Oil Industry Crucial To Debate

Campaigners in the referendum have clashed repeatedly over how best to harness Scotland's wealth of energy resources.

A key battleground has been the North Sea oil industry, with its estimated contribution of about £22 billion to Scottish gross domestic product (GDP) in 2012.

According to an independent review led by Sir Ian Wood, between 12 and 24 billion barrels of oil and gas could be left in the UK Continental Shelf.

Much of the debate has focused on how those remaining resources would be best managed in the years to come.

The Scottish Government argues the industry - and the wider economy - has suffered from a lack of stability under decades of UK mismanagement.

Successive Westminster governments have failed to capitalise on North Sea wealth by reinvesting it for future generations, its white paper on independence says.

The SNP hails the example of Norway, where an oil fund set up in 1990 has now grown to about £470 billion.

In the event of a Yes vote, a similar Scottish Energy Fund would be set up to save surplus oil and gas revenues.

The party envisions a short-term stabilisation fund established immediately after independence to manage fluctuations in offshore revenue.

Public spending and borrowing would be based on cautious forecasts of revenue from the industry, with the option to withdraw cash if receipts fall.

Investments would also be made into a long-term savings fund for future generations, according to the Nationalists.

Opponents of independence point out that North Sea reserves are finite and declining, with oil and gas increasingly challenging and expensive to extract.

They attack the Scottish Government's plans for being too dependent on a volatile source of income and say the SNP's oil revenue forecasts are unrealistic.

An independent Scotland would have to increase borrowing or taxation, or cut public spending, in order to cope with a fall in oil proceeds, according to UK Government analysis.

Westminster argues the Scottish economy is shielded from this unpredictability and supported as part of the UK's broader and more diverse tax base.

Even if an independent Scotland managed to set up an oil fund it could take a long time to reach a level at which it could manage instability in Scottish public finances, the No campaign claims.

The UK Government has also dismissed the assertion that an independent Scotland would be able to remain part of the Great Britain-wide energy market.

The Scottish Government says it would set up an energy partnership with Westminster to provide joint control of the market in the event of a Yes vote.

The white paper promises that it would be in everyone's best interests for the current electricity and gas arrangements to continue.

It points out that the networks between the countries of the UK are highly integrated and Scotland is a net exporter of electricity.

The growth in renewables energy north of the border benefits Scotland's neighbours, ensuring safe and secure supplies and helping them meet green energy targets, the paper says.

In return, the Scottish Government argues it would be reasonable to expect a system of shared subsidies for renewables and transmission costs among consumers in Scotland and the UK to continue.

The rest of the UK needs Scottish energy to ensure the lights stay on, it concludes.

This is disputed by Westminster, which says Scottish electricity accounts for only a small proportion of demand in the rest of the UK and supplies could be bought from elsewhere.

The current system could not continue after independence as the two countries would have competing national interests and priorities for energy policy, a UK Government analysis paper says.

Energy bills for homes and businesses in Scotland are likely to rise with an end to the shared costs spread across all customers in Great Britain, it adds.

According to the UK Government, this includes up to £6 billion for electricity transmission projects, £560 million for the renewables sector and support to 690,000 electricity customers in north Scotland.

Under independence, Scottish bill payers alone would be responsible for investment in the Scottish energy network, as well as subsidies for renewables and remote consumers.

This would add between £38 and £189 to annual household energy bills in 2020, Westminster concludes.

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