Sir Ian Wood: 15 years of oil left before independent Scotland spending cuts The North Sea’s most eminent industry leader comes out against independence and warns rapidly depleting reserves means a separate Scotland could end up importing gas from England.
Sir Ian Wood has warned the decline in North Sea oil will start hurting the Scottish economy in 15 years Photo: AFP
The North Sea most eminent oil and gas tycoon has delivered a devastating blow to Alex Salmond’s independence campaign by warning there are only 15 years of reserves left before its decline starts wreaking major damage on the Scottish economy.
Sir Ian Wood, who has been praised by both David Cameron and Mr Salmond as the industry’s foremost expert, said the First Minister was overestimating the remaining reserves by between 45 per cent and 60 per cent.
He said the industry’s projected decline means “the case is heavily weighted towards Scotland remaining in the UK” and he was speaking out to ensure young Scots voting in the referendum knew there would be little production by the time they are middle aged.
Instead he warned they would see a “real rundown” in Scottish public services and jobs after independence, significantly undermining the First Minister’s claim that a Yes vote is needed to save the Scottish NHS.
In the most galling humiliation for Mr Salmond, Sir Ian said a separate Scotland may end up importing gas from England following the discovery of “very significant shale gas reserves”.
Sir Ian, whose personal fortune is estimated at more than £1 billion, retired in 2012 after 48 years at Aberdeen-based Wood Group, building up the oil company into a global venture operating in 50 countries with a turnover of more than £7 billion.
He recently led a review for the UK Government on the regulatory and taxation regimes necessary to best exploit the remaining reserves, which the Prime Minister promised to implement.
But his views on the industry have also been repeatedly lauded by Mr Salmond and his SNP ministers and they asked him to conduct a review of Scotland’s education system to make young people more employable.
Speaking to EnergyVoice.com, Sir Ian said he had “no allegiance” to any political party or campaign but he felt he had to speak out both because he was sick of being misquoted by both sides and the significance of the referendum for “children, grandchildren and future generations”.
He said no more than 35 years of oil and gas production remain unless major new discoveries are made but warned the industry’s decline would be felt much sooner on Scotland’s public services and finances than that if there is a Yes vote next month.
“The loss of significant offshore oil and gas tax revenues as the North Sea runs down will have a big impact on our economy, jobs and balance of payments, with significant increases in household energy bills – and a very adverse impact on the legacy for future generations in an independent Scotland,” Sir Ian said.
“Young voters right now should just be aware by the time they are middle aged they’ll begin to see a real rundown not just in the level of oil and gas being produced but the ongoing implications of that, the jobs, economic prosperity, public services.
“And that rundown will begin in 2030, which is only 15 years away. So it’s really not right to focus the debate on the short term.”
The Scottish Government’s White Paper on independence claimed there are around 24 billion barrels of oil left in the North Sea but Sir Ian said the actual figure was between 15 billion and 16.5 billion barrels even with a “more sympathetic” tax regime.
The Aberdeen-born tycoon estimated that production would be down to around a sixth of current levels by 2050, the equivalent of around 250,000 barrels, meaning that “offshore oil and gas cannot figure significantly in Scotland’s medium-term economic calculations.”
The Scottish Government’s has estimated oil will generate £7 billion in tax per year but this is £2 billion to high, he said. Sir Ian added this is “quite a big shortfall” and is the equivalent of £370 per person north of the Border.
He said a Yes vote would be ironic as it would come just as England was well placed to succeed Scotland as the chief contributor to the UK’s energy reserves. Fracking south of the Border could make a “significant contribution” for the next 50 years, he said.
“This could see Scotland having to import hydrocarbons from England at significant cost to our balance of payments,” Sir Ian warned.
This is significant as it undermines Mr Salmond’s claim the remainder of the UK would accept a currency union with a separate Scotland because of the contribution of oil to its balance of payments.
Concluding that a separate Scotland would lose out on “our energy economics”, Sir Ian said the independence debate should be focused on the welfare and prosperity of Scotland’s citizens rather than nationalism.
“Against these measures, 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,” he said.
His intervention buttresses a report by the impartial Institute for Fiscal Studies, which warned a separate Scotland faces an extra £6 billion of spending cuts or tax increases partly thanks to declining oil revenues.
Alistair Darling, the leader of the pro-UK Better Together campaign and former Labour Chancellor, said: “Sir Ian Wood’s comments blow apart Alex Salmond’s plans for funding schools and hospitals. It is devastating for his ridiculous claims on pensions and on jobs,” he said.
“Alex Salmond has acknowledged that Sir Ian Wood must be listened to when he is talking about North Sea oil. Now Alex Salmond must listen to him and tell us his Plan B for Scotland.”
Iain Gray, Scottish Labour’s finance spokesman, added: “With just weeks to go before Scotland goes to the polls, it is now incumbent on the Yes campaign to spell out the spending cuts and tax rises which would be inevitable if Scotland votes for independence.”
Danny Alexander the Chief Secretary to the Treasury, said: “This is yet more evidence that we are stronger with the UK’s broad shoulders on our side. In a week when the nationalist currency position descended into a shambles, this analysis confirms that the case for independence has no economic credibility whatsoever.”
Mr Salmond has faced repeated criticism for wildly overestimating the value of the remaining reserves, even claiming there would be enough income to squirrel off some into an oil fund to be invested for future generations.
He highlighted a report published at the weekend by a group called N-56, which claimed that revenues could be six times higher than predicted by the Office for Budget Responsibility. However, Sir Ian pointed out the group was founded by a senior Nationalist.
Oil figures inadvertently released by the Scottish Government last week showed £4 billion was raised from the North Sea in 2013/14 compared to Mr Salmond’s prediction of £8.3 billion. The total was down £1.5 billion compared to the previous year.
Fergus Ewing, the SNP Energy Minister, said: “Sir Ian is of course entitled to his views in the debate on Scotland’s future – but there is a wealth of expert opinion on the huge scale of Scotland’s long-term oil and other energy reserves, and the opportunities which that will offer us as an independent country.
“This is ultimately a debate about exactly how big Scotland’s remaining oil reserves are, and most countries are not nearly lucky enough to be in that fortunate position.”
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