How Would Scottish Independence Affect the Region's Oil, Gas Industry?
Scottish independence from the UK could lead to fewer Scottish oil and gas jobs, according to Airswift CEO Peter Searle.
“If Scotland exits the UK this may create economic instability, which could negatively impact the oil and gas sector as companies might view the country as a less desirable place to operate,” Searle told Rigzone.
“In turn, this would likely reduce the number of available Scottish oil and gas jobs as companies look to move operations to more stable locations,” he added.
A Scottish exit could potentially create significant uncertainty within the wider UKCS (UK Continental Shelf) too, particularly with regard to issues such as the delineation of the Scottish Continental Shelf (SCS), the allocation of decommissioning liabilities and tax treatment, Rystad Energy Senior Vice President Mark MacLean said.
“The end result could lead to reduced capital spending in the UKCS and therefore recoverable resources falling well below our current estimate of 29 billion barrels of oil equivalent,” MacLean stated.
“In this case, both Scotland and the UK could miss out on the development of significant reserves and potential tax revenue,” he added.
Although admitting that it was difficult to say how Scotland leaving the UK would affect the oil and gas industry, Kevin Swann, UK upstream research analyst at Wood Mackenzie, supported MacLean’s prediction of uncertainty.
“So many of the details would be up for negotiation between the respective governments,” Swann told Rigzone.
“The only certainty would be a period of uncertainty for the industry as negotiations played out,” he added.
If Scotland does exit the UK and the maritime boundary is drawn using the Scottish Adjacent Waters Boundary Order 1999, or the Civil Jurisdiction Order 1987, the only main offshore oil and gas province left to England will be the Southern North Sea, MacLean said.
“There is only a small amount of exploration and appraisal activity communicated to occur in the SNS within the next 3-4 years, compared to the CNS [Central North Sea], NNS [Northern North Sea] and WOS [West of Shetland Isles] where the majority of activity is expected to take place,” he added.
The Rystad SVP also drew a question mark over decommissioning, a burgeoning sector on the UKCS representing a GBP 17.6 billion ($22.8 billion) opportunity from now to 2025, according to estimates from industry body Oil & Gas UK.
“The prospect of oil revenues being surpassed by decommissioning costs makes it difficult to determine a clear winner if Scotland leaves the UK,” MacLean said.
“An independent Scotland would argue that the UK should keep much of the liability having benefited from North Sea tax revenues for the past four decades, but significant uncertainty could arise and leave the UKCS as a whole worse off,” he added.
Despite concerns surrounding Scotland’s potential independence, MacLean highlighted that the UKCS has seen a number of M&A (merger and acquisition) deals in excess of $8 billion over the last six months, largely driven by a surge in private equity capital.
“The financial community seems to have come to terms with the potential uncertainty and the sizable investment suggests that the new entrants are comfortable with the risks, with the assumption that politicians will negotiate to protect investment in the UKCS,” MacLean said.
Scottish Independence Referendum: Results, Dates & Opinions
Scottish First Minister Nicola Sturgeon believes that the Scottish Parliament should have the right to hold another referendum following the UK’s decision to leave the European Union in June 2016.
This referendum could take a while to materialize though. In March, UK newspaper the Telegraph claimed that Scottish Secretary David Mundell ruled out a referendum until 2020 at the earliest, with a vote potentially being delayed to 2023.
Scotland previously held an independence referendum in September 2014, which saw 55 percent of voters pledge to stay in the United Kingdom, compared to 45 percent who stated they wanted to leave the UK.
As of May 18, 39 percent of those asked by non-partisan opinion tracker What Scotland Thinks wanted Scotland to become an independent country, compared to 49 percent who wanted Scotland to remain within the UK.
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Falcon Oil Declares Commercial Flow Test Results for Shenandoah Well
- UK Oil Regulator Publishes New Emissions Reduction Plan
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- PetroChina Posts Higher Annual Profit on Higher Production
- McDermott Settles Reficar Dispute
- Macquarie Strategists Expect Brent Oil Price to Grind Higher
- US, SKorea Launch Task Force to Stop Illicit Refined Oil Flows into NKorea
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- Pennsylvania County Joins List of Local Govts Suing Big Oil over Climate
- USA Commercial Crude Oil Inventories Increase
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call
- India Halts Russia Oil Supplies From Sanctioned Tanker Giant
- DOI Announces Proposal for Second GOM Offshore Wind Auction
- Centcom, Dryad Outline Recent Moves Around Red Sea Region
- PetroChina Set to Receive Venezuelan Oil
- Czech Conglomerate to Buy Major Stake in Gasnet for $917MM
- US DOE Offers $44MM in Funding to Boost Clean Power Distribution
- Oil Settles Lower as Stronger Dollar Offsets Tighter Market
- UK Grid Operator Receives Aid to Advance Rural Decarbonization
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call