Pressure on Salmond as expert ignites debate over North Sea oil reserves
Scottish Letter: oil tycoon Ian Wood says reserves are two-thirds the quantity claimed
Scottish Labour MSP Kezia Dugdale meets volunteers with unanswered questions on what independence will mean for Scotland, outside the Scottish parliament in Edinburgh yesterday. Photograph: Danny Lawson/PA
First minister’s questions in the Scottish parliament in Holyrood, in a chamber that was designed to encourage harmony, is often an unedifying affair, bitter, partisan and frequently petty.
Members of the parliament, known as MSPs, met for the final such session yesterday before Scotland’s voters go to the polls in the independence referendum on September 18th. First minister Alex Salmond would never have expected garlands of flowers there, but he could have done without oil and gas tycoon Sir Ian Wood’s warning in an interview that the SNP had exaggerated Scotland’s North Sea energy riches.
Wood, who is highly respected in the oil and gas industry and who recently led a review for the British government on the regulatory and taxation regimes necessary to best exploit the remaining reserves, said his review of the reserves had been subjected to “wildly inaccurate misquoting” by both sides in the referendum.
However, headlines in Scotland were dominated by his criticism of Salmond, whose arguments that Scotland can afford independence have relied heavily on the assumption of continuing riches from North Sea resources.
16 billion barrels
“I believe that even with a more sympathetic tax and regulation framework the likely best outcome, without new hydrocarbon regions being discovered, is between 15 billion and 16½ billion barrels,” Wood told the website Energyvoice.com.
Salmond has claimed that a further 24 billion barrels remain to be harvested, on top of the 42 billion taken since the early 1970s. Denying partisanship, Wood said he wanted to be able to look his granddaughter in the eye in coming years and know he did the right thing.
Production by 2050 will have fallen to a sixth of today’s level, he predicted, though £14 billion (€17.5 billion) has been invested in new fields this year and last.
“Young voters must be fully aware that by the time they are middle-aged, Scotland will have little offshore oil and gas production and this will seriously hit our economy, jobs and public services,” Wood said.
Forty years ago the North Sea was a reservoir that simply needed frequent tapping. Production there peaked at 4.6 million barrels a day 15 years ago. By 2030, Wood said, “we’ll be down to something like one million; by 2040 down to 0.5 million and by 2050 we’ll be lucky if we’re producing 200,000 barrels”.
Oil and gas taxes
The decline will be felt in just 15 years’ time, he argued, adding that, over the next five years, oil and gas taxes would reap 40 per cent less than the Scottish government believed.
If correct, Wood has blown a large hole through the figures put forward to voters by Salmond and Scotland’s finance secretary, John Swinney.
Wood said he would be voting No in the referendum: “I believe the debate should not be about nationalism but [about] growth and economic success and the quality of life for citizens and all that goes with that. It’s very hard not to conclude the case is heavily weighted towards Scotland remaining in the UK and getting the best of both worlds. I want the best for future generations of Scots.”
Privately, Swinney has been less bullish than Salmond, warning, in a private letter that caused embarrassment when it leaked, that an independent Scotland would face serious challenges.
Salmond has well-worn defences, notably, to use the endless newspaper clippings his office keeps on the public utterances of everyone of influence in Scottish life.
Drawing from the file, the first minister reminded MSPs that Wood had told Scotland’s young people two years ago that “the North Sea oil industry will see you through your lifetime”.
If Salmond is wrong on his figures then he is not alone: Oil and Gas UK, the industry’s representative body, has also spoken about 24 billion barrels, though that was its higher-end prediction.
Indeed, its chief executive, Malcolm Well, said frankly that all North Sea estimates have significantly underestimated production.
A commission set up by the Scottish government also chose the 24 billion figure, though it cautioned that significant tax and policy changes would be necessary to get all that oil out.
The latest field of battle highlights the problems undecided Scottish voters face in the weeks ahead. Wood’s figures may be right, or Salmond’s may be, but nobody will know before they vote.