Next week, voters in Scotland head to the polls to answer a decisive question: "Should Scotland be an independent country?"
For energy giants BP and Royal Dutch Shell, the answer is "no."
Oil looms large in the Scottish independence debate because of vast North Sea reserves that have buoyed economic growth across the United Kingdom for decades. Most of those reserves have dwindled over the years, but the energy industry still plays a major role both in Scotland and across the UK. If Scotland were to become independent, it would take with it what oil is left in the North Sea. Exactly how much that is – and whether or not it would support an independent Scotland – is a matter of much debate.
Ultimately it's up to the Scots to decide, but London-based BP and the Dutch firm Shell are major players in the region, and have both come out against the push for independence. The reason? Oil supermajors want certainty in future investments, and would rather not risk changing a favorable tax scheme that has long promoted North Sea development.
"Companies investing potentially significant amounts of capital in a country do not want added risk from geopolitical issues, most notably in their home country," Brian Youngberg, an energy analyst at Edward Jones, writes via e-mail. "Uncertainty is not welcome in their home country of all places."
It's why BP chief executive Bob Dudley said Wednesday that he "believes that the future prospects for the North Sea are best served by maintaining the existing capacity and integrity of the United Kingdom.” Last week, Shell chief executive Ben van Beurden told the Wall Street Journal that it would be better for Scotland to remain part of the union.
"Why on earth would it be a good thing for us?" Mr. van Beurden told the Wall Street Journal, in reference to Scottish independence. "Purely from a business perspective, the difficulties and uncertainties that [we would] have to go through make you say I don't see an upside, only downside from our perspective."
More than 90 percent of UK oil production takes place offshore – most of it in the North Sea – but volumes are steadily declining as the fields mature. Despite an investment of $23 billion in new projects last year, offshore crude oil production decreased by 9 percent between 2012 and 2013, according to the US Energy Information Administration.
How much is left? Supporters of independence tend to present higher estimates, projecting that as much as 21 billion barrels of oil remain in the North Sea. Tax revenue from producing those barrels, supporters say, would be enough to sustain an independent Scotland for decades to come.
Not everyone sees it that way. Sir Ian Wood, a former oil executive and a longtime leading figure in the North Sea oil scene, says those estimates are too high. He puts the figures closer to 15 billion barrels, and warns of propping up a new economy on resources that may or may not exist.
“By basing our economy and therefore the future of our children's quality of life, public services and jobs on unrealistic recovery of reserves let alone unproven reserves is a huge gamble and the stakes are too high,” he told The Telegraph. “The highly misleading and exaggerated claims around oil and gas give me cause for concern about where else in the case for independence there have been similar distortions, painting an overly-optimistic picture which is galvanising voters into making a decision we could all live to regret.”
Shell and BP, for their part, agree that the North Sea's best days are behind it. The region is unlikely to ever wield major influence over global energy markets like it did in the '80s and '90s, but there's hope that new drilling techniques will open up previously inaccessible reserves.
"Oil is expensive to produce there, many companies lack scale there, and the big fields have been found and exploited," Mr. Youngberg writes in an e-mail. "New technology may help reverse this. Spending could potentially rise in coming years, but it will likely be a smaller group of companies (probably including BP and Shell)."