A rigged result: Oil, independence and the future

Measuring 220 square kilometres wide, roughly the size of Malta, and buried beneath some 150 metres of open Atlantic, the Clair field is the largest reservoir of oil and gas in UK waters. The site, in the wild seas between the Shetlands and the Faroes, was first discovered in 1977, since when only the one fixed platform has been put in place to extract the black gold underneath. That went up in 2001, and has produced an estimated 80 million barrels. But it is thought that as much as seven billion barrels of oil lies underneath the raging North Atlantic.

Last week, David Cameron met with BP chiefs in Aberdeen to announce that the government had given its backing for a new phase in oil extraction on the site to commence.

It is more than ten years since North Sea oil production reached its peak in 1999. Thursday’s announcement, however, offered hope that the gradual decline of the industry since then might be reversed. Clair would continue to offer up oil until 2050, BP suggested. There was talk of a new oil bonanza.

For more than 40 years, the politics of oil has played a central part in Scotland’s story. For the SNP in particular, the emergence of the black liquid off the shore of the north-east has been the petrol in its tank. Now, just as the nation gears up for the big day when it must decide whether to become independent or not, the riches of Scotland’s oil windfall has suddenly returned into view. The possibility of harnessing those riches boosted the Nationalist cause once before. Might Clair do so again?

The scale of BP’s announcement on Thursday made headlines last week. The development at Clair is the centrepiece of a £10 billion investment programme by BP and three other oil companies to push forward work off the UK coast. The Clair project alone accounts for some £4.5bn of that. In total, BP reckons some 3,000 jobs will be created by the projects – although not all of them in Scotland. As we report today, the rigs themselves will be built in South Korea. When completed in 2016, the plan is for the two new rigs at Clair to churn out around 640 million barrels of oil.

BP chief executive Bob Dudley said his firm had produced some five billion barrels of oil from UK waters. “We believe we have the potential for three billion more,” he added.

Mark Higginson, a partner at PwC in Aberdeen, noted: “The death of the North Sea industry has often been predicted. The industry has managed to extend its life over and again.”

The excitement around Clair should be a little tempered, say some. The reason the Clair field hasn’t been tapped up until now, like other smaller fields in the North Sea, is because it lies under deep water and in just about the most inhospitable part of the UK’s territory.

One expert, who prefers not to be named, said: “I don’t think this is signalling some great renaissance in a second wave of North Sea oil. Clair is not insignificant but it has been hyped up a bit.”

More widely, it is noted the low-hanging fruit in UK waters has already been picked. Going to places like Clair means oil firms face a lot more in extraction costs, making more accessible oil fields around the world much more attractive.

Others, however, are more optimistic. Professor Alex Kemp, Scotland’s leading oil economist who is based at the University of Aberdeen, agrees there are problems: the oil at Clair is “heavy” and the reservoir fractured, preventing an easy flow to the surface. But, he added, what BP’s announcement shows is that there is enough technical progress to justify further big investment there. “Peak production of oil was in 1999,” he said. “We won’t go back to that, but if everything goes well then it is possible that the decline we have seen since then could be stopped.”

Enough of the oil, what of the politics? The key point being made by SNP figures this weekend is that BP’s announcement kills any claim that the North Sea can no longer be relied upon to provide the kind of income that a newly independent country might require.

SNP economy spokesman Stewart Hosie, said: “This confirms that there is at least £1 trillion of oil and gas sitting there. It confirms much of what we have known and it runs against the scare stories that the oil and gas is about to run out and that Scotland is too poor to look after itself. It confirms that is not the case.”

More than that, is the evidence from the 1970s that confidence about tax revenue from the North Sea increases support for both the SNP and independence.

Professor of politics at Strathclyde University John Curtice noted: “The mor