By Martin Kelly
An independent Scotland does not need oil in order to have a sustainable economy, according to First Minister Alex Salmond.
The SNP leader said comparisons with the UK showed that even without oil, Scotland already matched the economic performance of the rest of the UK and that oil should be seen as a “huge bonus”.
“If oil is taken out of the equation, then Scotland’s economic output per head is almost identical to that of the UK. The benefit we get from oil and gas will be a huge bonus.”
Mr Salmond also said that whilst an independent Scotland would be able to reap the benefits of its resource, it would be less reliant on oil than hugely successful Norway.
The SNP leader was speaking ahead of a paper on the future of oil and gas to be published this week by the Scottish government. The publication is expected to challenge recent claims by the UK government over the future potential revenue from Scotland’s oil and gas sector.
The paper is expected to highlight estimates from industry body, Oil and Gas UK, of a thirty per cent increase in oil production by 2017 – to two million barrels a day. It will also include details of plans by the Scottish government to introduce incentives in order to persuade companies to extend the life of more marginal fields.
Last week the UK Government’s Office of Budget Responsibility [OBR] cut its own revenue forecasts again by slashing £11bn off the total amount it claimed the oil and gas sector would contribute to the UK economy over the next 23 years.
According to the OBR, the sector’s contribution to the Treasury will contract significantly which will result in oil and gas having an almost negligible impact on UK GDP.
The UK Treasury has claimed that the tax relief and allowances it provides will allow for “every last drop” of oil to be extracted from Scotland’s waters and maintained the industry was thriving under the Union.
A spokesman added: “But this support costs money and combined with increased costs of production means that tax receipts are set to decline.
“Credible, independent forecasts like the OBR’s show that oil revenues are set to decline to £56bn over the period from 2017-18 to 2040-41. This would leave a significant gap in an independent Scotland’s finances.
“Scotland is better off dealing with a volatile resource like oil as part of the larger UK economy, where it is easier to manage both the fluctuations and the projected decline in revenues.”
BBC Scotland’s Douglas Fraser on OBR claims
However the OBR, set up by Chancellor George Osborne in 2010, has come under attack from industry experts and academics over what has been described as its over pessimistic forecasts.
Speaking to Newsnet Scotland last December, respected oil economist Professor Alex Kemp challenged the OBR forecasts and said: “The OBR’s combination of low production estimates with low price estimates is pessimistic compared with other predictions including our own.”
In March Professor Kemp describing the OBR’s revised forecasts as “contrary to the evidence from the industry.”
The Scottish Government’s own estimates indicate that there is at least 24 billion barrels of oil remaining which is worth £1.5 trillion. This view is backed by Chief Executive of Oil and Gas UK, Malcolm Webb who said that tax revenues can now be confidently expected to rise over the coming years.
Speaking to energy magazine ‘Enterprising Energy’ earlier this year, he said: “…the projects approved in 2011 and 2012 alone will over time produce more than two billion barrels of oil and gas, generate £100 billion value for the economy and an additional £25 billion in production taxes for the Exchequer.”
Challenging claims that the sector is running down, Mr Webb added: “The North Sea oil and gas sector, contrary to what some sources say, still has a long productive life ahead of it; we estimate 50 years or more.”
A spokesman for the First Minister added: “Westminster government departments have consistently underplayed the value of oil, and the production information from the Department of Energy and Climate Change (DECC), which underpins the OBR figures, is significantly at variance with the industry’s.
“For example, DECC’s forecasts assume that production remains broadly unchanged at approximately 1.5 million boe (barrel of oil equivalent) a year between 2012-13 and 2017-18.
“This is despite the record levels of investment currently observed in the North Sea and forecasts by Oil and Gas UK that production will rise to 2 million boe a day by 2017.”
Controversy over the accuracy of Westminster claims on oil resurfaced recently after former Labour Chancellor Denis Healey admitted his party had deliberately hid the true worth of the resource from Scots in the 1970s, fearing a rise in support for the SNP.
Speaking to Holyrood magazine in May, the senior party figure said: “I think we did underplay the value of the oil to the country because of the threat of nationalism…”
In an interview with magazine editor Mandy Rhodes, the former Cabinet Minister said that the current UK government is “worried stiff” that Scots might vote Yes in the 2014 referendum which will mean Westminster losing billions in tax receipts from North Sea oil.
Speaking candidly, the senior Labour party figure who was Chancellor from 1974 to 1979 said that the rest of the UK “would suffer enormously” if Scotland voted for independence but that Scotland “could survive perfectly well”.
The Labour peer’s admission that his party hid the true worth of oil from Scots confirmed the conclusions of a 1970s report which was marked secret for thirty years.
In 1974 Professor Gavin McCrone wrote a report which concluded that Scotland would have had an “embarrassingly large tax surplus as a result of the North Sea oil boom”. Successive Labour and Tory UK governments kept the information under wraps until it was eventually released in 2005.
Related articles:
Oil and gas reserves may be greater than forecast says industry chief
Anger at BBC Scotland virtual news blackout of Healey North Sea Oil admission
Scottish oil revenues massively underestimated according to new report
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