Nat myth no.1: “An independent Scotland could live off the oil”

Little Britannia is on a quest to dispel as many Nat myths as we can over the next few months and first up is that age-old favourite about Scotland’s oil.

Firstly, it’s not technically ‘Scotland’s oil’. The North Sea oil which we benefit from is in British waters and, if you want to be really picky, you could say it is really owned by major companies and investors.

Whilst the UK earns tax from the sale of the fossil fuel, it’s the big guys at the top – the CEOs of BP, Shell and the like - who are the real winners. Think of this guy and you get the general idea . . . .

JR Ewing, played by Larry Hagman (Pic by Glenn Francis)

Unlike Salmond’s favourite country, Norway, the firms which drill for the oil around the UK are not state-owned. Extracting oil is not like dookin’ for apples and, as great as it might be, Britain cannot afford the technology (an independent Scotland, even less so). Oil exploration is a multi-trillion operation that is getting more and more complex as companies have to dig deeper.

No doubt though, Super Salmond is poised to come to the rescue to conjure up a massive power drill capable of sucking the sea dry. Even if that were possible (and in Nat Land, it seems that anything goes), it is unrealistic to expect an independent Scotland to survive on such a volatile resource. Our Norwegian friends do not use their oil revenues to fund current expenditure - which the SNP are proposing for Scotland - and therefore they do not have the same risks in their budget.

Also, despite what the SNP want us all to believe, Scotland is not a major force on the global oil platform. The UK as a whole doesn’t even make it into the top 10 in the list of countries by oil production. 

 

World oil reserves (Source: Wikipedia)

Many Nats we’ve spoken to have pointed out that Scotland should have nationalised the North Sea oil decades ago. The trouble is, Scotland was already part of the union when the oil was discovered so any nationalisation would be by the UK Government. It’s not like the Beverly Hillbillies, where we strike gold, claim the goods and run.

It’s not as simple as scooping up all the rigs and singing “cheerio” while England, Wales and Northern Ireland happily wave Scotland off into the sunset. That wouldn’t be very neighbourly of us anyway, would it? As Dan Snow said recently . . . .

The Scottish Government can't just draw a line around the oil fields and say: "That's oor’s." The share would have to be negotiated; something we can’t imagine the rest of the UK would be unfazed to give up a lot of willingly.

Then there's Orkney and Shetland, who have said that in the event of Scottish independence they would either stay with the UK or go it alone entirely. Whichever way they choose, they have a better claim to the oil than Scotland.

The reason for that is simple and, rather flippantly, never acknowledged by the SNP. Territorial waters of the UK only stretch out 12 miles from the coast. That is not scaremongering; that is based on an agreement between the UK, Norway, Denmark, Germany and the Netherlands following the 1958 Continental Shelf Convention.

The map below shows the position of the oil and gas fields in the North Sea. How many oil fields do you see within the dozen-mile distance of the Scottish coast? Beatrice appears to be the only one (unfortunately we don’t even get any of the awesomely named terminals, like Vulcan, but that’s another argument altogether). 

North Sea oil and gas fields (Source: Wikipedia)

A separate Scotland would not only have to agree to boundaries with the UK (and possibly Orkney and Shetland), it would likely have to renegotiate with Norway, Denmark, Germany and the Netherlands as new treaties are signed. Things could then start to get really messy, as everyone starts pecking over the oil fields like confused crows. An independent Scotland could, so to speak, be treading in dangerous waters.

While the UK’s offshore oil and gas industry is currently enjoying its highest ever investment levels, there has been a decline in exploration activity and it doesn’t take Stephen Hawking to work out that less exploration equals less output. It’s all very well the oil being there but if you can’t drill for it, it might as well be in outer space.

Oil also has to be found first before it can be extracted and, as Doctor Jones told his students in The Last Crusade, “X never, ever marks the spot.” Oil companies don’t just cruise around like Long John Silver, hoping to stumble upon the treasure; exploration programmes are massive and rely on multi-billion investments. The decline in exploration activity suggests that investors are currently unwilling to take such a risk in an industry that seems to have reached its peak.  

There is also the decommissioning of North Sea oil rigs, which the Nationalists have conveniently ignored in public. Many of the 470 oil and gas installations in UK waters are over 40 years old and so are coming to the end of their lifespan. Incidentally, our beloved Beatrice is scheduled for renewal.  

A big, mean-looking North Sea oil platform

It’s clear that when it comes to oil claims, the SNP haven’t exactly been truthful with the Scottish people. In public, Salmond and co like to tell everyone who will listen that an independent Scotland would have its own sparkling oil fund, without nasty things like tax hikes, spending cuts and extra borrowing to fund the thing.

Behind closed doors however, it’s an entirely different dram of whiskey. In the deepest, darkest corners of the SNP villain lair, the Nats have actually admitted that an oil-reliant separate Scotland would be forced to raise taxes by a substantial amount.

And what scaremongerer informs us of this? The SNP’s very own John Swinney. Unfortunately for the Nationalist Government, one of their secret reports telling the real truth about their oil dream was leaked last year. Whoops.

Better Together published the leaked document, in which the Scottish Finance Secretary actually admits that North Sea oil revenues will sharply decline. He also helpfully acknowledges the volatility of the resource and adds that Scotland would be left with a proportionally higher deficit than the rest of the UK by 2016. Don’t believe me? See for yourself here. 

More recently, the official Government Expenditure and Revenue Scotland (GERS) report released this month stated that oil revenues dropped by £4.4 billion – that’s more than two-fifths. This puts Scotland’s deficit above the UK’s for the first time in recent years. Over the last five years, Scotland’s average deficit, including North Sea Oil, was -7.24%, which adds up to a shortfall of £51 billion.

And there’s worse news. The Centre for Public Policy for Regions (CPPR) said that this deficit gap will continue to widen and warned that Eck had "skewed” North Sea oil revenues “in an optimistic manner".

The CPPR’s research concluded that a separate Scotland would be far worse off than the rest of the UK unless there were “currently unforeseen” improvements to North Sea oil production. 

Let’s see what the experts say, shall we?

“Everyone agrees that in the long run, North Sea production levels will go down. Revenues will still be worthwhile, but much below what they are now.” – Professor Alex Kemp, University of Aberdeen

“If an independent Scotland intends to rely on oil revenues as the platform for its economy, it is placing a risky bet. Energy is a sector that will require heavy investment, and one where returns will be both volatile and lower than in the past. Alex Salmond’s political career may have been built on the slogan that “it’s Scotland’s oil” but the realities behind this romantic slogan may be more prosaic than he hopes.” – Lead editorial, Financial Times

“In the longer run the loss of these oil and gas revenues would lead to tougher choices than those faced by the UK as a whole.” – Institute of Fiscal Studies

"Affordability is a challenge for many developed countries including the UK, but the demographics of Scotland with a higher projected ratio of pensioners to those of working-age population mean that this is likely to be more of a challenge here." - The Institute of Chartered Accountants Scotland (ICAS)

"We have a lot of people in Scotland. We have a lot of investments in Scotland. My personal view is that Great Britain is great and it ought to stay together." – Bob Dudley, Director of BP Oil

What has Alex Salmond’s response been to these warnings? He has mostly laughed off these experts as “scaremongering” or, in the case of BP Chief Bob Dudley, dismissed his professional expertise as a mere “opinion”. Who would you believe? 

An interesting Scottish Government statistic (Graphic by Better Together)

I have no doubt that many Nats reading this blog right now will be yelling at their computers: “Read the McCrone Report, for goodness sake!”

The McCrone Report was written 40 years ago. That was the same year President Nixon resigned, Abba won the Eurovision Song Contest and the current Doctor Who was the guy who played Worzel Gummidge. Meanwhile, the Nats expect the global oil market, which fluctuates daily, to remain exactly the same.

The McCrone Report is almost as old as Dad’s Army, yet the Nats cling on to it like it’s the gospel. If that is the most recent evidence they can come up with, then it raises serious questions about their campaign. Let’s put this into perspective: if you were learning to drive, would you study the latest Highway Code or rely on the 1974 edition? Exactly.

As interesting and well-researched as the McCrone Report is, it is more out-of-date than the Bunty annual - and that went out of print at the turn of the millennium. The document did not predict the banking crisis, nor did it predict there would be a single currency, so why is there so much emphasis on it? Next the SNP will be setting their economic plans according to an Ancient Egyptian papyrus and their budget on cave paintings.

Even Professor Gavin McCrone himself has stated that “the situation has changed enormously since then” and that “the oil has run down quite a bit”. He also said that the peak of oil production was around 1999 and the industry is only just recovering from a crash in the early 80s. Hear it for yourself here.

Unless Alex Salmond has plans to stick us all in a Tardis and send us back to the 70s, we really can’t see how the McCrone Report has any relevance in today’s debate.

The SNP claim that they care about Scotland, yet they don’t respect us, the people of Scotland, enough to tell us exactly what their strategy is.

Even if the oil industry was booming, prices are too unpredictable for Scotland to rely on it as its main source of income – and that's assuming it would be able to take a large enough share of it in the first place.

Alex Salmond might like to put a punt on the horses in his spare time, but we can’t allow him to gamble with the future of our proud nation by risking our finances on such an unpredictable resource. His obsession with independence, in spite of recent events and warnings, is becoming ludicrous.

Oil might not be forever, but independence certainly is.