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How extensive are Scotland’s oil and gas reserves?

Up to 24 billion barrels of oil and gas reserves remain under the North Sea. Recent research by Professor Alex Kemp of the University of Aberdeen has suggested that around 98.8 per cent of North Sea oil production and around 60 per cent of gas production in the 30 years from 2011 will come from Scotland’s geographical share of the current UK Continental Shelf.

Source: Scotland's Future, Scottish Government, November 2013.

Is it Scotland’s oil and gas?

The vast majority of oil and gas in the UK comes from the Scottish Continental Shelf and will be in Scotland after independence. Analysis by academics at Aberdeen University tells us that in excess of 90 per cent of the oil and gas revenues are from fields in Scottish waters (based on well-established principles of international law).

Source: Scotland's Future, Scottish Government, November 2013.

How valuable are the expected tax revenues from our oil and gas production?

The latest Government Expenditure and Revenue Scotland report estimates that oil and gas production in the Scottish portion of the UK continental shelf generated £10.6 billion in tax revenues during 2011/12. This is equal to 94 per cent of the UK’s total tax revenues from oil and gas production. Production in Scottish waters could generate approximately £48 billion in tax revenue between 2012/13 and 2017/18 based on industry estimates of production and an average cash price of approximately 113 dollars per barrel.

Oil and gas production is expected to rise to two million boe (barrels of oil equivalent) per day towards the end of the decade as a result of the current record levels of capital investment. This will see the industry continue to make a substantial contribution to tax revenues for decades to come.

Source: Scotland's Future, Scottish Government, November 2013.

Are oil companies still investing in the North Sea?

North Sea operators have £100 billion of capital investment within their current business plans.

Source: Scotland's Future, Scottish Government, November 2013.

What about the impacts of global recession?

The market for oil and gas is not immune to global recessionary factors. Between 2008/09 and 2009/10, for example, North Sea tax revenues fell from £12.9 billion to £6.5 billion. However, despite this fall, Scotland continued to have a smaller fiscal deficit, as a share of GDP, than the UK as a whole. Even in years when oil revenues fell to as low as £1 billion, Scotland still generated more tax revenue per head than the average for the UK.

Source: Scotland's Future, Scottish Government, November 2013.

How will an independent Scotland maximise the benefits of our oil and gas reserves?

Careful management of Scotland’s oil and gas reserves will be a key priority for an independent Scotland. Unlike successive Westminster governments, the Scottish Government recognises that an independent Scotland should provide industry with the necessary fiscal and regulatory stability and predictability for it to innovate and thrive in a globally competitive environment. We will consider how the existing fiscal regime can be enhanced to maximise oil and gas recovery, and to encourage development in the most technically challenging oil and gas fields.

Source: Scotland's Future, Scottish Government, November 2013.

Will an independent Scotland establish an oil fund to safeguard the benefits of our oil and gas production?

Yes, that is the intention of the current Scottish Government. Since the 1970s, approximately £300 billion in tax receipts (in today’s prices) has gone directly to the Westminster Exchequer, with none of it being saved for the future. We cannot repeat this mistake in the future.

The Scottish Government proposes that an independent Scotland will establish a Scottish Energy Fund which will be both a stabilisation fund and long-term investment fund into which a portion of tax revenues will be invested when fiscal conditions allow. Stabilisation funds and sovereign wealth funds are common among oil and gas producing countries, with the UK being a notable exception.

Norway provides a good example of how a country can effectively manage its oil and gas revenues. It established its oil fund in 1990, although the first net investment was modest and was not made until 1996. The fund is now the largest sovereign wealth fund in the world, worth around £470 billion. It currently owns, on average, 2.5 per cent of every listed company in Europe, and 1.2 per cent of the world’s listed companies. These investments have achieved average annual returns of 5.9 per cent over the last five years.

Source: Scotland's Future, Scottish Government, November 2013.

Is continued oil and gas production consistent with Scotland’s commitments on climate change?

Yes. In Scotland, we will need a mixed energy portfolio, including hydrocarbons, to provide secure and affordable heat and electricity for decades to come. Scotland has a target of delivering the equivalent of 100 per cent of electricity demand and 11 per cent of non-electrical heat demand from renewables by 2020. As we increase our use of renewable energy sources, we also have a duty to minimise carbon emissions in line with our world-leading climate change targets.

Source: Scotland's Future, Scottish Government, November 2013.

Will the recommendations from the Wood Review be taken forward in an independent Scotland?

The Scottish Government welcomes the interim report produced by Sir Ian Wood in his review, Maximisation of Recovery in the UKCS. The report estimates that the prize from increased and effective collaboration could be an additional three to four billion barrels of oil equivalent over 20 years, which could be worth £200 billion. By addressing the challenges facing the industry and harnessing the opportunities, enormous benefits can be reaped by the industry and in tax revenues. This was recognised by the Scottish Government in our Oil and Gas Strategy published in May 2012, and in our paper Maximising the return from Oil and Gas in an Independent Scotland published in July 2013.

We particularly welcome the proposal to create a new regulator. This will provide the necessary skills, knowledge and authority to ensure that we maximise the potential of the wealth of resources remaining. The Expert Commission appointed by the Scottish Government will consider Sir Ian’s recommendations as part of its work and will report in spring 2014.

Source: Scotland's Future, Scottish Government, November 2013.