Wednesday, May 1, 2013

The Politics of Oil In Scotland

Posted by Euan Mearns on May 1, 2013 - 11:20am

On 18th September 2014 the Scottish People will have a referendum on their future within the United Kingdom where they will be asked the simple question: Should Scotland be an Independent Country? Yes or No.

Should the people say yes then this will not only have far reaching political and socio-economic consequences for Scotland and the rest of the UK but it will also leave the rest of the UK’s energy security in a parlous state since the bulk of the remaining oil and gas reserves of the North Sea and Atlantic margin lie in Scottish waters. Or is it that simple?

 UK crude oil + condensate + natural gas liquid production. Accelerated declines in recent years are the result of inept changes to the taxation regime, increased scheduled maintenance in the wake of Macondo and increasing numbers of unscheduled platform shutdowns attributed to ageing infrastructure. Data from the US Energy Information Agency (EIA).

The University of Aberdeen will host a two day conference / debate on The Politics of Oil and Gas in a Changing UK on the 8th and 9th of May 2013. Entrance is free for all those who wish to attend.

In order to understand the events leading up to the current situation it is necessary to go back to 1707 when the current Union between Scotland and England was established. This came in the wake of a disastrous investment enterprise undertaken in the new world of Panama called the Darien Scheme where many Scottish nobles lost significant portions of their wealth leaving Scotland impoverished.

However, not all were in agreement and come 1745 the second Jacobite rebellion against The Union culminated in the battle of Culloden where the Jacobites were slaughtered and a period of military occupation followed accompanied by clearing farmers from the land to make way for Nobles from the South. Many fled to the colonies of Canada, America, Australia and New Zealand.

Since 1745 Scotland has been part of one of the most successful political and monetary unions in history and was part of the global super power that conquered the world. Despite this there has always been discontentment and those who saw a brighter future as an independent Scotland. In 1934 The Scottish National Party (SNP) was born with sole purpose of lobbying for independence via the ballot box.

The success of the SNP has fluctuated with time but on an ever upward trajectory. In 1999, a large number of executive powers were transferred from Westminster to the new Scottish Parliament, a move that had very broad cross party support. However significant powers remained with the UK, mainly fiscal powers, foreign policy and energy policy. The proportional voting system for the Scottish Parliament was designed specifically to not enable any single party to gain an overall majority.

The SNP were naturally in favour of devolution of power from Westminster to Edinburgh even though this did not go far enough for their cause. Under the leadership of Alex Salmond, one of the UK's most astute politicians, the SNP fared well in Scottish parliamentary elections.

The last election took place in May 2011. In March of that year, in an act of political ineptitude, UK Finance Minister George Osborne launched a £2billion tax raid on North Sea oil and gas profits which in some measure determined the outcome of the election. Come May, the SNP won a resounding landslide victory winning an overall majority in the Scottish Parliament, an event that was never supposed to happen. Whilst there was no constitutional case for doing so, the UK government could quite clearly not deny the SNP and the Scottish people a referendum vote on their political destiny. Osborne has since learned the error of his ways with sweeping reforms to the North Sea taxation system in order to encourage investment in marginal fields.

The SNP face an uphill struggle to convince the Scottish electorate to vote yes. Looking towards Europe, we can all see how difficult it is to form a successful political and monetary union. I do not want to go into the many facets of the political debate, but energy security will form a central plank. With control over North Sea oil and gas, Scotland would be an exporting nation. Not on the scale of Norway, but not far behind. England and Wales would be left in a situation similar to France, with very little indigenous oil and gas production and heavily dependent upon imports. This is the ace up the sleeve of the SNP.

But it is not that simple. Much of the remaining oil and gas reserves lie to the east and west of the Orkney and Shetland islands that are both strongly opposed to severing links with The Union. Should the Scottish people vote yes, and the Islands vote no, Salmond may be deprived of The Prize he has fought so long and hard to win.

Syndicated from The Oil Drum

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