Ministers from both the UK and Scottish governments are in north-east Scotland to set out plans for the future of the North Sea oil and gas industry.
Both governments will be holding cabinet meetings in the Aberdeen area to coincide with the publication of Sir Ian Wood’s review of the industry.
Prime Minister David Cameron is expected to accept the recommendations in Sir Ian’s report.
These include a new regulator to help maximise economic gains.
Scotland’s first minister Alex Salmond has already praised Sir Ian’s work, and Scottish ministers claim Mr Cameron should be apologising for the UK government “squandering” the riches of the North Sea over the past 40 years.
The future of the the North Sea oil and gas industry has been a major battleground in the campaign ahead of the referendum on Scottish independence in September.
The first North Sea oil came ashore in June 1975 and production is thought to have peaked in 1999, with more than 40 billion barrels extracted so far.
Although the oil and gas is now tougher to extract, the reserves are substantial – between 15 billion and 24 billion barrels of oil equivalent – meaning possibly another 30 to 40 years of production. And there could be new discoveries such as the fields west of Shetland.
However, concerns over falling production led the UK government to ask retired oil tycoon Sir Ian Wood to carry out a review of the offshore industry.
In an interim report in November, Sir Ian recommended a new arms-length regulator to oversee the industry.
He said the UK government’s Department of Energy and Climate Change (DECC) was “significantly under resourced and far too thinly spread” to effectively manage the increasingly complex business and operating environment.
Sir Ian said a 38% fall in production over the past three years had cost the Treasury £6bn in lost taxes and declining exploration threatened more missed opportunities.
It is claimed that Sir Ian’s recommendations could result in the equivalent of three to four billion more barrels of oil being recovered from the North Sea over the next 20 years, bringing in more than £200bn to the UK economy.
The UK government is expected to accept and fast-track 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.
Prime Minister Cameron has insisted that the “broad shoulders” of the UK government are best able to support investment in the industry.
He 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.
Scotland’s First Minister Alex Salmond, who will hold a separate meeting of his cabinet in nearby Portlethen, welcomed the prospect of a new regulator for the oil industry, saying the Westminster government’s record over the previous 40 years had been “abysmal”.
He called for the regulator to be based in Aberdeen, “Europe’s oil and gas capital”.
Meanwhile Scottish Green MSP Patrick Harvie said that claims of the UK government to be the “greenest ever” and the Scottish administration’s talk of “world-leading Scottish climate targets” would count for little in Aberdeen.
“Both the prime minister and the first minister are falling over each other to court the fossil fuel industry,” he said.
“It’s a pretty sickening sight.”
