Hugh Fraser, an oil and gas industry executive, has added his support to the Yes camp, claiming it would be the best way to provide a legacy from North Sea oil for future generations. The managing partner of Andrews Kurth (Middle East), located in Dubai, writes below for Business for Scotland. He is the latest member to join the expanding business network that supports a ‘Yes’ vote this September.
First, the press reported business people are subject to undue UK Government pressure to make statements against independence. This is unacceptable and only serves to get people’s backs up.
Secondly, it was inaccurately suggested independence lacks the support of energy industry executives. In fact, there is support for a Yes vote among many colleagues at home and abroad. As one said publicly this week, most are “unfazed” by the prospect.
We all operate in dozens of countries. What matters most is not the constitutional framework but rather the policy environment therein. In this respect, it strikes me that Scotland is more incentivised than the UK to support its leading industry. Oil and gas represents a bigger proportion of the Scottish economy than is the case for the UK as a whole, which would mean that its interests were given proper attention – in stark contrast to the disgraceful and destabilising treatment of the industry by successive Westminster governments.
With the inclusion of oil and gas in GDP figures, Scotland generates more economic activity than the UK as a whole – £26,424 compared with £22,336 per head of population.
We saw competing interests in action when in 2010 UK Chancellor George Osborne unexpectedly increased tax on North Sea companies. The measure stifled investment and jobs before it was ultimately reversed. Since then, Westminster has tried desperately to rebuild bridges, to limited affect.
Our industry involves a lot of risk. It needs more than most the certainty of consistent and supportive tax regimes to ensure investment, especially in the exploration of outlying fields, if the societal dividends are to be realised.
Although I visit Scotland every few weeks, today I spend most of my time in the Middle East. As I fly back and forth I am reminded of how international Scotland’s oil and gas industry has become. It is not only about extracting the black gold from the waters around Scotland but also selling related expertise, goods and services to other parts of the world.
I am also reminded of how Scotland should have benefitted from investing the dividends of discovering oil in a sovereign wealth fund for future generations. The Abu Dhabi fund is the second largest in the world and represents an astonishing $773bn in assets, the interest on which enriches an entire society.The largest national fund is just across the water from Scotland in Norway with its $818bn and rising.
Westminster has squandered nearly half of the people’s oil and gas wealth. Scotland has nothing to show for it but mountains of UK debt. But over half of the value is still to flow.
According to independent official figures – and accounting for not only oil and gas but also the many other areas of the economy – Scotland has been in surplus since figures were first produced in 1980, and I suspect for much longer. Assuming a very modest 4% nominal interest rate on the yearly cash surplus, if Scotland had become independent in 1980 it would have generated a cumulative surplus of £68.7billion by 2008/09 and £50billion as of 2011-12, factoring in the recession.
Yet Scotland finds itself held back by a Westminster system that’s accumulated the second largest debt in the developed world (behind only Japan) and with economic growth lagging comparable countries like Denmark and Norway. On many metrics Scotland performs relatively better than the UK, but it has more untapped potential and should benchmark globally.
The oil is going to run out one day, many decades from now. But that is a reason FOR not against independence. Scots must not allow the remaining reserves of this natural and finite resource to be squandered. Scotland can afford to and must surely put some of the dividends away for its children whilst investing the rest in building Scotland’s many other areas of economic strength.
I have chosen to join the pro-independence group Business for Scotland because I am convinced of the economic case. I have spoken out today because people may like to know how much support there is in business for a Yes vote. Put simply, I believe the referendum is the opportunity of our time.
Hugh is the Managing Partner of Andrews Kurth (Middle East) located in Dubai. He is a Scottish businessman originally from Aberdeen but based in the Middle East for 10 years and with 25 years of experience in the international energy industry.
He was the founder and Chief Executive of Hugh Fraser International (2003-2013) and the former Group Head of Legal at Wood Group PLC (1996-2003). He acted for John Wood Group PLC in engineering projects, mergers & acquisitions and joint ventures in over 40 countries, culminating in the flotation of the Group.
His career has been built in the international energy sector, including extensive connections with the North Sea, Gulf of Mexico, the Middle East and the broader international oil and gas sector.