex Salmond will hold a separate meeting of his Cabinet in nearby Portlethen and has promised to base part of the Scottish energy ministry in Aberdeen if there is a Yes vote for independence on September 18.

The two meetings have been timed to coincide with the publication of retired oil tycoon Sir Ian Wood's review of the industry, which recommends measures that could result in three to four billion more barrels being recovered, bringing in over £200 billion to the UK economy.

The measures in the review, which the UK Government will accept and fast-track for implementation, include the creation of a new independent regulator to supervise licensing and to ensure maximum collaboration between firms to explore and develop oil and gas fields.

There will also be a joint commitment between Government and the industry to ensure licences are awarded on the basis of recovering the maximum amount of petroleum from UK waters.

The report also recommends more sharing of infrastructure and geophysical information and a reduction in red tape for the industry.

Mr Cameron said: "For many years the UK has supported the North Sea oil and gas industry and we have worked together to make this an economic success the whole country can be proud of.

"I promise we will continue to use the UK's broad shoulders to invest in this vital industry so we can attract businesses, create jobs, develop new skills in our young people and ensure we can compete in the global race."

The UK Government claims that the country's large consumer and tax base will allow it to support the industry and help exploit the increasingly hard-to-reach oil and gas reserves.

The Scottish Government has already put forward plans to establish two separate oil funds if there is a Yes vote in September's referendum - one short-term fund to help deal with fluctuations in oil and gas revenues, alongside a long-term savings fund.

But Downing Street highlighted the difficulties Scotland would face in coping with volatility in oil prices due to the greater dependence on the industry it would have after independence.

Tax revenues from oil and gas in 2012-13 were £4.7 billion lower than the year before - a drop of more than 40% and a sum that equates to more than a third of Scotland's health budget or two-thirds of its spending on education.

Downing Street said t he UK was "well placed" to absorb price shocks that would "dramatically affect a small country's budget".

Mr Salmond said a new energy department for Scotland would be split between Glasgow and Aberdeen, while the North Sea oil capital would also host the regulator recommended by the Wood Review.

He said: "Independence presents an unrivalled opportunity to boost our energy wealth, support employment and grow our economy.

"A new energy department for Scotland co-headquartered between Aberdeen and Glasgow will capitalise on existing knowledge and expertise; building an effective, efficient and world-leading energy industry.

"These locations connect our two main centres of energy expertise, bringing our academic institutions and industry together.

"Aberdeen is Europe's oil and gas capital and its importance in the global market is undisputed, making it the natural home for a new energy department. It is also a vital and growing centre for the development of marine energy.

"At the same time, Glasgow is fast becoming the most influential low carbon engineering centre in the UK; its proximity to electricity and gas supply industries and the renewables industry is crucial to ensuring we have the right expertise in the right place, especially in relation to the development of offshore wind in Scotland.

"With independence we would have new powers in areas such as energy regulation and the ability to target and apply financial incentives. With a new Scottish based energy department and control over key economic levers, the potential to boost the energy industry and bring benefits to consumers and the wider economy would be enormous.

"I wholeheartedly agree with Sir Ian Wood's recommendation that a new regulator for the North Sea should be created. That regulator should be in Aberdeen.

"This would create the right conditions for a close, constructive and effective relationship to be forged between central government in Scotland, the North Sea regulator, and the industry.

"This model of government mirrors that which has been so successful in Norway, and represents an opportunity to begin to realise the full potential of the oil and gas industry in Scotland."

Patrick Harvie, Green MSP said: "Talk of the 'greenest ever government' and 'world leading Scottish climate targets' will count for little in Aberdeen. Both the Prime Minister and the First Minister are falling over each other to court the fossil fuel industry. It's a pretty sickening sight.

"I want to hear less about a clash of cabinets and more about a clash of ideas on what we choose to do with our remaining fossil fuel reserves. It's one of the most important decisions for Scotland's future and our leadership in the world.

"Oil and gas can only offer a real economic value if we use them sparingly, within ecological limits. Many in the SNP still recall the slogan "it's Scotland's oil". Well maybe it was, but we've burned too much of it already. The future must be clean, green and renewable, or it'll be no future at all.

"Greens are campaigning for a Yes vote because we see it as a route to the political change our society needs, not an opportunity to repeat all the same mistakes from an Energy Department in Glasgow or Aberdeen instead of London."

SNP Westminster leader Angus Robertson MP said: "There is a big contrast between the UK Government jetting into Aberdeen to lay down the law to the people of Scotland and heading off again - and the Scottish Government engaging with local people in a question and answer session to make the case for Yes."

He added: "And it would be even better if David Cameron had the courage to debate Alex Salmond face-to-face - as two-thirds of people in Scotland want. The next time the UK Government comes to Scotland, it should be for the Prime Minister to debate Alex Salmond - we'll even pay his easyJet fare!"

WWF Scotland director Lang Banks said: "While it's true that the oil and gas industry is and will continue to be a major contributor to our economy for some time, we should really be setting out a plan to sensibly transition away from dirty fossil fuels.

"If we are to address the problem of climate change then we cannot ignore the emissions that come from burning North Sea oil."

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