2. To ask the Scottish Government whether it will provide an update on the productivity of the Laggan and Tormore fields west of Shetland. (S4T-01318)

The Scottish Government welcomes the announcement from Total that production has started from the west of Shetland Laggan and Tormore fields. The gas from those fields will be sent to the newly constructed Shetland gas plant, where it will be treated and processed before being exported to the mainland. It is the success of such large investment projects that will see the Shetland Islands remain a key hub for oil and gas production in the North Sea. Production from the North Sea as a whole is now increasing and cost efficiencies are being achieved. The Laggan and Tormore fields, which have a lifespan of 20 years, will provide a further boost to North Sea production.

Given reports that the gas produced from the Laggan and Tormore fields is expected to provide around 8 per cent of the United Kingdom’s gas needs, equivalent to that of about 2 million homes, does the cabinet secretary agree that this is a significant boost to North Sea production; that with 22 billion barrels of recoverable oil remaining in the North Sea, the oil and gas sector still has a viable and, indeed, bright future; and that the UK Government needs to act now in the industry’s time of need to provide an appropriate fiscal regime that helps to maximise economic return?

It is very clear from the experience of Total in relation to the Laggan and Tormore fields that the existence of a tax allowance for deep-water gas developments has undoubtedly assisted in securing that advancement, which rather makes the point that Mr MacKenzie raised in his supplementary question. I very much welcome the steps that were taken in the budget last spring by the Chancellor of the Exchequer to improve the fiscal regime in the North Sea; it certainly needed to be improved and it was improved. We would encourage further developments as part of the preparation for the budget later this year, which would enable us to address some of the further challenges that are required to be addressed to improve the fiscal position of North Sea oil and gas companies.

I agree with the Deputy First Minister’s broad analysis of Total’s reason for its investment and, indeed, its commitment to staying the course on the project, given gas prices. However, with regard to his representations to the chancellor prior to the budget, does the Deputy First Minister accept that there is going to be a deal of decommissioning in the east Shetland basin in particular and that it is very important that the tax relief that is provided for decommissioning goes to ensure that that work stays in the UK? We would rather have it in Scotland, but it should certainly stay in the UK and not go to Norway, as some already has.

I entirely agree with Mr Scott’s point. Of course, he will be familiar with the assistance that the Government has given for the development of decommissioning capability in the Shetland Islands, which I think has been an important contribution. I also have to say that the opportunities have been strongly embraced by the Lerwick Port Authority and the Shetland community.

Mr Scott correctly highlights a significant economic opportunity. We will ensure that our representations adequately make the case on the points that he raises. It is inevitable that there will be a focus on decommissioning and we have to make sure that as much of that activity as possible happens as close to home as possible. Although it is accepted that there will be an increased level of decommissioning activity, we have to ensure that that activity is not premature and that we take other steps to ensure that there is a viable fiscal regime in place to support the development of companies and the propositions that they take forward so that we can maximise the capability to extract sustainably the resources that exist in the North Sea oil and gas sector.