What role does the oil & gas sector play?
UK oil & gas production is almost entirely from offshore waters on the UK Continental Shelf (UKCS). Most of this is from waters closer to Scotland than to the rest of the UK; more on this in Section 3, ‘Boundaries’. (Onshore production is presently relatively minor[i] although shale gas development may be set to change that.) Since Scottish devolution began in 1999, Westminster has retained control, chiefly via the Department of Energy & Climate Change (DECC)[ii] and the Health & Safety Executive (HSE).[iii] Oil & gas tax revenues are collected by the UK Treasury.
The UKCS contributes £11 billion in taxes (2012), provides 450,000 jobs (50% in Scotland) and meets most of UK demand.[iv] Since its discovery in the 1960s, North Sea oil has ‘fuelled’ the nationalist agenda and, thanks to its substantial remaining value, is central to the referendum debate.[v] The Scottish Government estimates a further 24 billion boe, valued at £1.5 trillion, to be recoverable.[vi]
The importance of the sector in the referendum debate was highlighted on 24 February 2014 when both the UK and Scottish cabinets visited the north-east of Scotland to highlight their proposals for the future.[vii]
What is the current state of the oil & gas sector?
Although production has halved from its 1999 peak (4.5 MMboe/d), high post-millennial oil prices have seen the UKCS enjoy an ‘Indian summer’;[viii] 2013 investment was a record £13 billion.[ix] Multi-nationals now focus on major West of Shetland (WoS) finds (e.g. BP Clair Ridge,[x] Total Laggan-Tormore[xi]) having divested mature assets to independents (e.g. BP Forties to Apache,[xii] Shell Northern Assets to TAQA[xiii]). New entrants include National Oil Companies (NOCs, e.g. Statoil[xiv]) and utilities (e.g. GDF-Suez[xv]). Decommissioning of redundant infrastructure (e.g. BP NW Hutton[xvi], Shell Indefatigable[xvii]) is also under way.
UPDATE (December 2014): The new Oil & Gas Authority (OGA) is due to commence activities when its first chief executive, Andy Samuel, takes up his new role in early 2015.[xviii] Whilst new North Sea developments have recently begun production (e.g. Nexen Golden Eagle),[xix] a recent rapid decline in global oil prices has impacted upon investment and employment.[xx]
How does oil & gas fit into the Scottish economy?
Scotland’s population is approximately a tenth of the UK’s (5 vs. 60 million).[xxii] Were it to acquire the majority of reserves upon independence, oil would become Scotland’s largest industrial sector, forming almost 20% of the economy.[xxiii] Therefore, whilst many issues below apply irrespective of the referendum, they are much more material in an independent Scottish context. (For perspective, note that Scotland would hold just 0.1% of global reserves;[xxiv] this is no prospective Gulf-style petro-state. Don’t expect an OPEC invitation or a World Cup hosting bid[xxv].)