Oil (Overview)

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Since privatising them in the 1980s, the UK has mismanaged its North Sea oil and gas reserves. An independent Scottish state would take a different approach, making a rapid transition to green energy in a way which protects jobs and livelihoods.

Privatisation

In the 1980s, just as the oil boom was beginning, the UK Government privatised key aspects of North Sea oil and gas. The British National Oil Corporation was sold off in 1982, Enterprise Oil in 1983, and British Gas in 1986. Norway, which has a slightly smaller share of North Sea oil and gas, and which began extraction at around the same time, took a markedly different approach: investment in the industry was channelled through the majority state-owned Statoil, while the assets were controlled by the fully state-owned Petoro.

These different approaches had very different outcomes:

[Norway] "generated more than double the revenue the UK did from each barrel it produced...[the] $18.8 per barrel extra government revenue Norway enjoyed equates to $727 billion...Our analysis shows that the UK Government may have missed out on hundreds of billions of pounds in potential revenue as a result of the privatisation path taken in the early 1980s." - Keith Myers and David Manley, Did the U.K. Miss Out on £400 Billion Worth of Oil Revenue?[1].

Lost oil revenues

Statisticians Jim and Margaret Cuthbert found that if an independent Scotland had controlled its geographic share of UK oil and gas reserves (approximately 90 per cent of the UK total) since 1980, and had followed the same taxation and public spending policies as the UK since that time, the country would have generated a fiscal surplus for every year between 1980 and 2014. It could also have accumulated a sovereign wealth fund (like Norway’s) worth up to £148 billion by 2011 (Jim and Margaret Cuthbert, Issues surrounding the sharing of UK debt post-independence - a paper from the Jimmy Reid Foundation, Section 6.[2]).

Remaining reserves and carbon emissions

Oil and Gas UK (OGUK), an organisation which champions the UK oil and gas industry and lobbies for it, notes that 45 billion barrels have been recovered from the UK share of North Sea oil, with 10-to-20 billion barrels still in the ground (OGUK, Economic Report 2019[3], p37). At the current price of $60 a barrel[4], those reserves are worth up to $1.2 trillion.

OGUK argues, unsurprisingly, that the UK should pursue maximum extraction of oil and gas, firstly to provide energy security, and secondly to reduce world-wide carbon emissions (on the grounds that UK extraction processes prduce lower emissions than those of other countries)(OGUK[3], p50.) A coalition of environmental organisations disagreed, showing in May 2019 that a worldwide policy of maximum extraction would raise the global temperature to a level significantly higher than the 2-degree limit of the Paris 2016 Climate Agreement (Sea Change, 2019[5], p3), which the Scottish and UK Governments have both committed to. An independent Scotland, however, would not need to pursue maximum extraction, because Scotland is already almost wholly self-sufficient from renewables. In the first quarter of 2019, Scotland’s renewables electricity generation reached a record level of 8877 GWh, enough to power 88 per cent of Scotland’s homes (Scottish Government, June 2019[6]), and Scotland is on target to get all of its energy from renewables by the end of 2020 (World Economic Forum, 2019[7]).

Jobs

Despite the estimated 170,000 jobs lost from the downturn in international oil prices, the industry still supports 105,000 jobs in Scotland in 2019 (Just Transition[8], p2. para 1.1), most of them in Aberdeen and the North-East. As reserves run out, these remaining jobs are vulnerable unless a transition to renewables ensures that no one is put out of work by the decline of the sector. This process, known as "Just Transition", is actively supported by the Scottish Government, with a Just Transition Commission already established (Scottish Government[9]). The Just Transition Commission proposes to use the engineering and design skills of North Sea oil-and-gas workers in a Scotland-based global decommissioning centre, developing Carbon Capture, Usage, and Storage (CCUS) (Just Transition[8], p6, paras.4.5-4.7).

A fully costed plan for a zero-carbon transition over the next 10 years in an independent Scotland was presented recently by the think-tank the Common Weal (Common Weal[10], download .pdf, p30.) This transition would create an estimated 100,000 high-skilled jobs. The Common Weal further argue that without the full powers of an independent country, planning a zero-carbon transition will be difficult (Common Weal[10], download .pdf, pp132-133.)

Summary

Critics of plans to transition to renewables usually point to the jobs lost in the sector since the oil price fall of 2014, and the failure to keep renewables jobs in Scotland even as the Scottish renewables industry has grown (STUC[11], Conclusions). However, these factors do not take into account the lack of political will on the part of the UK, and the powers that the Scottish Government needs but does not have - including powers over the energy grid, powers to fund investment and powers over North Sea oil and gas. Independent statehood would provide the Scottish government with such powers, and enable it to reverse the damage done by four decades of UK state control of these resources.

References

  1. National Resource Governance Institute. https://resourcegovernance.org/blog/did-uk-miss-out-£400-billion-worth-oil-revenue? Accessed 23/12/2019.
  2. http://www.jamcuthbert.co.uk/papers%201/JRF%20debt%20paper%2019%201%202014.pdf Accessed 23/12/2019.
  3. 3.0 3.1 https://oilandgasuk.co.uk/wp-content/uploads/2019/09/Economic-Report-2019-OGUK.pdf Accessed 23/12/2019.
  4. https://oilprice.com/ Accessed 10/12/2019.
  5. Platform, Oil Change International and Friends of the Earth Scotland: "Sea Change: Climate Emergency, Jobs and Managing the Phase-out of UK Oil and Gas Extraction'. https://foe.scot/wp-content/uploads/2019/05/SeaChange-final-r2-web.pdf Accessed 23/12/2019.
  6. Scottish Government: "Scotland's Economy - Renewable electricity at record levels". https://blogs.gov.scot/scotlands-economy/2019/06/27/renewable-electricity-at-record-levels/ Accessed 23/12/2019.
  7. World Economic Forum: "Scotland’s new target: 100 per cent renewable electricity in 2020". https://www.weforum.org/agenda/2019/07/scotland-wind-energy-new-record-putting-country-on-track-for-100-renewable-electricity-in-2020/ Accessed 23/12/2019.
  8. 8.0 8.1 Just Transition Commission Scotland: "Advising on a net-zero economy that is fair for all. Paper 4/1 - Oil and Gas sector background information". https://www.gov.scot/binaries/content/documents/govscot/publications/minutes/2019/10/just-transition-commission-meeting-papers-september-2019/documents/paper-4-1-oil-and-gas/paper-4-1-oil-and-gas/govscot%3Adocument/Paper%2B4.1%2B-%2BOil%2Band%2Bgas.pdf Accessed 23/12/2019.
  9. "Just Transition Commission". https://www.gov.scot/groups/just-transition-commission/ Accessed 23/12/2019.
  10. 10.0 10.1 The Common Weal: "The Common Home Plan - A Green New Deal for Scotland". https://commonweal.scot/policy-library/common-home-plan Accessed 23/12/2019.
  11. STUC: "Broken Promises and Offshored Jobs: STUC report on employment in the low-carbon and renewable energy economy". https://www.gmb.org.uk/sites/default/files/Broken%20promises%20and%20offshored%20jobs%20report.pdf Accessed 23/12/2019.