The independence referendum process, irrespective of September’s outcome, has been credited by some as a catalyst for reform.
However, as the countdown continues, an examination of the possible consequences of a Yes vote for the oil and gas industry is becoming more urgent.
A number of documents have been published over the last year or so that offer a degree of insight into the approach the government of an independent Scotland would take.
The Scottish Government’s white paper Scotland’s Future – Your Guide to an Independent Scotland provided a broad picture.
Setting out its support for the Wood Review’s proposal for the creation of a better resourced and more powerful regulator to provide more proactive stewardship, this recommendation has also been backed by the Independent Expert Commission on Oil and Gas.
The Commission, which published its Maximising the Total Value Added report last month, has taken this one step further, by recommending that the new regulator’s agenda should be set by the government’s over-arching strategy.
Likening the role of the new regulator, to a limited extent, to that of national oil companies in other countries, the commission also calls on government to provide a “road map”, to create a more positive sentiment in the context of a rolling five-year strategy.
The report goes on to suggest that a new regulator, possibly with devolved licensing powers, should continue to be a single entity responsible for the entire current United Kingdom Continental Shelf, presumably still based in Aberdeen, but answerable to both the UK and Scottish governments.
While policies would be set jointly by both governments, the report recognises that these are likely to diverge over time.
On taxation, the report continues the white paper’s theme, recommending a simplified fiscal regime that ensures international competitiveness, stability and predictability, which reinforces positive investment sentiment.
If adopted, this would mirror current UK Government initiatives.
On decommissioning, the Scottish Government has confirmed its commitment to certainty and stability for the long-term treatment of decommissioning tax relief.
This is expected to be provided both in the manner and at the rate provided by the existing current fiscal regime, which is operated by the UK Government.
A Yes vote in September’s referendum would require agreement between the UK Government, the Scottish Government and the relevant licence holder, before the transfer of a licence to the Scottish Government.
Such licences were originally granted by the UK Government and the contractual terms cannot be changed without either the licence holder’s consent or the state resorting to retro-active legislation.
As a result, it is not automatic that the terms of any licence would transfer from the UK Government to the Scottish Government and be binding on the licence holder (or the Scottish Government).
While it is likely that operators will accept a transfer of the existing licences on current terms, post-independence, the UK Government would not have sovereignty over the resources on the Scottish Continental Shelf.
Therefore, current licences would not be enforceable.
This means that any licences that were not transferred must be replaced with new licences issued by the post-independence Scottish Government.
There is a risk that any changes made to existing terms could see claims of unjustified enrichment being raised.
Both governments’ desire for stability and continuity in key areas of regulation is comforting.
However, in the event of a Yes vote, there would be a period of uncertainty while the details are negotiated.