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Oxford economist cautions against North Sea oil grab

SCOTTISH ministers' plans to take ownership of the bulk of North Sea oil in the event of independence would set a "truly dangerous precedent" around the world, says a leading economist.

Sir Paul Collier, Professor of Economics at the Blavatnik School of Government at Oxford University, said an independent Scotland would be entitled to only its UK population share of North Sea oil and gas revenue - 8% - and not its geographical share of 90% which the SNP Government insists it would be entitled to.

Prof Collier, who is also director at the college's Centre for the Study of African Economies and a former director of the Development Research Group at the World Bank, noted how in the 1960s Britain like almost every other country established a "very sensible" rule that when a natural resource was found, it belonged to everyone.

"Once it's found, resource-rich regions can't turn round retrospectively and say - ah, forget about that, it's ours, we're off; resource secession can't be allowed. I work in Africa, where, if this precedent was set, it would be catastrophic."

On the issue of North Sea oil and gas, he said: "Scotland is legally entitled to 8% of the UK's oil. This is not a theoretical issue; it's a very important principle in international energy law. Scotland cannot be allowed to set a precedent that elsewhere in the world would be truly dangerous."

Prof Collier cited the example of coal. "Coal is a non-renewable resource. Most of Britain's coal is in Yorkshire. The coal from Yorkshire benefited everybody in the country. The profits from Yorkshire's coal accrued to Scotland as well as Yorkshire.

"The idea that suddenly Scotland is entitled to run off, retrospectively, with oil is a dangerous precedent that will be resisted internationally because it will produce conflict and inequality in very poor countries around the world."

However, Tony McKay, an Inverness-based oil consultant, described Prof Collier's argument as "theoretical", which might have been relevant 40 years ago. Stressing he was confident that, following any Yes vote, a fair deal on oil and gas could be reached between the UK and Scottish governments, he noted that the "bulk" of the decommiss-ioning costs - removing platforms and pipelines - would be borne by an independent Scotland and not the UK.

Mr McKay added: "If the politicians can reach an agreement, it would go ahead regardless of what the legal, theoretical arguments are."

While the UK Government notes how the valuable resource is declining and price-volatile, its independent forecaster, the Office for Budget Responsibility, last month cut its revenue predictions for the next five years by nearly £3 billion.

For 2016/17, the year the First Minister hopes to declare independence, the OBR now predicts revenues of £3.2bn; this contrasts with the Scottish Government's most cautious estimate for the same year of £6.8bn.

In total, the SNP administration expects at least £34.6bn in North Sea taxes between now and 2017/18; the OBR puts them at £18.8bn.

Oil tax revenues are assigned to the United Kingdom Continental Shelf, an economic region in its own right.

Professor Alex Kemp, of Aberdeen University, a leading expert on the oil industry, has suggested the so-called "median line principle" is the obvious one to use in any post-independence negotiations.

This is the equidistant line used when the North Sea was divided up between the UK and its neighbours 50 years ago and it was used to determine the fisheries boundary between Scotland and the rest of the UK following the establishment of devolution in 1999.

However, in complex negotiations, which Defence Secretary Philip Hammond earlier this month made clear meant "everything will be on the table", assumptions cannot be made.

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