Since oil was first discovered in the cold, stormy waters of the UK North Sea, people in Scotland have pointed out that the majority of the resource lies in Scottish, rather than English, waters. As a result, the whole of the United Kingdom has benefited from this bounty – and ‘Scotland’s oil for Scotland’s people’ rapidly became a rallying cry for Scots who felt it was time to break the centuries-old tie with Britain. On 18 September the Scots got their chance to decide, in a referendum with the simple question “Should Scotland be an independent country?”
The debate was about much more than oil. Nationalism, self determination, taxation and anti-establishment feeling all played their part, but crucial to the discussions was the economy; and key to that is oil. The oil and gas industry is the UK’s largest corporate taxpayer and a major industrial investor, employing thousands of people. Many different figures for remaining reserve potential were flung around during the run-up to the referendum, with ‘Yes’ campaigners (those in favour of independence) claiming that there was 24 Bboe remaining in Scottish waters, which would lead to revenues of about £1.5 trillion (US $2.45 trillion). By contrast, consultants Wood MacKenzie said that the figure for the whole UK is more like 15.3 Bboe, 84% of which would come under the jurisdiction of an independent Scotland.
There was definite unease in the industry, not at the thought of an independent Scotland, but of the disruption and uncertainty which would result in the interim. The issues were daunting. What currency a newly independent Scotland would use was not clear, while offshore borders would have to be negotiated and an entirely new fiscal regime established. For the oil industry these matters are all key to ongoing investment, as would be the setting up of new hydrocarbon laws and regulating bodies. As Wood MacKenzie warned, ‘prolonged disputes could cause uncertainty and negatively impact the investment plans of companies active in the area.’
Much of the remaining UKCS resource is in mature fields, or in difficult deepwater environments. Tax reliefs and allowances have been implemented by the UK government to assist with the associated complex and challenging issues, but with apprehension in the industry as to whether a Scottish government would continue such benefits, a number of projects have been temporarily put on hold. With costs ever-increasing, yet production dropping, the thought of a prolonged period of uncertainty was causing a lot of unease and inertia in the O&G industry during the run-up to the referendum.
In the end, the Scottish people decided by a narrow majority to preserve their union with the UK, with 55.3% voting against independence and 44.7% for it. Financial markets, as well as the oil and gas industry, breathed a sigh of relief.