How Would Scottish Independence Have Impacted the Oil Industry?
Over the past few months, one issue has been dominating the headlines in the UK press: the referendum on Scottish independence. Countless issues pertaining to the independence vote have been debated vociferously by parties on both sides, and the result currently looks too close to call. One of the major issues, which remains unresolved, is the future of North Sea oil and gas. Just who is the rightful owner of the oil reserves, and what impact will the result of the independence referendum have on the global oil industry?
40 Years of Oil Production
Figures have revealed that there are still approximately 24 billion barrels of oil still to be extracted from the North Sea, enough to ensure active production for possibly the next 40 years. Scotland is said to control approximately 90% of this oil, meaning that a vote for independence could potentially see the Scottish nation shoot to the top of the global league table for oil and gas production. While this may at first seem a huge positive for Scottish independence, supporters of the No campaign have argued that an over-reliance on oil revenue could leave Scotland desperately exposed to price fluctuations. This situation is exacerbated further by the fact that the oil reserves will eventually run dry, thereby taking away the Scottish nation’s biggest revenue generator.
To alleviate concerns over the issue of over-reliance on oil, Scottish First Minister Alex Salmond has outlined a plan which would see Scotland adopt a Norwegian-style approach. Currently, Norway sets aside a certain amount of its oil and gas revenue to be placed in an oil fund. Under Salmond’s plan, Scotland would earmark around 10% of its oil and gas revenues, worth approximately one billion pounds per year, to be placed in a separate fund. This could potentially equate to a sovereign wealth pot of thirty billion pounds over the lifetime of the oil reserves. The Scottish First Minister is of the opinion that an independent Scotland would be able to run the gas and oil industry better than Westminster has, and that the Scottish nation has missed out on many potential benefits that would normally be afforded an independent country.
An Uncertain Future
On the other side of the debate, Prime Minister David Cameron has stated that the North Sea oil industry would be better supported with the whole of the United Kingdom behind it, as oil and gas is becoming increasingly hard to recover. Whether this statement was made to cover concerns over the potential loss of revenue to the UK if Scottish independence goes ahead remains to be seen. It seems that the long-term future of North Sea oil will remain uncertain no matter what the result of the independence referendum is.