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How would Scottish independence impact the oil and gas industry?

23-09-2013

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As the date of the Scottish referendum on independence draws ever nearer, speculation over how it would impact the UK as a whole and its myriad industries has been rife - particularly when it comes to how it would affect the nation's oil and gas industry.

It's a mixed bag

Opinions are certainly divided amongst not only MPs and MSPs, but throughout the industry's workforce, too. If Scotland achieved a 'yes' vote on independence, it would take ownership of 90 per cent of the North Sea's oil resources; in addition to 81 per cent of existing oil and gas receipts - at an annual worth of anywhere between £6 billion and £12 billion.

Plus, some industry representatives are feeling confident too. In a recent survey undertaken by NES Global Talent, which saw 199 oil and gas workers questioned over their thoughts regarding independence, over half felt confident that a 'yes' vote would create more jobs within the sector. Almost one-third believe investment in the industry would increase and another third think exploration efforts would rise, too.

Praised by the Scottish government, these results are proof that many working in the oil and gas industry would welcome full devolution. It seems their beliefs are well-founded, with the government confirming that "almost all" of Britain's oil production over the next 30 years would take place in Scotland.

MSP Maureen Watt added: "Unlike successive UK governments, an independent Scotland will provide the necessary stability and predictability for taxation and regulation, creating the optimum conditions for the oil and gas industry to innovate and thrive in a globally competitive environment."

Is it as promising as it seems?

Even though 90 per cent ownership of the North Sea's oil sounds tempting, the Scottish government has argued that in order to reap the full benefits and make the most of the remaining £1.5 trillion oil and gas resources left in the UK, the creation of a Scottish oil fund would be crucial. Chancellor George Osborne remains unconvinced on this, claiming that the country would have to make "substantial cuts" (to the tune of £8 billion) in order to create such a fund.

He believes the efforts of the UK government to maximise the amount of oil and gas extraction are a much more reliable incentive for oil and gas workers, stating: "The oil industry representatives that I've been talking to in Aberdeen, they're very encouraged about the future and about the tax environment." 

Osborne's claims are backed up by the remaining results published by NES Global Talent's survey, in which a further 53 per cent said they would be negatively impacted by a vote for independence. Some 39 per cent feel that investment in the industry will decrease and almost one-third are worried that oil and gas exploration efforts will drop.

Plus, it's important to remember that Scotland would inherit a debt of £153 million if the majority said yes to independence. Although the National Institute of Economic and Social Research (NIESR) has proposed that Scotland could pass over some of its oil-based revenues in return for the debt being taken on by the UK government, the profits created by oil production form a significant part in the Scottish National Party's strategy for independence. Could it really feasibly operate a sustainable economy without this profit?

So, what's the answer?

All in all, trying to predict how a move to full devolution would impact the UK's oil and gas industry is difficult. Whilst independence could mean great things for Scottish oil and gas workers, would it ultimately leave the country in a dire, inescapable economic situation? Given that opinions are so divided, it seems all we can do is sit back, wait and hope for the best.

Author: Deborah Bates

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