Scottish Independence: Oil ‘a bonus’ in Scotland
AN INDEPENDENT Scotland will benefit from a North Sea oil “boom” but will not become over-reliant on the offshore industry, a Scottish Government paper will claim this week.
The paper will argue that offshore revenue should be treated as a “bonus” after independence, meaning that Scotland would not have to become an oil-based economy.
Looking ahead to the publication of the paper on Tuesday, the First Minister Alex Salmond said: “If oil is taken out of the equation, then Scotland’s economic output per head is almost identical to that of the UK. The benefit we get from oil and gas will be a huge bonus.”
The paper will make much of figures published last month by Oil and Gas UK, the trade association for the offshore industry, which predicted that North Sea production is likely to reach two million barrels a day by 2017 – a 30 per cent increase on current levels.
The document will say that an independent Scotland will be less reliant on oil revenues than Norway and will point out that the oil industry has already committed £100 billion to future investment in the North Sea.
It will also paint a far more optimistic picture of North Sea reserves than figures released last week by the Office for Budget Responsibility (OBR), the UK Government’s independent forecaster. The OBR figures said oil and gas revenues will decline from 0.4 per cent of Gross Domestic Product this year to 0.03 per cent in 2040-41 with total revenues over the projection period revised down by £11bn.
The projections considered the impact of alternative scenarios for oil and gas prices – high, medium and low – with the cumulative revenues being £82bn, £56bn and £44bn respectively. Between 2018-19 and 2040-41, total receipts are now projected at around £56bn – the medium price scenario – compared to £67bn predicted last year, a decrease of £11bn.
The Scottish Government has taken issue with the OBR’s analysis. Last night, Salmond’s spokesman said: “Westminster Government departments have consistently underplayed the value of oil, and the production information from the Department of Energy & Climate Change, which underpins the OBR figures, is significantly at variance with the industry’s. For example, DECC’s forecasts assume that production remains broadly unchanged at approximately 1.5 million barrels of oil equivalent (boe) a year between 2012-13 and 2017-18. This is despite the record levels of investment currently observed in the North Sea and forecasts by Oil and Gas UK that production will rise to 2 million boe a day by 2017.”
The spokesman added that it was estimated that £1.5 trillion or more of revenue is still to come from the North Sea – and 98.8 per cent of oil still to be extracted is in Scottish waters.
Last night, a spokesman for the UK Treasury said: “Scotland has a thriving oil industry that plays a key role in the UK economy. The UK is supporting the industry to extract every last drop of oil through decommissioning, tax reliefs and field allowances, which provide a more certain environment in which to invest.
“But this support costs money and combined with increased costs of production means that tax receipts are set to decline.
“Credible, independent forecasts like the OBR’s show that oil revenues are set to decline to £56bn over the period from 2017-18 to 2040-41. This would leave a significant gap in an independent Scotland’s finances.”