The (infamous) European Union debate
The UK is a European Union (EU) member state which enjoys key ‘opt-outs’; these include retention of its pound sterling currency (i.e. not required to join the single currency, the Euro, in the future)[i] and exclusion from the Schengen common travel area.[ii] It also continues to enjoy a rebate on its contributions; any attempt to re-negotiate this is highly politically controversial.[iii]
The Scottish Government contends that Scotland, following negotiations, would become a new EU member state upon independence and retain the UK’s special terms.[iv] Whilst a senior legal opinion has supported this view,[v] European Commission President Jose Manuel Barroso warned it would be “extremely difficult, if not impossible” for an independent Scotland to join the European Union.[vi] A key concern relates to the requirement to obtain ratification from all 28 existing member states; Spain (said to be keen to discourage ‘copycat’ breakaways by the Basque Country and Catalonia)[vii] has been identified as a potential objector to Scottish entry. As with the currency question, this issue is unlikely to be resolved prior to the referendum date. It should be noted that any undertaking Spain (or any other member state) gives now relating to Scotland may or may not apply in future; governments and circumstances change.
How might this affect oil & gas?
Following the BP Deepwater Horizon incident (2010),[viii] the EU sought to create pan-European legislation for offshore health and safety. The UK pushed for a re-think with both the industry[ix] and the media[x] concerned that this could have proven the ‘thin end of the wedge’ with the EU ultimately assuming control over a shared offshore resource as per fishing rights. These have since been ‘watered down’ into a Directive.[xi] An independent Scotland could have to defend its prized reserves, the largest in the EU, from future attempts at common management.
And if Scotland doesn’t join?
Alternatively, Scotland could look to the example of Norway, an EU non-member with North Sea resources and a similar population. Whilst the Scottish sector may be too mature to foster a Statoil[xii] equivalent (Norway’s highly-successful NOC), once unencumbered by EU law, options for state ownership and local content could be explored. Norway, incidentally, is not an example of pure state control as is widely thought; multi-nationals (e.g. Shell) have invested heavily from the very start.