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* Shetlanders want more say, more oil revenue
* Debate stirred by Scottish independence movement
* Shetlanders first, Scottish second
By Sarah Young
LERWICK, Shetland Islands, April 16 (Reuters) - Twelve hoursby ferry from the Scottish mainland, hundreds of miles fromEdinburgh and closer to Oslo than London, the windswept Shetlandislands have their own aspirations about Scottish independence.
Some of the 23,000 inhabitants even want their own.
Many Shetlanders see the Sept. 18 vote on whether Scotlandshould end the 307-year-old union with England as an opportunityto gain control over local services and a share of revenues fromthe 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 inthe livestock auction house in Shetland's main town of Lerwick.
"If we could have all the revenue from all the oil then wecould probably be very self-sufficient."
One example: Over the last four decades, Britain's oilfields have pumped out 42 billion barrels of oil equivalent;about 20 percent of it has flowed through Shetland, piped in toBP's Sullom Voe, one of Europe's biggest oil terminals.
Another is that about a fifth of the oil and gas thoughtstill to be found off Britain's coast is believed to lie to thewest of Shetland.
As the Scottish independence vote nears, Shetland's councilhas joined forces with two other island councils, Orkney and theWestern Isles, to ask for greater control of local services andnew 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 ofthe 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-styleflag flutters from masts amongst the peat hills and isolatedcoves, a sense of being a Shetlander comes ahead of anyScottish, British or, given history, even Norwegian identity.
In Lerwick, where seals wait in the harbour to greet thearrival of the next fishing boat, some islanders see the resultof the Scottish referendum as irrelevant.
"Why would we believe in independence if all it means isthat powers move from London to Edinburgh? No, we want to movean awful lot further than that," said Tavish Scott, a LiberalDemocrat who is Shetland representative in the devolved Scottishparliament in Edinburgh, dominated by the Scottish NationalParty.
Scott says around 67 percent of North Sea reserves liewithin Shetland coastal waters. The Scottish governmentenvisages using the money from the 94 percent of British oil andgas production tax revenues it estimates come from Scottishwaters to support its state spending.
Shetland's bid for power over local affairs and a slice ofoil revenues could complicate negotiations between Edinburgh andLondon over currency, national debt and splitting oil reservesin the event of a Yes vote in September and ahead of what wouldbe independence in March 2016.
"Scotland will need Shetland more than Shetland will needScotland," said Caroline Miller, 56, an ex-Shetland councillorwho now helps run a bed and breakfast hotel.
NEW OIL BOOM?
Oil production taxes have boosted British government coffersby about 300 billion pounds in 2012 money. Shetland, which doesnot receive any of the oil production tax revenues but doesreceive payment for oil company use of some harbour facilitiesand land, has directly benefited from oil to the tune of about1.7 billion pounds, according to figures provided by itscouncil.
Some of the gains are invested in an oil fund which hasgenerated a further 1 billion pounds. Most of this income hasbeen reinvested in the local community and infrastructure, thecouncil says.
Since 1996, Shetland's gains from oil have been shrinking.The oil industry stopped its "disturbance" payments - annualsums negotiated in the 1970s to make up for their presence - asthe ageing fields dried up and crude volumes pumped throughShetland plunged.
But new drilling and plant investment has reversed thosefortunes. Locals talk of a second oil boom, strengthening theirhand.
The shiny new cars parked on Lerwick's streets and the "novacancies" signs at bed-and-breakfasts suggest the wealthflowing through. In the harbour, cruise ships rub alongside hugefloating hotels, both housing an influx of 1,400 workers.
Near to the Sullom Voe terminal - a cluster of huge tankshidden over the brow of a hill and edged by a deep inlet -French oil company Total is building a new gasprocessing facility.
Investments of over 8 billion pounds from companiesincluding Total and BP announced over the last four years willdevelop untapped reserves to the west of Shetland, explore fornew oil and gas and build the new plant, keeping the site openfor the next 40 years.
GOING IT ALONE
The detachment many Shetlanders feel on their northerlyoutpost runs deeper than the stormy, cold seas which separatethem 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 beingpawned to the Scots in 1469 as a dowry for Princess Margrethewho married King James III of Scotland.
Nordic-style wooden houses hug the hillside overlookingLerwick harbour and road names like Norgaet and Veensgarth hintat the historic, extinct language of Norn. An annual firefestival 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.
Recognising the distinction, a grassroots group from acrossShetland and its island neighbours, Orkney and the WesternIsles, have started a petition asking for a second vote, a weekafter the Scottish referendum.
It would give islanders the option of choosing their ownindependence, voting to be part of Scotland, or sticking withthe United Kingdom.
Locals speak with admiration for the set-up in the nearbyFaroe Islands, a self-governed territory within the DanishRealm, and Britain's crown dependencies, which have control overtheir own tax matters.
"I'd like to see ultimately something in Shetland on theFaroese model or possibly Guernsey or Jersey or the Isle ofMan," said Ian Gidney, 57, who runs an online leather retailer.
Alistair Carmichael, a Liberal Democrat member of theBritish parliament for Orkney and Shetland, believes it is inthe islands' best interests to be part of a bigger unit.
"What we need though, is more control within that biggerunit over the public services that we have here," he said.
Last year, Scottish First Minister Alex Salmond set up aworking group to consider devolving some powers to the islands,which is due to report back in June. The Scottish governmentsupported "local decision making", he said then. (Reporting by Sarah Young; Editing by Angus MacSwan)
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