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Energy Voice | OBR lowers forecast for UK oil and gas revenues

A new report has lowered forecasts for UK oil and gas revenues by an average of £600million per year to 2024.

Following the Chancellor’s Spring Statement, the Office for Budget Responsibility (OBR) has published its fiscal and economic outlook, making revisions to an earlier report produced in October after the Budget.

It has lowered its forecast for oil and gas revenues following a drop in the oil price and “unexpectedly weak” spending in 2018.

Revenues are expected to be £1.1billion next year, a drop of £800m compared to the earlier forecast made in October.

Each year to 2024 has seen its revenue expectations reduced.

The OBR bases its oil and gas forecasts on data collected by the Oil and Gas Authority (OGA), the industry regulator.

Oil prices rose in the first three quarters of 2018, then fell sharply to average $68 a barrel in the fourth quarter, which was 20% lower than the OBR assumed in October.

Office for Budget Responsibility

The OBR said unexpectedly weak spending, based on OGA data, also caused the downgrade in revenue forecasts.

Earlier this week the OGA said capital expenditure in the North Sea oil and gas industry had a “significant” decrease in 2018, dropping for the fourth consecutive year.

Spending was £5.01billion, down from £5.7bn in 2017.

The “downwards trend” is expected to halt in 2019 with a 4% increase projected, before resuming its descent in 2020 and beyond.

In his Spring Statement today, the Philip Hammond also announced measures to decarbonise gas supplies with an increased portion of green gas in the grid.

It will also take measures to halt the use of fossil fuel heating systems in new-build homes from 2025.

Renewables partner at law firm Ashurst, Antony Skinner said: “While the Government has been discussing policies around decarbonising energy for some time, the main focus has been on decarbonising electricity, so it is therefore very encouraging that the Government is intending to develop concrete proposals to support investment in green gas.”

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