Scottish independence vote: How much North Sea oil is left?
Can an independent Scotland run on North Sea oil and gas?
That鈥檚 one of many questions Scottish voters will have to consider Thursday as they vote for or against breaking with the United Kingdom in a hotly anticipated Scottish independence vote.
Offshore oil and gas fields in the North Sea have fueled economic development in the United Kingdom for decades, and almost all of them lie in Scotland鈥檚 territorial waters. Nationalists have long claimed the resources 鈥淪cotland鈥檚 oil,鈥� and see independence as a way to keep more of the billions in oil tax revenue in Edinburgh, rather than London. in the style of Norway, which has funneled oil revenues into a multi-billion dollar investment fund for future generations. 听 听
The largest North Sea fields have matured, analysts say, and most everyone agrees that they are unlikely to create the oil bonanza the region saw during its peak in the 1980s and 1990s. Where the 鈥測es鈥� and 鈥渘o鈥� (to independence) camps disagree is exactly how much oil supermajors will be able to squeeze out of the existing fields, and whether or not there are untapped fields that might yield at least a partial renaissance in the North Sea.
"The North Sea is important, but it has seen declining volumes over time for the energy sector," Brian Youngberg, an energy analyst with Edward Jones, told the Monitor last week via e-mail.听"Oil is expensive to produce there, many companies lack scale there, and the big fields have been found and exploited. New technology may help reverse this. Spending could potentially rise in coming years, but it will likely be a smaller group of companies ... "
鈥淵es鈥� campaigners tend to put the number at the higher end of the spectrum, and tout the benefits of keeping more of the revenue in Scotland. 鈥淣o鈥� campaigners, meanwhile, are more skeptical. They say what鈥檚 left of North Sea oil will dwindle to a trickle by mid-century, leaving an independent Scotland with no fuel left on which to run.
In a blow to the 鈥測es鈥� campaign, Scotland-based consultancy Wood Mackenzie issued an eleventh-hour statement Wednesday casting doubt on the North Sea鈥檚 potential as an economic engine for an independent Scotland.
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鈥淒espite the current North Sea investment boom, there is an uncertain project pipeline with two principal factors contributing to this situation,鈥� the Edinburgh-based group . 鈥淭he current high cost environment has led to projects being put on hold or deferred ... and poor exploration success has resulted in fewer discoveries, and therefore fewer new projects.鈥�
All told, Wood Mackenzie projects there鈥檚 about 15.3 billion barrels of oil equivalent (boe) remain in the UK, with 83 percent of it in Scotland. That鈥檚 toward the lower end of the 11 billion to 21 billion boe projected by the UK鈥檚 Department of Energy & Climate Change, and the industry group Oil and Gas UK鈥檚 estimated 15 billion to 24 billion boe. It鈥檚 also in line with oft-cited projections by Alexander Kemp, a professor of petroleum economics at the University of Aberdeen, and
North Sea production has steadily declined since the 1990s, but Wood Mackenzie does expect oil output to rise in the coming years 鈥� from 1.43 million barrels of oil equivalent per day (mmboe/d) in 2014 up to 1.46 mmboe/d in 2018 鈥� thanks to 鈥渞ecord levels of investment鈥� in the region. After that, it gets ugly: By 2023, production is forecasted to drop below 1 million mmboe/d, less than a quarter of the 1999 peak, according to Wood Mackenzie.
BP and Royal Dutch Shell, major oil players in the region, take a similarly pessimistic view:
鈥淭he opportunities today are smaller and more challenging to develop than in the past,鈥� BP chief executive Bob Dudley against Scottish independence. 鈥淲e also face the challenges of extending the productive life of existing assets and managing the future costs of decommissioning. 听Much of this activity requires fiscal support to be economic, and future long-term investments require fiscal stability and certainty.鈥�
Still, no one can know for sure how much oil is left, and the oil and gas sector has a history of finding new ways to unlock resources that were previously thought impossible to tap. The other important variable to weigh is how much Scotland might make on however much oil remains. That depends enormously on what happens to the price of oil, and how the industry is taxed.
N-56, a pro-independence group, notes that the oil and gas sector 鈥� its largest industry 鈥� accounted for only 13 percent of Scottish GDP in 2012, compared to the 26 percent contribution it makes in Norway. In other words, by bringing energy companies, policies, taxation, and associated industries closer to home 鈥� both literally and figuratively 鈥� Scotland is likely to benefit more directly from what鈥檚 left in the North Sea. In the process, they might even stimulate new production that nobody expected.
鈥淲hile predictions that the oil is about to run out have been made regularly since even before production started, there are still considerable reserves in the UK Continental Shelf (UKCS) and so the sector will continue to be an economic driver for decades to come,鈥� the . 鈥� ... Scotland requires a new approach to economic policy development and implementation, with government working more collaboratively with business and others to identify and pursue competitive advantage.鈥�
