24 Feb 2014

Yes/No Scotland: Cameron and Salmond do battle over oil

David Cameron and Alex Salmond chair meetings in the UK’s oil and gas capital, Aberdeen, in the latest clash over Scottish independence and set out their plans for North Sea exploration.

David Cameron and Alex Slamond do battle over North Sea oil

The prime minister went on the attack by gathering his top team north of the border in Aberdeen, and warning that leaving the UK would harm the key sector.

But Mr Salmond accused the Westminster government of hampering growth by fiddling with taxes, and dragging their feet over a new gas-fired carbon capture and storage plant in Peterhead.

Millions of barrels

The exchanges came as Mr Cameron backed a report from retired oil executive Sir Ian Wood, calling for measures to generate £200bn for the British economy by ensuring up to four billion extra barrels are recovered from the North Sea over the next 20 years.

Sir Ian recommends:

  • the creation of a new independent regulator to supervise licensing and to ensure maximum cooperation between businesses to explore oil and gas fields,
  • a joint commitment between government and industry to ensure licences are awarded on the basis of recovering the maximum amount of petroleum from UK waters,
  • a sharing of infrastructure and geophysical information,
  • a reduction in red tape.

Downing Street said tax revenues from oil and gas in 2012-13 were £4.7bn lower than the previous year – a drop of more than 40 per cent and a sum it says equates to more than a third of Scotland’s health budget or two-thirds of its spending on education.

Mr Cameron toured a BP installation 150 miles east of Aberdeen ahead of a cabinet meeting in the city this afternoon, and argued that Scotland alone would find it harder to invest and deal with oil market volatility.

“Because we are a top ten economy we can afford the tax allowances, the investment, the long term structure that is necessary to make sure we recover as much from the North Sea as possible,” he said.

Mr Cameron added: “I profoundly believe the United Kingdom will be better off if we all stay together.

“We all bring things to this United Kingdom and I’ve been very clear to say on behalf of the rest of the United Kingdom to the people in Scotland we want you to stay.

“We think that we’ll benefit by you being in the United Kingdom, by keeping this family together, but in the end the choice has to be for people in Scotland.

“It’s their choice, they will make it, but I think it’s important to lay out all the arguments of the benefits of staying together.”

Tax changes

However, Mr Salmond, chairing a meeting of his cabinet in Portlethen, just outside Aberdeen, said: “We are seeing a massive investment in the North Sea at the present moment, it could be argued that much of this investment would’ve gone ahead in 2011/12 if it hadn’t been for George Osborne’s number of tax changes that caused uncertainty.

“We’ve had 16 tax changes in the North Sea in ten years, we’ve had 14 oil ministers in the last 17 years, three in the last four years, one thing that Scottish control of oil and gas resources will offer is a much more stable, long term policy.”

Welcoming the decision to locate the multi-million pound carbon capture and storage site in Peterhead, Mr Salmond added: “It’s something we’ve been calling for for over a decade but successive Westminster governments haven’t gone ahead with it.

“I think it’s imperative we do go ahead so I welcome it because carbon capture technology is one of the most exciting things, both for containing CO2 emissions and for enhancing oil and gas recovery from the North Sea, so it’s a double win.”

The first minister has promised to base part of the Scottish energy ministry in Aberdeen if there is a Yes vote on 18 September.

There are also plans to establish two separate oil funds – one short-term fund to help deal with fluctuations in oil and gas revenues, alongside a long-term savings fund.

Asked why Mr Cameron would not debate the independence issue directly with Mr Salmond while he is in Scotland, the prime minister’s spokesman told a daily Westminster media briefing: “This is a debate and a vote amongst the people of Scotland.

“As the prime minister has said, he doesn’t have a vote, and that is why – as I think the secretary of state for Scotland was reiterating yesterday – the question is ‘Is Mr Salmond willing to debate with Alistair Darling?’ “

He added: “The reasons why the cabinet is in Aberdeen today very much relate to the North Sea oil and gas industry and the arguments the government is making in respect to that industry.”

Mr Cameron earlier argued that the UK’s financial clout will mean that it is able to support the oil and gas industry consistently.

The prime minister said: “For many years the UK has supported the North Sea oil and gas industry and we have worked together to make this an economic success the whole country can be proud of.

“I promise we will continue to use the UK’s broad shoulders to invest in this vital industry so we can attract businesses, create jobs, develop new skills in our young people and ensure we can compete in the global race.”

North Sea oil 

North Sea oil production began in about 1975 and an estimated 40 billion barrels have been extracted to date.
The Etap, or Eastern Trough Area Project, began operating in 1998 and comprises nine oil and gas reservoirs.
From a peak of 140,000 barrels of oil a day in 2000, it currently produces around 30,000 to 40,000.
The oil is exported via the Forties pipeline to Grangemouth and Etap's gas is transported by the Cats pipeline to Teesside.
An investment programme is under way to extend the platform's production from 2026 through to 2030.