Peter Jones: Yes at odds with environmental stance

Alex Salmond, right, and Patrick Harvie, of the Greens, seem likely to diverge on energy. Picture: Ian Rutherford

OF the many things about this independence campaign that I struggle to find a rational explanation for, perhaps the most bizarre is the backing of a Yes vote by the Green Party and quite a few environmentalists. It is becoming increasingly clear that if there is to be a boost, or more realistically a maintenance, of living standards, Scotland will need to produce every last ounce of oil and gas. Yet if we do that, we will also be helping planet-wrecking climate change.

More and more in this campaign, some suggested outcomes are so weird as to require defying the laws of gravity. Some days ago, I remarked to a friend that any day soon I expected to see a sober-looking economics report backed by Nobel prize-winners declaring that the fabled pot of gold at the end of the rainbow had been found near Auchtermuchty, guaranteeing endless riches for an independent Scotland.

And lo! Did it not come to pass. A report commissioned by N56, a supposedly “independent business organisation whose aim is for Scotland to become one of the top five wealthiest countries in the world” but actually run by a nationalist property developer/hotelier, claimed that there are at least another 21 million barrels of oil on top of the 24 billion barrels said to be left in the North Sea.

And, it said, if we extract that, an independent Scotland could accrue £300 billion in tax revenues. So there we are, that’s everything solved then. No it’s not, it’s tosh. Just as much tosh as Ed Miliband’s warning of border guards or as the claim that Islamic State fanatics want Scottish independence.

The details of the latter assertion are too appalling to repeat. I’ll only note that it did not, so far as I can tell, emanate from the No campaign but from some dubious newspaper enterprise.

Dear me. Back to this extra oil. The report pointed out a geological fact – that the conventional oil and gas fields now being drained from the North Sea mostly all seeped upwards from much bigger deposits of hydrocarbons underneath in a rock called Kimmeridge Clay, which is a type of shale.

Most readers will know that shale and its oil content has been known about for decades, but it is only recently that the means of getting it out, now known as fracking, has made it possible. North American oil companies have pioneered the way with astonishing results.

North American gas production has soared, causing gas prices to fall by two-thirds. Oil production has also soared, but with less of a price fall because the oil market is global. West Texas Intermediate crude now sells for between 8-12 per cent less than Brent Crude, a differential which could disappear within a few years if the USA drops its 40-year-old ban on crude exports, something which is now being argued for.

The N56 report claimed that exploiting the North Sea shales could yield about 21 billion barrels of oil and about $300bn (£185bn) in tax revenues. It is technically feasible; some fracking has been done in the North Sea, there are no residents to complain about earthquakes and pollution, and a lot of the infrastructure is in place and could be used as the conventional fields run down.

The odds are, however, well against this happening. The chief executive of the one firm with a licence to explore North Sea shale deposits, Trapoil, a small independent company, estimated that taking into account the extra costs of fracking, his concession could be economic with an oil price of about $100 per barrel.

Given the price safety margins that producers like to operate on, that means the oil price would probably have to be about $120 a barrel and probably higher still for some others. Right now, Brent crude is hovering about $100 a barrel.

That may sound promising, but market trends now look downward. It remains much cheaper to produce from shale on land. North America has vast onshore shale deposits; so does Russia and Poland, so why would you bet millions, probably billions, of dollars on more difficult offshore shale?

Well, although the increasing flood of shale oil looks like keeping crude prices low for some time, maybe the price will rise to those sorts of levels in, say, a decade’s time. Oil prices are, after all, unpredictable both up and down.

Maybe, but here’s the kicker. There is a body of quite respectable research which says that if mankind wants to keep climate change down to a world-wide temperature increase of 2 degrees centigrade, we should burn only a third of the world’s known fossil fuel reserves over the next 35 years.

It means Scotland could get away with producing the 15 billion barrels of oil and gas that the industry and others think is likely over the next 40 years. Technological improvement might stretch that to 20 billion, putting Scotland hard up against if not beyond the theoretical climate change limit.

But go beyond that into the North Sea shales, and there is little doubt that Scotland will be contributing to more climate change, nullifying any gain there has been to switching electricity production from fossil fuels to renewables.

But such is Scotland’s deficit – revenue of £53.1bn including £5.6bn oil taxes against spending of £65.2bn, a shortfall of £12bn or an unsustainable 8.3 per cent of GDP in 2012-13 – we will have a desperate need to get out all the oil, conventional and unconventional, that we can.

Unless, of course, you agree with me that it would be better to be a bit poorer in both income and public services than to join in wrecking the planet’s ecosystem even more than we have done already. Personally, in view of the dire consequences of what would be inflicted on my children and their grandchildren, I think I would become a militant greenie to stop North Sea shale oil happening. But nobody is voting for independence in order to get poorer.

Why the Green Party is being complicit in creating this environmental disaster scenario, I do not know. And why trade body Scottish Renewables is saying nothing about the serious risk that the rest of the UK will cut the subsidy flow to the Scottish renewable generators and destroy their industry, I do not know either. It looks like environmental craziness to me.