NORTH Sea oil and gas production is likely to receive a boost after Alistair Darling announced new measures to support investment in smaller, less profitable fields.
The Chancellor unveiled a package of incentives which, he claimed, would unlock two billion barrels from remaining reserves.
There was little detail in the Budget statement itself, but the measures are expected to do two things: boost tax revenues
for the Treasury and help the UK cut expensive imports of oil, which harm the country's balance of payments.
The industry is crucial in the Scottish economy – there are more than 160 oil exploration and production companies working in the North Sea, and many have their UK headquarters and employ substantial numbers of people in Aberdeen.
The announcement was given a cautious welcome by industry experts yesterday, who said they wanted to see the detail before deciding exactly how beneficial the moves will be.
Malcolm Webb, the chief executive of industry body Oil & Gas UK, said: "The measures announced today are a positive step for those companies trying to develop small and challenging fields in this mature, high cost province.
"However, we now need to direct our attention to sustaining and promoting investment in and around many of our older fields to prolong their lives."
Mr Webb also claimed that exploration activity needed to be stimulated, with "frontier areas" west of Shetland opened up.
"This Budget is a step in the right direction," he added.
But Martin Findlay, tax partner for KPMG in Aberdeen, said: "The North Sea needed the Chancellor to ease the increasing pressure it faces from an unattractive tax environment, and while his announcement on the development of smaller fields will be good news for some, most will argue that it hasn't gone far enough.
"I'm afraid to say Scotland's oil and gas industry is yet again left wanting.
"Investment in the North Sea has fallen dramatically, and with the oil price predicted to remain low for the foreseeable future, many in the sector will be worrying about their immediate future."
Mr Darling also announced new measures to help the development of renewable energy, including the promotion of wind farms in the North Sea.
With the credit crunch putting the squeeze on attempts to further develop the UK's offshore wind capacity, the Chancellor said an extra £525 million over the next two years would be raised through the government's Renewables Obligation, introduced in 2002, which funds clean energy schemes through an industry levy.
And, in an attempt to tackle the emissions from coal and gas-fired power plants, Mr Darling said a new funding mechanism would finance between two and four projects which tested the use of technology which captures and stores carbon underground.
Scotland has long been seen as a potentially prime site for the commercial development of carbon capture in the UK.
Duncan McLaren, chief executive of Friends of the Earth Scotland, said: "The inclusion of support for more carbon capture and storage demonstration projects is a tacit acknowledgement of the climate-trashing nature of new unabated coal-fired power stations like those proposed at Kingsnorth or Hunterston.
"But unless this money drives rapid full-scale adoption of carbon capture and storage, such new coal plants will remain a disaster."
