What about oil in an independent Scotland?

Question: 

What about oil in an independent Scotland?

Answer: 

Scotland will continue to produce oil and gas into the second half of this century. As the UK Government’s own Oil and Gas Industrial Strategy (published in March 2013) confirms - “According to Oil & Gas UK’s Activity Survey, the reality is that the UK will continue to supply oil and gas well beyond 2055” (p24).

There will be opportunities beyond this in terms of supply of our skills internationally, and in taking forward a programme for decommissioning.  At the same time, new opportunities will be opening up, particularly in industries such as renewable energy.  

Using the “median line” principle which is most often applied in international law, Scotland would get about 90% of the oil revenues, according to Professor Alex Kemp of Aberdeen University.  (For further details, please see this article.)   More details of the share of Scottish tax receipts coming from North Sea oil and gas since 2000 can be found here - in chart 3.6.

From time to time, the No campaign tries to suggest that Scotland is 'too dependent' on oil.  But this is simply not true.  Scotland has generated more tax per person than the rest of the UK in each and every one of the last 30 years and that includes a period when the oil price was as low as $10 a barrel (it's currently well over $100) and revenues just a tenth of what they have been in recent years.

In fact, the share of tax receipts in Scotland coming from oil and gas revenues is generally around 10 to 15%, while the figure for Norway is around 25% to 30%. This shows we are not too reliant on oil and gas. It is worth remembering that Norway discovered oil and gas at the same time as Scotland, and has been able to use this wealth to become one of the very wealthiest countries on earth in terms of GDP per head of population and also now sits at the very top of world wellbeing and equality league tables.

Another important comparison with Norway relates to the establishment of a “sovereign wealth fund”.  Unlike the UK, since 1996 the Norwegian government has been investing proceeds from its oil revenues into an investment fund so that future generations can benefit too. That fund is now worth over £500 billion (£100,000 per person).  Analysis by the Fiscal Commission concluded that, had Scotland used its oil wealth to establish an oil fund in 1980, Scotland could have eliminated its share of UK debt by 1982/83. and by 2011/12 Scotland could have accumulated a fund worth between £82 billion and £116 billion.

The Westminster governmnet chose not to follow the Norwegian example.  Instead, Margaret Thatcher's Westminster government used the North Sea revenue to fund tax cuts for the rich.  

An independent Scotland could still choose to invest in a similar "rainy day fund", building a secure legacy for the future.  

Remember there are up 24 billion barrels of oil still to be extracted from the North Sea with a wholesale value of up to £1.5 trillion. That’s more than ten times our likely share of national debt.  The No campaign recently seized on suggestions by oil businessman Sir Ian Wood that there might be 16.5 billion barrels left.  And yet the most striking feature of Sir Ians comments is that they are 60% higher than the very conservative figures generally used by the UK government.  

Furthermore, they are also much lower than Sir Ian's previous forecasts, forecasts from the industry itself, and forecasts from two of Scotland's most respected oil economists - Professor Sir Donald MacKay and Professor Alex Kemp - as the following table shows.

 

And these figures do not take into account the possibility of additional finds in fields to the west of Scotland.  A report published on 3rd September 2014 by oilandgaspeople.com and industry experts suggests Scotland could be sitting on twice the oil and gas reserves currently predicted.  

Scotland is a wealthy country, and fortunate to have these resources.  With Yes we will have powers to steward them properly for the benefit of the people who live here, whereas Westminster has wasted them.  

Topics: 
Energy, Public finances