This report is a contribution to the Strategic Environmental Assessment (SEA4) conducted by the Department of Trade and Industry (now Department of Energy and Climate Change). The SEA4 area includes the most northerly part of the UK continental shelf, north of the Shetland Islands between the international boundaries with Norway and the Faroe Islands, and the area to the west of Shetland and the Orkney Islands. Starting with scenarios of possible exploration and development activity in the area provided by the Department of Trade and Industry, this study provides forecasts of oil and gas production, expenditure, employment and tax revenues. The impacts of future oil and gas developments in the SEA4 area on the local economies of Shetland and Orkney will be small in comparison to what has happened in the past. The main impact will be to postpone or to slow down the decline in UK oil production. Nevertheless, production from fields in the area could make significant contributions to overall UKCS production, employment and tax revenues, as well as extending the lives of facilities such as the Sullom Voe and Flotta terminals. It could help to retain employment and population in the area.