Alisdair Pettigrew, Managing Director, BLUE Communications provides his perspective on the role of oil and gas in the recent Scottish independence referendum.
Like many Scots living outside Scotland over the past few months, I was afforded a degree of objectivity when watching the increasing intensity of the debate around Scottish independence in the run up to the vote. My interest in the debate was particularly piqued by the tossing around of “Scottish oil” by the “yes” campaign as if it were a giant FPSO waiting to carry the hopes of a nation, or if you were to believe the “no’ campaign’s final push, little more than a punctured barrel floating in Aberdeen harbour.
Perhaps as palpable as the intensity of the debate preceding 18 September 2014 has been the relative calm since. The ramifications of a “yes” vote for North Sea oil would certainly have required a degree of bureaucratic recalibration, and the debate over Sterling would no doubt still be raging, however speak to those in the oil and gas industry and they know only dollars, not Sterling. Would anything really have changed in the North Sea, other than the tax beneficiaries being based in Edinburgh, not London?
Yet, as the UK oil majors voiced their concerns about an independent Scotland, to what extent did they damage their reputation in Caledonia? BP Group chief executive, Bob Dudley, said future long-term investment requires “fiscal stability and certainty”. It’s an obvious point, however, if taken literally, given the unrelenting lack of fiscal stability and increased uncertainty that we’ve seen all over the world in the past 20 years, in particular the oil producing Middle East, no company would ever have parted with one investment dollar.
Causing further eyrie to nationalists’ pre election was claims from eminent oil sector experts accusing the Scottish government of exaggerating North Sea oil reserves by up to 60%. Ian Wood, the billionaire founder of the oil services firm Wood Group, said the first minister’s administration had also overestimated North Sea oil income over the next five years by up to £2bn a year or £370 per person, raising serious questions about Alex Salmond’s public spending plans. Revealing himself as an opponent of independence, Wood said North Sea oil reserves would begin to decline sharply within 15 years, raising questions about the future of the Scottish economy, jobs and its balance of payments if voters backed independence.
Despite this, research published on 25 September 2014, one week after the election, revealed that gas and water technologies could add decades to the life span of North Sea oil, according to a Herriot Watt University research team. Despite this, on October 4th, the Oil & Gas UK’s 2014 economic report said the sector needs to raise more than £1 trillion but is finding it increasingly difficult to compete for investment internationally. Like the situation in the US, falling oil prices are also a double-edged sword for Britain’s economy and investors. Although George Osborne, the Chancellor, is less reliant on tax revenues from the North Sea than some of his predecessors, prices are approaching the point when many of the developments planned offshore west of Shetland by international oil companies could be placed on ice.
Unsurprisingly, conspiracy theories have started the rounds in Scotland as to which – almost daily – report stands true and which doesn’t. So was the Scottish electorate duped? It is clear that price and revenue will dictate the extent of North Sea oil’s contribution to future oil reserves. Nevertheless, regardless of where price and revenues end up, those workers and families relying upon North Sea oil (Scottish and otherwise), it is likely that the status quo post 18 September 2014 will be viewed as anything other than a view to continued prosperity without political interruption is likely to be extremely well received.
There is a degree to which the oil majors that voiced their deep concerns may have indeed faced a degree of backlash to their brand and reputation had the independents’ won the day. However there will be no boycotting of BP or Shell pumps in East Kilbride this winter. In what wound up being a vote that centred upon the politics of left and right rather than national boundaries and status, it is unlikely that dissenting oil voices will lose any brand credibility north of the border.