Power Scotland: energy from land and sea

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Scotland's primary energy output

By Russell Bruce

There is a long-term unionist narrative that Scotland’s oil and gas days are over. Not so as our research shows. It is still ‘privately’ considered crucial to retaining Scotland in the Union. Scotland has more power than it can ever use for its own needs and is a major element of our exports. There is no end of willing European and other countries willing to buy our surplus energy should England decide they would not want to buy from an Independent Scotland.

Scotland by producing more energy than it requires for its own needs, including renewables, makes Scottish energy a major export earner. The latest, December 2020 Compendium of Scottish Energy Statistics, shows that in 2018 our energy exports were worth £14.6 billion – £2.1 billion to non-EU countries, £3.1 billion to EU countries and £9.4 billion to the rest of the UK. Scotland’s total energy turnover in 2018 was £40.8 billion with exports amounting to 36% of total turnover. Energy exports represented 17.2% of Scotland’s total exports that year.

Oil and gas remain the lion’s share of Scotland’s energy output

Scotland produced 95.3% of all UK oil production and 62.4% of all gas production in 2018. As new automotive vehicles – buses, lorries and cars transistion to renewable energy sources, demand for oil fuels will reduce as output from the North Sea continues to decline over the next two decades in line with Scotland’s climate change objectives. Oil will remain a major source of household heat in rural areas not on the gas network for some considerable time. In Scotland 65.1% of domesic consumption is gas, 7.2% oil and 27.7% other fuels.

Oil accounts for more than half of primary energy (55.2%), with gas making up 35.7% and petroleum products 3.0% in 2018. Oil and gas accounts for 93.9% of Scotland’s primary energy resources which includes some imported oil and gas from other parts of the North Sea, mainly Norway.

Of the gas brought ashore at St Fergus in Aberdeenshire only just over a quarter is required to meet Scotland’s needs. A broadly similar amount is exported to N. Ireland and the remainder to England.

Oil and gas sales revenues for 1998/1999 were £9.6 billion and £25 billion in the 2018/19 financial year, having risen from £19.5 billion in 2017/18. Sales revenues vary from year to year on output and particularly the price of Brent but has always been above 1998/1999 revenues. Oil prices took a short term dramatic hit in March 2020 due to the impact of Covid and short-term market technical adjustments.

Oil and gas price collapse March 2020

Prices have been recovering steadily with Brent trading at $77 this week. This is also around the average, through peaks and troughs, since January 2015. Twenty years on and seven years after the 2014 failed Independence referendum oil and gas output is still increasing in value.

On volitility

Oil prices may well be volatile but oil companies work on longer term price averages and price trends. Much of present volatility is generated by OPEC and Russian price machinations based on boosting production to hurt US shale producers and drive out competition, then alternating with production cuts to boost the oil price. Both need prices well above production costs to support their national budgets and keep their population in a degree of contentment.

Only around 40% of Russian/Saudi production cuts have been restored and that is keeping US shale producers nervous. Neither Russia or OPEC want the US to increase output so whilst a steady price suits them for now they will boost production to force international prices down if they see US shale output rising. Predictions of $100 a barrel therefore seem unlikely given the international energy powerplay unless it is a short term goal. Some US shale producers are likely to commit to employment and new drills if $100 happens. That could be the trigger for Russia, Saudia Arabia and the UAR to flood the market and drive more US shale producers out of business when it would hurt most. On Monday, for the third time, Russia, Saudi Arabia and UAR failed to agree on output increases.

Rising gas prices

Europe’s reserves of natural gas are at an all time low and the Russians have cut supplies through the Ukrainain pipeline driving gas prices up. Another power play with the objective of damaging Ukraine and breaking opposition to the construction of Nord Stream 2 (NS2) intended to run parallel to the Nord Stream 1 pipeline via the exclusive economic zones (EEZ) of Finland, Sweden and Denmark. Natural gas prices in Europe have hit a 13 year high. It is highly unlikely that will not have some knock on impact on natural gas prices in the UK. The market price of gas has soared by over 50% this year. The price for UK gas delivery in August hit a record high of 91.4p a therm last week which is certain to be passed on to consumers.

Renewable energy and electricity generation

Most readers will be well aware of Scotland’s developing renewable energy resources with pumped hydro, onshore and offshore wind currently the most developed. Offshore wind electriciy generation is due to dramatically increase in the next few years. Scotland has 25% of Europe’s entire wind generation capacity. Both wave and tidal have seen significant early development in Scotland and are set to become major sources of electricity generation in the years to come as the costs of development and increased production from higher output capacity generators are installed leading to lower unit costs, as has been the case with wind. The waves roll and the tide moves in and out every day regardless of other atmospheric conditions.

Pumped hydro, wind, wave, tidal and solar all produce electricity. The issue with generating electricity is limited storage capacity other than mainly small scale battery storage requiring increasing use of rare earth resources. But there is another developing energy source that can provide both storage capacity and replace diesel, the most polluting of automotive fuels, and that is hydrogen which Scotland is well placed to produce. Blue hydrogen produced from natural gas and more environmentally friendly green hydrogen produced from renewable electricity. With Scotland’s offshore wind capacity scheduled to increase dramatically over the next few years we are ideally placed to produce hydrogen to fuel the new generation of lorries currently being developed to replace diesel. Newsnet will be looking at Scotland’s hydrogen opportunity in more detail shortly.

As some oil fields come to the end of life their usefulness is not lost as these have potential for both hydrogen or carbon capture storage. Engineering work on Europe’s first large-scale carbon capture facility is underway. It will be based in the North-East of Scotland to take advantage of local skills and offshore infrastructure. The target is to have it operational by 2026. Scotland’s oil and gas legacy has much longer economic and energy potential than was ever envisaged in the early dramatic years of discovery and exploitation. Another reason to end the exploitation and dumbing down at the hands of the Union.

Our diagram showing the share each fuel has of Scotland’s power resources is striking for a number of reasons. Scotland is not dependent on imports. Self sufficiency is always an economic bonus. A significant surplus means we have valued export products and are positioned to be a leader in the new fuels that will increasingly replace oil and gas. The small percentage of electricity production at 5% of total TWh belies the fact Scotland produces more electricity than it needs. Net exports account for around 15% of the electricity we produce but we need to look a bit closer at our electricity production because it is not quite as presented by the Scottish government.

Scotland’s increase in renewable energy output is impressive with considerably more to come. We rely on electricity for so much of our daily needs and tend to think it occupies a much larger part of our energy mix than is the case, as our graphic demonstrates. We will be delving more into electricy generation in a further article.

Time to put the power of Scotland into the hands of the people of Scotland