A recent report by Sir Ian Wood concluded that North Sea oil can deliver a £200 billion injection into the Scottish economy over the next 20 years. The report – described as “the biggest independent review of the North Sea oil and gas industry in its history” – argued that reforms to exploration and production would vastly increase output. An independent Scotland, which mobilised such resources, would be well placed to generate far greater prosperity for people and business.
Yesterday the group outlined a plan to use unmanned buoys to produce oil and gas from the North Sea. Supporters state that this will bring more oil fields into production and reduce current costs.
In a wider context, there are three key factors which will influence the potential of North Sea oil resources: price, reserves and investment. All three areas suggest vast, untapped economic opportunities.
Current projections from a wide range of organisations are largely upward. The ITEM Club forecast price rises over $130 a barrel; as does the Department for Energy in the UK. NIESR, the Economist Intelligence Unit and the US Energy Information Administration all forecast rises above $110 a barrel. The UK Government’s newly formed OBR – which Alistair Darling accused of being a front for the Conservative Party – is isolated in predicting a price fall.
An outlying figure from the OECD paper ‘The Price of Oil’ suggests a surge in oil prices towards $190 dollars a barrel due to rising demand for energy, especially in developing nations. Were such a surge to occur, the overall value of North Sea oil would hit an astounding wholesale value of $4.5 trillion.
The second crucial issue in the potential of North Sea oil over future decades is the level of reserves. According to the UK Oil & Gas 2013 Economic Report, there are substantial volumes of North Sea oil and gas remaining. (page 7) Current programs have already identified 11.4 billion barrels. With future exploration, the UK regulator estimates the levels to range between 15-24 billion barrels.
Ministry of Defence blocked oil exploration on the West coast
It recently came to light that the Ministry of Defence blocked a potential oil boom in the Firth of Clyde during the 1980s. BP undertook seismic surveys south of Arran and east of Kintyre in early 1981. However, the MoD were “very strongly opposed to any drilling” according to a briefing for Scottish Secretary George Younger. Any Firth of Clyde drilling program would potentially have interfered with MoD operations, including the operation of the nuclear weapons submarine fleet at Faslane. Since then, no known investigation of oil reserves on the West coast has taken place. After a Yes vote the removal of nuclear weapons would open up this massive area for oil and gas exploration.
Current investment in the North Sea is at an all time high. Over £11 billion was invested in 2012, with the figure expected to exceed £13 billion this year. BP, for instance, have made it clear that they aim to continue their investments in North Sea oil business. The new Clair Ridge project involves $4.5 billion with of investment. The Kraken field, off Shetland, is majority-owned by Aberdeen based EnQuest and contains 120 million barrels of oil.
In February Statoil – the Norwegian national firm – confirmed investment of $7 billion in the Mariener oilfield, which was the largest new offshore development in the North Sea in over a decade.
Only two countries within the world’s top oil producing nations failed to establish national oil funds: Iraq under Saddam Hussein and the United Kingdom. As a result one of Scotland’s vital assets was squandered. If Scotland stands on the brink of a new North Sea and West Coast oil boom, will we allow the same mistakes to be made again or will an independent Scotland seize the chance to do things differently?
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