North sea oil who owns it

The prospect of a second independence referendum, like the first in see our Routes and obstacles to a second Scottish independence referendum briefing , raises a number of issues for the North Sea oil and gas sector. This briefing takes an initial look at some of those issues. The location of any future land and maritime boundary between the rest of the UK and Scotland will be a significant issue. Under relevant international law, coastal states have sovereign rights to exclusive exploration and exploitation of the natural resources within their Exclusive Economic Zone EEZ , as well as over offshore wind, wave and tidal and carbon capture, usage and storage CCUS projects.

The maritime boundary between Scotland and the continuing UK will therefore determine the jurisdiction of both sides over North Sea oil and gas reserves. There is no agreed maritime boundary currently.

UNCLOS encourages parties to reach agreement, and contains mechanisms for the resolution of disputes, commonly based around the line of equidistance. As a practical matter therefore, the continuing UK and Scotland may reach interim arrangements such as a joint development zone. Co-operation between regulatory bodies should help ensure consistency in the regulatory environment and that licensed activity is recognised in both jurisdictions. In the longer term, it may be possible for the continuing UK and Scotland to negotiate an intergovernmental framework similar to the framework already entered into between the UK and Norway in respect of infrastructure and fields that straddle the UK-Norwegian EEZs.

For more information on international law issues arising in the case of Scottish independence please see our briefing on Scottish independence: the international law implications briefing. The fiscal position of a hypothetical independent Scotland has been significantly affected by North Sea tax revenues over time.

For it was 6. A Average Scottish budget deficit excluding geographic share of North Sea revenue. E Average that A was higher than C. For these illustrative purposes, GERS estimate the apportionment of North Sea revenues is based on the median line principle as employed in to determine the boundary between Scotland and the rest of the UK for fishery demarcation purposes. A major concern for companies operating in the North Sea oil and gas sector will be to ensure that nothing jeopardises tax reliefs associated with future decommissioning costs.

The legislation governing decommissioning costs allows participators in an oil and gas field liable to decommissioning expenditure to seek tax relief for such expenditure, through a carry back against profits arising to the participants from the field. This usually results in significant repayment of tax to present or past participators. The division of such State liabilities will be just one part of wider independence negotiations in relation to the apportionment of assets and liabilities see our briefing on Scottish independence and currency: choices, issues and implications on this question more broadly.

Indeed the Scottish Government saw the scale and value of future decommissioning work, as a significant opportunity to support future economic growth. The counter-argument from the White paper perspective was that the negotiations on dividing up State assets and liabilities relating to oil production and to decommissioning tax relief should balance future decommissioning liabilities against the previously accrued tax receipts which had not at that time been apportioned to Scotland on a geographic basis.

The SGC Report did not discuss this issue although, as we touch on in our currency briefing , it took quite a firm position on the dividing of assets and liabilities generally. Surely the historical contributions and initial investments from London-based groups have been accounted for by decades of healthy revenue from the extracted oil to date.

It's not as if these corporations have just set up shop, and because they did decades ago [that] doesn't give them the given right to keep mining for decades to come. Well maybe for some. But who will pay for the old field platforms to be dismantled if the oil companies argue that their legal inheritance to keep producing on old terms agreed with the UK government has been changed? We believe that is the best way forward. We have not got into detailed discussions and negotiations about how independence would affect that because the referendum hasn't even been established and we've got all of those issues to go through.

Hendry argued that the difficulties of operating two different taxation and regulatory regimes in what is essentially the same region — the North Sea — will be for the Scottish government to tackle. So far, it has failed to do so. It is a movable feast and economists, as well as politicians, can change their minds.

The change is to do with the faster than expected fall in oil and gas production. This cash all goes to the Treasury in London and then is distributed back to Scotland and the regions. He has done various bits of number-crunching work on Scottish independence , but insists he is has no view on whether Scotland should go it alone. This is well worth a read for those wanting more "hard numbers". I think we are going to have to wrap it up there. It's Friday afternoon and the family weekend beckons.

Very many thanks for all those who have contributed to a civilised and constructive debate on a potentially-emotive issue. The past cast a shadow over the hundreds of different comments as much as the future and this may influence discussions should political independence become a reality.

North Sea platforms have been pumping for over 30 years and there have been many reminders that a lot of public cash has been raised in taxes and occasionally mis-spent - certainly not set aside in any way for future generations as in Norway. There has been more debate on how any the past legacy of investment would be dealt with and plenty of discussion about whether operators and their facilities and workers could partly decamp to England, if corporation tax and others fiscal measures made it better.

But there is always opportunities for disagreement over oil. Russia and Norway agreed last summer how they would divide up the oil-rich Barents Sea but a deal only came after decades of negotiation. Topics UK news Reality check: Scottish independence.

Energy industry Scottish independence Scottish politics Scotland. Reuse this content. The new owners say they can squeeze out more and cheaper barrels from North Sea fields than big companies, making faster decisions and specialising in North Sea extraction.

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