Support for Scottish independence is booming – what does that mean for North Sea oil?

Matthew Hall 8 March 2021 (Last Updated March 24th, 2021 15:54)

In light of Brexit, the possibility of a new attempt at Scottish independence is looming large. A tentpole issue on both sides of the debate has been the question of North Sea oil. With the situation fundamentally altered in the seven years since Scotland’s independence referendum, we dive into the situation as it stands and ask what the future holds for Scotland's relationship to the North Sea.

Support for Scottish independence is booming – what does that mean for North Sea oil?
“The world has changed since 2014. Scotland must change too. It is time for a new approach to our energy sector,” said Craig Berry. Credit: joiseyshowaa

There’s a common idea that, across seven years, all the cells in the human body die and are replaced by new cells – a completely new body from head to toe, and you are quite literally not the same person you were seven years ago. It’s a nice thought: as humans we can shed our skin, change our entire being, and maybe with it, eschew completely from our systems that cringeworthy thing we did in 2014. But it’s scientifically nonsense, sorry.

That doesn’t mean a lot can’t change in seven years, though. February 2021 marked the 21st consecutive opinion poll to record a majority of Scots in favour of Scotland’s independence from the United Kingdom – just seven years after a “once in a generation” referendum on Scottish independence returned a 55-45 decision to the contrary.

Then the world turned on its head, or at least, the little part of the world the British Isles sit in. Seven years ago, Britain was still a member of the European Union and led by the largely EU-supportive Prime Minister David Cameron. The Brexit referendum itself was two years away; the UK is now onto its third Prime Minister since the public voted to leave the EU on 23 June 2016.

While the Brexit referendum results came in at just under a 52-48 split across the four nations, 62% of the Scottish population voted to remain, and remain won a majority of votes across every council in Scotland. You’d be hard pressed to find a time that the divisions between Scotland and its English neighbours have been wider.

“It’s Scotland’s oil”

Almost half of voters in England and Wales now think Scotland will become independent in the next decade, and across all four nations Scotland is viewed as the weakest link in the Union. Key to the case for independence is Scotland’s economic viability as an independent state and, historically, that argument has centred around North Sea oil.

“It’s Scotland’s oil”, or so was the 1970s claim that put the Scottish National Party (SNP) on the path to becoming a major force in Scottish politics. Forties Oil Field, the largest oil field in the North Sea, was discovered by oil major BP in 1970, with production beginning five years later. Like other oil finds off the coast of Scotland, the pro-independence SNP claimed that the revenue created by oil drilling offshore Scotland should go to Scotland, not Westminster.

Oil drilled on the UK Continental Shelf generates revenues for the UK treasury, which is reinvested across the four nations. But if you draw a line out into the North Sea from the Scottish border, around 90% of oil tax revenues would fall under Scottish jurisdiction.

That’s how most international agreements around oil have been made, and is theoretically how oil rights would be settled between the UK and an independent Scotland. History, however, throws a wrench in the works.

BP, for instance, are a London-based group that did much of the heavy lifting in the past to begin extracting the oil in the first place. There is now debate over how those past investments, which provided much of the knowledge and infrastructure for the oil to begin with, should be accounted for in the event of a Scottish breakaway.

Last year, the Covid-19 pandemic wreaked havoc on the oil industry, with the initial wave of the virus across the world in March and April 2020 turning US oil prices negative for the first time on record. Energy research company Rystad Energy’s 2020 global energy outlook predicted that the downturn caused by Covid-19 would expedite peak oil demand, reducing the viability of exploration efforts and reducing the amount of recoverable oil in the world.

For the UK, this cut the estimate of economically recoverable oil from 15 billion barrels to 12 billion. The effect of the pandemic on oil prices may have put paid to the hopes of a post-independence oil boom for Scotland.

A future beyond the North Sea

The Covid-19 pandemic and its effect on the offshore industry has been well documented. Compounding an accelerating climate crisis – SNP leader and Scottish First Minister Nicola Sturgeon made Scotland the first UK nation to declare a climate emergency in April 2019 – Covid-19 has cast doubt on the reliability of an economy that would be, in at least some capacity, propped up by oil.

Oil is simultaneously facing an image problem. Most countries are recognising the need to decarbonise their economies, and an oil-heavy economy can be difficult to reconcile with a green push, certainly in the eyes of an electorate facing a historic in-out decision.

The SNP currently argues that there is, and will continue to be, demand for oil and gas as the world transitions to a low-carbon economy. They believe that it  is essential for Scotland to control its own resources, while also undergoing a wider green transition and supporting oil workers in retraining for new sectors, including renewable power.

But some argue that an independent Scotland should go further. Common Weal, a Scottish think tank that campaigns for social and economic equality in the country, pushes for a more progressive vision for Scotland outside the UK.

A 2018 paper on how to transform Scotland’s energy sector by 2030 argued that the point for nationalisation of Scotland’s oil had “passed its stage of desirability”, owing to the industry’s decline and the large cost of decommissioning that would be required for the North Sea.

The SNP Common Weal Group, a group of grassroots SNP members promoting the ethos of Common Weal inside the party and working to put green policies on the party agenda, has called for a diversification away from oil and gas and a zero-carbon economy in Scotland by the end of the decade.

“We are facing an unprecedented global emergency,” says SNP Common Weal Group convener Craig Berry. “The Scottish Government has rightly committed to urgent action to reduce emissions and make a just transition to a low-carbon economy. Continuing with a policy of maximum extraction of North Sea oil and gas would be contrary to that commitment.

“The world has changed since 2014. Scotland must change too. It is time for a new approach to our energy sector, one that makes use of the strength and potential of Scotland’s oil and gas workforce to drive a rapid transition away from fossil fuels.”

In the 2014 independence referendum, the SNP used a price of $110 a barrel to justify its spending plans outside the UK. Mere months after the referendum took place, oil prices plunged below $50 a barrel, throwing the potential economic plans of an independent Scotland into disarray.

Sturgeon played down the impact of the dip on Scotland’s future, arguing that the best way forward is for Scotland to control its own resources, and to be “the masters of our own destiny”. In the seven years since the referendum, the price of Brent crude hasn’t been close to that 2014 price point.