Scottish Energy Minister Fergus Ewing has published a new report comparing and contrasting Scotland and Norway’s experience since the discovery of North Sea Oil – and highlighting ‘mismanagement’ of the resource in the UK and the opportunities of Scots independence.
The UK and Norway both began extracting oil and gas from the North Sea in the early 1970’s. While both countries are amongst the largest oil producers in Europe, there are some interesting differences in their approach and economic performance:
In 1970, levels of GDP per capita in Norway were 7.5% lower than in the UK. By 2013, GDP per capita in Norway was over 80% higher than the UK.
Norway is ranked top of the UN Human Development Index in 2014, a measure of standards of living. The UK was 14th in these rankings.
Norway has established an oil fund that is now worth over £500 billion, equivalent to £100,000 for every Norwegian citizen. This is something that successive UK Governments have failed to do.
Welcoming the new report “North Sea – Two Futures” – Ewing said: “Norway is a great example of how, by fostering a stable and predictable fiscal and regulatory regime, a resource rich nation can not only develop a very strong oil and gas sector, but through the development of an oil fund use its energy wealth to benefit the whole country.
“Unlike Norway, the UK Government has been missing the point – formulating policy based on short-term gain instead of focusing on the long-term impact upon value generation, and the need to sustain investment in all areas of the oil and gas industry.
“There is no doubt that as part of the UK we have so far lost out on the very real benefits that an independent country can secure. For example, Norway has established an oil fund that is worth over £500 billion – equivalent to £100,000 for every Norwegian citizen. While over the same period the UK Government has accumulated £1.3 trillion of public sector net debt.”
The new report ‘North Sea – Two Futures’ – will doubtless have the political effect of throwing oil on a burning fire as both sides in the Yes/No Scottish Independence Referendum claim it supports their respective positions.
Meanwhile, the proxy-political battle of ‘who can best count the unknown number of undiscovered barrels of oil in the North Sea’ continues following Sir John Wood’s comments on various forecasts.
Graeme Blackett from BiGGAR Economics, author of “Oil and Gas – A Pivotal Moment”, commissioned by business organisation N-56 said: “We welcome Sir Ian Wood’s confirmation that recoverable oil is far higher than the OBR estimates, as set out in the N-56 report launched earlier this week.
“The N-56 analysis estimated that future oil taxation revenues could be worth up to £365 billion between 2014-2040, based on a high production scenario of 14.9 bn boe, six times that forecast by OBR.
“If Sir Ian is right and there are up to 16 bn boe recoverable, then future oil taxation revenues would be even higher than this, perhaps as high as £400 billion.
“This confirms the N-56 analysis that, based on rising oil prices and industry views on recoverable reserves, the remaining value of oil to the economy and to the Treasury could total around the same as the total historic value to date.”
Meanwhile, Mathew Hancock, a UK Energy Minister has published the following statement in response to an article published on 20 August 2014 by SNP MSP Joan McAlpine in the ‘Daily Record’ regarding oil and gas reserves.
I write in response to the article by Joanne McAlpine which made a number of false and unsubstantiated claims in regards to oil and gas reserves.
First of all, the assertion that the UK Government is hiding oil discoveries is ridiculous. The oil sites she mentions at Bentley, Clair Ridge and Lowlander are not new discoveries – they have been widely known for decades and are at varying stages of development. For instance, the Prime Minister announced consent for the Clair Ridge site three years ago. There are also no oil finds in the Firth of Clyde area.
There is no dispute that the North Sea is still a hugely valuable resource, but we must note that over the past two years North Sea tax revenues were around £5 billion less than the Scottish Government’s lowest estimate.
The YES Campaign continues to base their argument for independence on the very optimistic claim that there is £1.5tn worth of oil and gas remaining in the North Sea – 12 times higher than the independent Office of National Statistics. This is based on the highest possible forecasts, and assumes these resources can be extracted from the North Sea without any cost. Indeed the industry expert Sir Ian Wood believes an independent Scotland would lose out as no more than 35 years of oil and gas production remain in the North Sea.
The Government is working hard to ensure long-term energy security for all of our citizens and we exploring new home-grown resources, such as shale gas and record investment in renewables. But only when the UK works together do we have the broad shoulders to maximise the remaining benefits of the North Sea and guarantee our future energy resource.”