Remote, oil-rich Shetland elbows way into Scotland's independence vote

Reuters News
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Posted: Apr 16, 2014 8:04 AM

By Sarah Young

LERWICK, Shetland Islands (Reuters) - Twelve hours by ferry from the Scottish mainland, hundreds of miles from Edinburgh and closer to Oslo than London, the windswept Shetland islands have their own aspirations about Scottish independence.

Some of the 23,000 inhabitants even want their own.

Many Shetlanders see the September 18 vote on whether Scotland should end the 307-year-old union with England as an opportunity to gain control over local services and a share of revenues from the oil pumped from the North Sea.

"The oil belongs to us. We don't have to argue about that. It is ours," said Shetlander Hazel Mackenzie, 43, who works in the livestock auction house in Shetland's main town of Lerwick.

"If we could have all the revenue from all the oil then we could probably be very self-sufficient."

One example: Over the last four decades, Britain's oil fields have pumped out 42 billion barrels of oil equivalent; about 20 percent of it has flowed through Shetland, piped in to BP's Sullom Voe, one of Europe's biggest oil terminals.

Another is that about a fifth of the oil and gas thought still to be found off Britain's coast is believed to lie to the west of Shetland.

As the Scottish independence vote nears, Shetland's council has joined forces with two other island councils, Orkney and the Western Isles, to ask for greater control of local services and new fiscal arrangements to enable them to benefit from the oil, fisheries and renewable energy resources surrounding them.

At stake for the Scottish government could be its share of the 7 billion pounds or so of annual oil production taxes which Edinburgh wants in the event of a "Yes" vote for independence.

For many on Shetland, where the blue and white Nordic-style flag flutters from masts amongst the peat hills and isolated coves, a sense of being a Shetlander comes ahead of any Scottish, British or, given history, even Norwegian identity.

In Lerwick, where seals wait in the harbor to greet the arrival of the next fishing boat, some islanders see the result of the Scottish referendum as irrelevant.

"Why would we believe in independence if all it means is that powers move from London to Edinburgh? No, we want to move an awful lot further than that," said Tavish Scott, a Liberal Democrat who is Shetland representative in the devolved Scottish parliament in Edinburgh, dominated by the Scottish National Party.

Scott says around 67 percent of North Sea reserves lie within Shetland coastal waters. The Scottish government envisages using the money from the 94 percent of British oil and gas production tax revenues it estimates come from Scottish waters to support its state spending.

Shetland's bid for power over local affairs and a slice of oil revenues could complicate negotiations between Edinburgh and London over currency, national debt and splitting oil reserves in the event of a Yes vote in September and ahead of what would be independence in March 2016.

"Scotland will need Shetland more than Shetland will need Scotland," said Caroline Miller, 56, an ex-Shetland councilor who now helps run a bed and breakfast hotel.

NEW OIL BOOM?

Oil production taxes have boosted British government coffers by about 300 billion pounds in 2012 money. Shetland, which does not receive any of the oil production tax revenues but does receive payment for oil company use of some harbor facilities and land, has directly benefited from oil to the tune of about 1.7 billion pounds, according to figures provided by its council.

Some of the gains are invested in an oil fund which has generated a further 1 billion pounds. Most of this income has been reinvested in the local community and infrastructure, the council says.

Since 1996, Shetland's gains from oil have been shrinking. The oil industry stopped its "disturbance" payments - annual sums negotiated in the 1970s to make up for their presence - as the ageing fields dried up and crude volumes pumped through Shetland plunged.

But new drilling and plant investment has reversed those fortunes. Locals talk of a second oil boom, strengthening their hand.

The shiny new cars parked on Lerwick's streets and the "no vacancies" signs at bed-and-breakfasts suggest the wealth flowing through. In the harbor, cruise ships rub alongside huge floating hotels, both housing an influx of 1,400 workers.

Near to the Sullom Voe terminal - a cluster of huge tanks hidden over the brow of a hill and edged by a deep inlet - French oil company Total is building a new gas processing facility.

Investments of over 8 billion pounds from companies including Total and BP announced over the last four years will develop untapped reserves to the west of Shetland, explore for new oil and gas and build the new plant, keeping the site open for the next 40 years.

GOING IT ALONE

The detachment many Shetlanders feel on their northerly outpost runs deeper than the stormy, cold seas which separate them from the rest of Britain.

The 100 or so islands of Shetland, where road signs warn of "otters crossing", were part of Norway for 500 years until being pawned to the Scots in 1469 as a dowry for Princess Margrethe who married King James III of Scotland.

Nordic-style wooden houses hug the hillside overlooking Lerwick harbor and road names like Norgaet and Veensgarth hint at the historic, extinct language of Norn. An annual fire festival involves a Viking long ship.

"If you ask a Shetlander who are you? We say Shetlander, we're not Scottish," said abattoir manager Lauraine Manson, 47.

Recognizing the distinction, a grassroots group from across Shetland and its island neighbors, Orkney and the Western Isles, have started a petition asking for a second vote, a week after the Scottish referendum.

It would give islanders the option of choosing their own independence, voting to be part of Scotland, or sticking with the United Kingdom.

Locals speak with admiration for the set-up in the nearby Faroe Islands, a self-governed territory within the Danish Realm, and Britain's crown dependencies, which have control over their own tax matters.

"I'd like to see ultimately something in Shetland on the Faroese model or possibly Guernsey or Jersey or the Isle of Man," said Ian Gidney, 57, who runs an online leather retailer.

Alistair Carmichael, a Liberal Democrat member of the British parliament for Orkney and Shetland, believes it is in the islands' best interests to be part of a bigger unit.

"What we need though, is more control within that bigger unit over the public services that we have here," he said.

Last year, Scottish First Minister Alex Salmond set up a working group to consider devolving some powers to the islands, which is due to report back in June. The Scottish government supported "local decision making", he said then.

(Reporting by Sarah Young; Editing by Angus MacSwan)