What’s missing from the oil debate around Scotland’s referendum?
The dominant voices on both sides of the #indyref debate have focused on total reserves left on the UK Continental Shelf, and on the potential for an oil fund. But the debate has shied away from asking in whose interest oil should be governed, and whether the priority should be to maximise extraction, or to maximise revenues. This research plugs the gap.
All the large parties take the existing fiscal regime for granted. However, by comparing with Norway’s model, we show that Britain has missed out on £10 billion in oil revenues a year.
Platform is not taking a position on the referendum on September 18, but believes in a full debate around the issues.
We will be uploading the calculations and sources very soon. If you have any questions, please contact email@example.com
Platform’s research, compiled into a simple infographic, shows that
- Britain only receives a fraction of the oil revenues that Norway receives. In 2010, the state revenue per barrel in Norway was $48.50; in Britain it was only $21.50 – less than half.
- The value of Scotland’s proven reserves per UK resident under the current fiscal regime is $1,020. If an independent Scotland mirrored Norway’s tax & ownership structure over oil, the value would be $27,479 per Scottish resident.
- The lax tax regime allows corporations to make enormous profits, at the expense of the public purse. Profitability for UK Continental Shelf companies is generally at least three times that of non-UKCS companies. In 2008 Q2, the net rate of return for North Sea oil companies reached 62.6%, while non-oil companies were at 12.2%. In 2013 Q4 the UK Continental Shelf companies’ net rate of return was 30.4%, while non-oil companies rate of return was 11%.
- Cashflow from the North Sea is used to subsidise drilling elsewhere in the world.
- In the six years from 2002 until 2008, Britain missed out on £74 billion in oil revenues, compared to if it had applied the Norwegian model. This could have covered five years of cuts to legal aid, the NHS, pension credit, child benefit, the arts, sports and public transport. Alternatively, £74 billion spent in Scotland could have provide Scotland with 10 new mega-hospitals like the South Glasgow Hospital and 1,000 new GP clinics, with 10,000 new doctors and 20,000 new nurses to staff them. As well as a renewable energy project in every community, a community centre in every village and a solar panel on every home, to enable a decentralised and democratically-owned energy system. And a high-speed rail between Edinburgh and Glasgow, 10 new railway lines in Scotland and free local bus services. And free state childcare for pre-schoolers, a return to grants for higher education students and a citizen’s income for all Scottish residents of £5,200 per year.
If Scotland gains full control over its energy resources, whether through independence or devolution-max +energy, it could follow the Norwegian model, rather than replicating the UK fiscal regime.
* Norway is a comparable oil province to the UK Continental Shelf.
* The UK does not have higher costs; investment in Norwegian offshore drilling has been consistently higher than in the UK.
* Norway’s fiscal regime is not a deterrent to investment. According to the Norwegian Ministry of Petroleum, it is “designed to be neutral, so that an investment project that is profitable before tax will also be profitable after tax.”