The idea of an independent Scotland never entirely died after the Act of Union in 1707. It gained credibility in the 1960s and '70s when North Sea oil--much of it from Scottish waters--made the UK a major player in the world oil market. The referendum on September 18th is the result of a political deal by the current UK Prime Minister, following a process of "devolution" that has gradually ceded greater autonomy to Scotland within the UK. If Scotland votes to leave, the energy world will look different, too.
The resource portion of the "Yes" argument, articulated in a lengthy white paper, hinges on the proposition that Scotland's post-split allocation of the UK's natural resources would greatly exceed its per capita share, or its 8-9% share of GDP, workforce and similar economic measures. A quick look at a map of UK oil and gas fields shows why. Most of the UK's oil fields lie in waters Scotland would claim, while England's offshore holds mainly lower-valued gas.
According to figures published by the Scottish government, 94% of 2013 UK crude oil production and 49% of natural gas production were attributable to Scotland, equating to over 80% of oil and gas sales revenues of £32 billion. Estimates of a Scottish government's future share of oil and gas taxes vary widely, not least because UK North Sea oil production is in serious decline, while newer resources in the "West of Shetlands" and the Atlantic margin are just starting to be developed. UK oil production peaked in 1999 at 2.9 million barrels per day (bpd) and still yielded over 2 million as recently as 2004, but fell below 900,000 bpd last year. That covered less than 60% of total UK oil demand. The UK became a net oil importer in 2006, but Scotland, with its much lower demand, would be a significant net oil exporter from day one.
The bigger concern isn't current production and revenue, no matter how many details would have to be negotiated concerning the split of producing assets and infrastructure between the two countries. Rather, it's the uncertainties surrounding the development of the remaining North Sea oil and gas resources, which despite its being a highly mature province, look substantial.
The UK government's official 2013 estimate indicated total reserves in currently producing oil fields and those under development at 3.0-7.1 billion barrels, with a central estimate of 4.9 billion. That's after cumulative production of 27 billion barrels. Add natural gas, and reserves increase to 4.5-10.4 billion barrels of oil equivalent (BOE), centered on 7.1 billion. Throw in another billion-plus BOE for "significant discoveries where development plans are under discussion", along with "potential additional resources" and total oil and gas might exceed 18 billion BOE.
The "Yes" campaign's estimate is higher, and it has attracted still bolder assessments, though even at the figure from the UK Department of Energy and Climate Change potential future production would be worth around $1.5 trillion at current prices, ignoring the costs of development and production. After apportioning ownership of these assets, the design and stability of the policies imposed by their new owners would be crucial in determining the pace and extent of future development. It's these uncertainties that appear to worry companies like BP and Shell, based on their public comments. Arguably, the increased uncertainties since the independence referendum was set in 2012 have contributed to the reduced pace of UK North Sea exploration.
As focused as the debate has been on the disposition of today's oil and gas, I'm equally intrigued by the energy choices a post-Scotland UK might make. Consider its unconventional resources, such as shale gas and shale oil. The British Geological Survey identified promising basins in England, such as the Bowland Shale in the midlands, with up to 2 quadrillion cubic feet of gas in place, and the Weald Basin, estimated to hold up to 8 billion barrels of oil in place. Shale development to date has been slow, but accelerating its pace might move up the agenda, particularly under different leadership. For example, Boris Johnson, London's mayor and a possible successor to David Cameron, favors shale policies modeled on successful US conditions. Mr. Johnson recently announced his intention to stand for Parliament next year.
Nor are oil and gas the only energy assets that would have to be divided. The UK has over 5,000 MW of offshore wind capacity in operation or under construction, on seabed held by the Crown Estate--literally the lands of the royal family. While Her Majesty would apparently remain as sovereign north of the border, the "devolution" of the Scottish portion of the Crown Estate has already been broached in the UK Parliament. In any case, most existing UK offshore wind installations are in waters that would likely be controlled by the abbreviated UK. Scotland doesn't lack for wind resources, along with sites for wave and tidal energy, but the bulk of marine renewable energy investment so far has flowed towards England and Wales.
A Washington Post headline this week suggested, "Britain could be on the verge of breakup". Since Britain is technically the island shared by England, Scotland and Wales, rather than their political union, that seems unlikely. However, I can see that the idea of a UK without Scotland (and vice versa) feels geologically momentous to some. It would still be the 7th largest economy in the world, instead of the 6th, with the fourth largest population in the EU, behind Italy. But it wouldn't just be losing some oil and gas, including one of the world's most watched oil prices. The ingenuity and endurance of the Scots have been key ingredients in the national success of the UK for centuries, and they would be sorely missed.