North sea oil: a tale of two countries [Oil & Gas Industry

Abstract

BACK IN THE 1980s, for a whole golden decade it seemed that the sun would never set on the prosperity North Sea exploration brought to the United Kingdom and Norway. Both nations gratefully cashed in on a new gold rush ushered in by the alignment of two factors. First, the price of oil had rocketed since the global political shocks of the ArabIsraeli War of 1973-4 and the Iranian Revolution of 1978-9. Second, while consumers sought an alternative to dealing with the inflated markets of the Middle East, rapid exploration of the North Sea's continental shelf meant that economically viable oilfields were coming on stream at considerable pace. With the energy crisis of the 1970s a thing of the past, Time magazine reported that “the world temporarily floats in a glut of oil”. The Institute of Fiscal Studies stated that “the growth of North Sea oil revenues is the most important fiscal development in the British economy in the 1980s”. In fact, during the 1980s, taxation on oil from the North Sea delivered to the UK's Treasury (when adjusted for inflation) an average of £18bn per annum, or 10 per cent of its entire income. As a direct result of tax revenues and state investment in oil generated from the North Sea, Norway was able to consolidate its economic independence and resist joining the EU.