Glasgow university chief joins call for £5 billion UK oil and gas tax revenues to be devolved to Holyrood


Professor Anton Muscatelli
Professor Anton Muscatelli

Pressure is continuing to grow for N. Sea oil and gas taxation revenues to be devolved to the Scottish Parliament following Scotland’s Independence referendum in September.

While total independence from the rUK was rejected by 55-45%, there is continuing support for devolution of more powers from Westminster to Holyrood across a range of social and economic powers – including oil and gas tax revenues.

More than two in every three Scots support this – according to the latest opinion poll on this issued carried out at the Independence referendum.

And the principal of Glasgow University has lent his weight to this popular policy. In a written submission to the Scottish Parliament’s Finance Committee – albeit sent in a personal capacity as an economist –  Professor Anton Muscatelli said voters in Scotland now have “a greater appetite for additional devolution”.

Professor Muscatelli – who previously acted as chair of a group of economic advisers to the previous commission on more home rule for Scotland (the former Calman Commission) told Holyrood MPs on the Scottish Parliament’s Finance committee:

 “Oil and gas taxation is geographically well-defined, and could be devolved.

“There is a precedent for devolving natural resource taxes in other countries. As we pointed out in IEG (2009b) it is technically feasible to do so and clear criteria could bedeveloped.

“The main issue relates to the volatility of these tax revenues which would need to be smoothed over time e.g. through some ‘oil stabilisation fund’. It would certainly be highly undesirable to divide the jurisdiction over these taxes between Scotland and the UK because of the need to provide long-term visibility and minimise uncertainty on tax policy to the North Sea industry.

 “If these taxes are devolved, they should be fully devolved.”

Meanwhile, the London-based Oil & Gas UK  industry association has announced the kick-off of two  new projects aimed at stimulating oil exploration in the North Sea.

Two projects have evolved from a scoping study for the 21st Century Exploration Road Map that made recommendations for both the geological and geographical scope and urgent priorities going forward.

The first project comprises an industry-wide review, led and funded by the Department of Energy (DECC) of wells drilled in the Central North Sea 2003-2013, an area deemed to hold the largest remaining potential on the UKCS. The second is a study, developed by the British Geological Survey, of the Palaeozoic potential of the N. Sea that will draw on data from operators and contractors.

Oonagh Werngren, Oil & Gas UK’s operations director, explained: “The findings from these two pan-industry projects will feed into the 21st Century Exploration Road Map Project which aims to improve exploration success through developing a systematic analysis of the key exploration plays of the North and address the 50% fall in the number of wells drilled.

“We are looking to all companies working on the UKCS to actively participate in these projects through sponsorship and by providing staff time or geological or geophysical interpretations.

“There is an urgent need to increase the success rate of N. Sea oil exploration  where well costs, as well as operational costs, continue to rise.

“This week, all oil operators in the North Sea will receive a letter from DECC and Oil & Gas UK about these projects and I encourage the industry to commit its energies to supporting this important work to maximise economic recovery of N. Sea oil and gas”.

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