Separating the 'ownership' of oil and gas as easy as drawing a boundary in the waters around Britain

09 January 2007 | 06:25 Code : 12359 Geoscience events
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The North Sea will run out of oil and gas. The question is, when. The United....

  The North Sea will run out of oil and gas. The question is, when. The United Kingdom Offshore Operators' Association predicts that production will fall below one million barrels per day before 2020. The UK government's energy review said production will be reduced from just under 3.5 million barrels a day now to below 1.5 million by 2030. THE EXPERT SAYS: Tony Mackay, the managing director of Mackay consultants, says: "North Sea oil production peaked in 1999 and gas production in 2001. Both are currently declining by about 10 per cent per year and there is little chance of that trend being reversed. "New fields continue to be discovered and developed, but are much smaller." THE NATIONALISTS SAY: Stewart Hosie, the SNP's Treasury spokesman, says: "The Department of Trade and Industry estimates proven and possible oil reserves of up to 38 billion barrels. So far, 35 billion barrels have come out." THE UNIONISTS SAY: Derek Brownlee, the Tories' Holyrood finance spokesman, says: "The real question is when it is no longer commercially viable. That depends on the oil price, the costs of extracting the oil, including the tax regime, and the level of reserves available. It's difficult to tell how these factors will combine."

According to the Treasury, the estimated revenue for this year is £10.4 billion, rising to £12.2 billion in 2009-10 and dropping to £11.8 billion in 2011-12. There are no predictions beyond that and much of the revenue depends on the price of oil. THE EXPERT SAYS: Stuart Haszeldine, professor of sedimentology at Edinburgh University, says: "Barring catastrophes, you can be relatively sure of oil revenue for two years. When you get beyond that it becomes more and more difficult to predict." THE NATIONALISTS SAY: Mr Hosie says: "Scotland would benefit from about £65 billion in revenues over the next few years." THE UNIONISTS SAY: Malcolm Bruce, the president of the Liberal Democrats, says: "Ball-park figures might be £40 billion; £20 billion and £10 billion - a small and declining proportion of the revenue required to fund Scotland's public services."

The SNP claims that Scotland would receive 95 per cent of oil revenue, but its calculation is based on the total revenue from oil and gas. Its opponents say that they do not take into account the large number of gas fields in English waters. THE EXPERT SAYS: Prof Haszeldine says: "The vast majority of the oil is in Scottish waters. With practically all of the gas in the UK in the southern North Sea, that is in 'English' territory." He says it is hard to separate the revenue from oil and gas. THE NATIONALISTS SAY: Mr Hosie says: "A comprehensive study of this was undertaken by Aberdeen University. At current oil prices, the percentage of revenue accruing to Scotland would be up to 95 per cent." THE UNIONISTS SAY: Mr Bruce says: "A total of 100 per cent of what falls north of any median line would be Scotland's, but settling of that could create a long-term dispute."

Devolution forced the UK government to define the boundary between Scotland and England because of the different legal systems and for fisheries protection. THE EXPERT SAYS: Dr Stephen Neff, of Edinburgh University law school, says that international law dictates that two countries should first negotiate. However, if England insisted that the boundary should go at 45 degrees from the Border - giving some oil fields to England - but Scotland objected, the matter would go to arbitration. "It would be very easy for the English to argue their case and then the matter would go to the World Court of Jurisdiction in The HagueTHE NATIONALISTS SAY: Mr Hosie says: "Scotland and England are two mature nations and I have no doubt we will be able to agree.THE UNIONISTS SAY: Lord Foulkes, vice-chairman of Labour's Scottish election campaign, says: "By looking for a fight with Westminster, Scotland would not be in a position to focus on economic growth and public service delivery."

The Nationalists say that Scotland should invest an unspecified proportion of the £10 billion a year oil revenues to build up a futures fund. If it was as successful as Norway's, it would leave a substantial legacy for Scotland when the oil runs out. THE EXPERT SAYS: Mr Mackay says: "The oil and gas industry could certainly be an important part of an independent Scottish economy in the future, but it could not provide the financial bonanza some people have claimed recently THE NATIONALISTS SAY: Mr Hosie says: "An oil fund is the best way to guarantee that our oil will bring benefits for today and for all future generations of Scots.THE UNIONISTS SAY: Mr Bruce says: "In principle a fund could be set up, but how will the SNP divert tax revenues on which their promises depend?"

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