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Scottish independence: Cabinets to set out North Sea plans Scottish independence: Rival North Sea oil visions set out
(about 2 hours later)
Ministers from both the UK and Scottish governments are in north-east Scotland to set out plans for the future of the North Sea oil and gas industry. The Scottish and UK governments have set out competing visions for the future of North Sea oil and gas.
The cabinet meetings came as Westminster ministers said they would fast-track plans to get the most out of remaining UK offshore oil and gas. Scottish First Minister Alex Salmond called for a Norwegian-style approach, under independence.
The move followed Sir Ian Wood's review of the industry. But UK Energy Minister Ed Davey said reserves could be better managed with Scotland as part of the Union.
The Scottish government said the UK government should apologise for "squandering" North Sea riches. Both the Scottish and UK government cabinets are meeting separately in the Aberdeen area, to argue the case for their proposals.
Ahead of the 18 September independence referendum, Scottish First Minister Alex Salmond said a "Yes" vote could secure a better future for the industry. The two events came as Westminster ministers said they would fast-track plans to get the most out of remaining UK offshore oil and gas, in the wake of an industry review which included calls to set up a new regulator.
But UK Energy Secretary Ed Davey said North Sea oil and gas resources were declining rapidly and needed a lot of support in the future. The future of North Sea oil and gas has been a major campaign battleground, ahead of the 18 September Scottish independence referendum.
The Westminster government-commissioned study produced by Sir Ian, who chaired the Wood Group from 1982 until 2012, included calls for a new regulator to help maximise economic gains. Mr Salmond has outlined plans to earmark about a tenth of oil and gas tax revenues - about £1bn a year - for an oil fund similar to the one operated in Norway.
The future of the North Sea oil and gas industry has been a major battleground in the campaign, ahead of the referendum. This, he said, could create a £30bn sovereign wealth pot over a generation.
The first North Sea oil came ashore in June 1975 and production is thought to have peaked in 1999, with more than 40 billion barrels extracted so far. The first minister, who has been holding a meeting of his cabinet in Portlethen, welcomed the prospect of a new regulator for the oil industry, but rejected Prime Minister David Cameron's claim that the "broad shoulders" of the UK could better support the North Sea oil and gas industry.
Although the oil and gas is now tougher to extract, the reserves are substantial - between 15 billion and 24 billion barrels of oil equivalent - meaning possibly another 30 to 40 years of production. And there could be new discoveries such as the fields west of Shetland. He said an independent Scotland would "run oil and gas a great deal better" than Westminster had, and said Scotland needed "the Norwegian approach to things as opposed to the Westminster approach".
But concerns over falling production led the UK government to ask Sir Ian to review the offshore industry. Asked whether an independent Scotland could withstand volatility in the oil market, Mr Salmond added: "It's not just a question of what happens one year, it's what happens over the next half century, and the idea that you wouldn't want be stronger having control of your own natural resources, given what we've seen in the past, is an absolute lunatic one.
He said the UK government's Department of Energy and Climate Change (DECC) was "significantly underresourced and far too thinly spread" to effectively manage the increasingly complex business and operating environment. "Why should Scotland be the only country in the world which wouldn't be better off having for having massive oil and gas resources?
Sir Ian said a 38% fall in production over the past three years had cost the Treasury £6bn in lost taxes and declining exploration threatened more missed opportunities. "We've got the exploration, the development, the potential, but the revenues have been siphoned off by the London exchequer. Little wonder the chancellors, like George Osborne, want to hang on to them."
It is claimed Sir Ian's recommendations could result in the equivalent of three to four billion more barrels of oil being recovered from the North Sea over the next 20 years, bringing in more than £200bn to the UK economy. The Scottish government's Fiscal Commission, in October 2013, said there was "clear merit" in an independent Scotland setting up two oil funds - a short-term "stabilisation" fund to buffer the effects of volatility in the oil market, and a long-term savings fund to ensure future generations benefited from the wealth.
Mr Davey told the BBC Sir Ian's review "does play into the independence debate". The review produced for the UK government by businessman Sir Ian Wood, made several recommendations, including revitalising exploration to ensure recoverable oil and gas resources in the UK are fully explored and exploited.
"Scotland would be very reliant on oil and gas revenue and, with the oil price being so volatile, with decline in North Sea revenues, I think that would expose the finances, the public spending of Scotland very seriously," he said. Westminster ministers said the changes would produce an extra three to four billion more barrels of oil.
Mr Davey told the BBC: "Scotland would be very reliant on oil and gas revenue and, with the oil price being so volatile, with decline in North Sea revenues, I think that would expose the finances, the public spending of Scotland very seriously," he said.
"What we are showing today in the Wood Review is that Westminster will manage the oil and gas reserves that the UK has in a far more effective way and that's great for Scotland.""What we are showing today in the Wood Review is that Westminster will manage the oil and gas reserves that the UK has in a far more effective way and that's great for Scotland."
Mr Davey added: "Scotland has benefited from North Sea oil, let's be clear about this.Mr Davey added: "Scotland has benefited from North Sea oil, let's be clear about this.
"It is the third booming region in the UK. After London and the South East, Scotland is doing incredibly well, as part of the UK.""It is the third booming region in the UK. After London and the South East, Scotland is doing incredibly well, as part of the UK."
Mr Salmond, who will hold a separate meeting of his cabinet in nearby Portlethen, welcomed the prospect of a new regulator for the oil industry, saying the Westminster government's record over the previous 40 years had been "abysmal". The first North Sea oil came ashore in June 1975 and production is thought to have peaked in 1999, with more than 40 billion barrels extracted so far.
At the same time, he rejected claims from Prime Minister David Cameron that the "broad shoulders" of UK could better support the North Sea oil and gas industry. Although the oil and gas are now tougher to extract, the reserves are substantial - between 15 billion and 24 billion barrels of oil equivalent - meaning possibly another 30 to 40 years of production. And there could be new discoveries such as the fields west of Shetland.
Mr Salmond said: "I think it's a nonsensical argument. Why? Because all we have to do here in Aberdeen is glance across the North Sea to Norway, and then we see a country, much smaller than Scotland, which is run by all accounts the most successful oil and gas industry in the world." But concerns over falling production led the UK government to ask Sir Ian to review the offshore industry.
In a report in October 2013, the Scottish government's Fiscal Commission working group said there was "clear merit" in an independent Scotland setting up two oil funds - a short-term "stabilisation" fund to buffer the effects of volatility in the oil market, and a long-term savings fund to ensure future generations benefit from the wealth. He said the UK government's Department of Energy and Climate Change (DECC) was "significantly underresourced and far too thinly spread" to effectively manage the increasingly complex business and operating environment.
Earlier this month, Mr Salmond outlined plans to earmark about a tenth of oil and gas tax revenues - about £1bn a year - for an oil fund.
According to the first minister this could create a £30bn sovereign wealth pot over a generation.
The Scottish cabinet usually meets in Edinburgh, but regularly holds sessions in town and cities across Scotland, especially in the summer months.The Scottish cabinet usually meets in Edinburgh, but regularly holds sessions in town and cities across Scotland, especially in the summer months.
Mr Cameron's predecessor as prime minister, Gordon Brown, held a meeting of the UK cabinet in Glasgow in 2009.Mr Cameron's predecessor as prime minister, Gordon Brown, held a meeting of the UK cabinet in Glasgow in 2009.
The UK cabinet had last met in Scotland in 1921 - when Winston Churchill was the Colonial Secretary and a Liberal MP for Dundee.The UK cabinet had last met in Scotland in 1921 - when Winston Churchill was the Colonial Secretary and a Liberal MP for Dundee.
Meanwhile, Scottish Green MSP Patrick Harvie said that claims of the UK government to be the "greenest ever" and the Scottish administration's talk of "world-leading Scottish climate targets" would count for little in Aberdeen.
"Both the prime minister and the first minister are falling over each other to court the fossil fuel industry," he said.
"It's a pretty sickening sight."