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Monday, 3 February 2014

What will happen to the Oil & Gas in the event of a YES vote?

Well well well! I was as surprised as anyone to read the article in todays Financial Times, so surprised that I almost forgot that I was well aware of the facts and assertions they were espousing. Scotland would become the 8th richest country by GDP and the 35th biggest exporter of manufactured goods and services & has all the ingredients required to prosper from the get-go.

The only caveat that the FT attaches to its research is that they are dependent on Scotland inheriting a geographical share of existing oil & gas reserves. To some people, that might be construed as a problem - but for a man who's spent much of the last 15 years traipsing all over the north sea as a measurement specialist - I can assure you it's no problem at all. Now, anyone with an iota of common sense or rudimentary geographical knowledge would be able to tell you the lions share of oil &gas resides in Scotland but in order to validate this statement, I'll oblige with some factual graphics - provided no less by the DECC - The regulatory body of the oil and gas industry in the UK.

You might notice that something is missing from the latest version of the map - the English / Scottish maritime border. It might surprise you to know that it was only this year that the DECC decided to remove the median line entirely - at the behest of the UK Government (I can't imagine why!) - luckily for me AND you, I have a copy of the 2012 Map that shows the median line very clearly.

From the legend, you will note that Red is crude oil, Green is Gas & Yellow is Gas Condensate (Or LPG/NGL in layman's terms)

Above you will see that the English Sector of the North Sea has a multitude of green, indicating that natural gas is extremely abundant. However - on oil, there is very, very little. So little in fact, you'll note that NE England's only Oil Terminal at Tees port is actually fed from the Norwegian (Ekofisk) Sector of the North Sea - adjacent to the Scottish J-Block - so known because of the names of the neighboring fields, Jade, Joanne, Judy.

Off the coast of Eastern England is a long established & mature extraction zone that has excellent reserves of natural gas which are not only used to power the many CCGT Gas Turbines that produce electricity, but heat the homes of millions of gas customers. These fields bring in fairly good tax receipts for the UK exchequer - but as gas is a use-now energy resource when you preclude adequate liquifaction facilities (Something the coalition has completely neglected) it is more often sold through the Zebrugge pipeline to Liquefaction companies in Germany & The Netherlands.

The UK, with it's chronic short-term (usually 5 years - imagine that) attitude towards energy infrastructure is extremely ill-equipped to capitalise on the natural gas England produces. The Germans however - have developed massive underground storage facilities for storing liquefied natural gas. As things stand, the energy companies in the UK that produce gas end up selling it to the Germans in the summer, who then liquefy * store it, before selling it sell it back to us at 3 times the price in the winter. It might surprise you to learn that Germany produces very little Natural Gas domestically, but nonetheless makes exceptional returns on the gas that the UK sells to it.

But I digress, this isn't about how poorly the UK administers England's plentiful natural resources - no, this is about how much of the UKCS Oil and Gas is in Scotland & with the aid of the illustration below, I'll demonstrate just how much there is.

Above, north of the median line, you will see the long established and extensive oil and gas networks within the Scottish Sector of the North Sea. Note the 3 main oil pipelines. Sullom Voe Terminal on Shetland being fed from the Ninian & Brent Pipelines. Flotta Terminal on Orkney being supplied oil from the Tartan / Claymore pipelines. The famous Forties pipeline making landfall at Cruden Bay before being piped overland through Scotland to Kinneal. Note too the 10 year-old BP Clair Platform West of Shetland alongside the Schiehallion field - which has been producing very strongly and was the main focus of attention of David Cameron's visit to Aberdeen in October to see Bob Dudley (here). Those of you with sharp eyes may also notice the St Fergus Gas terminal near Peterhead - which houses 3 large Gas & Condensate plants run by Total, ApacheCorp & Shell. These various terminals are often neglected when we talk about Scotland in terms of oil and gas - but prove by their very existence that Scotland is certainly in no short supply of gas.

In the unlikely event that UK decided it was going to hold on to Scotland's rightful share of oil & gas assets - the vast majority of fields & pipelines make landfall inside Scotland itself. This makes it very difficult to attempt to cut Scotland out of the game & in all likelihood - threatening to do so would be so damaging to the industry & by extension the economy it's inconceivable as an option. Its far more likely that energy agreements will be drawn up post independence between rUK & Scotland - the politics of necessity.