Secure the future of Scottish oil and gas with an ambitious sector deal
The Government must act now to ensure Scotland’s oil and gas industry has a bright future, writes Pete Wishart
Scotland is at the forefront of the global oil and gas industry. In 2017 it contributed £9.2bn to the Scottish economy and supports around 135,000 jobs in Scotland. It is also central to the UK’s energy security; it is forecast that two-thirds of the UK’s primary energy needs will be met by oil and gas until at least 2035.
However, the sector is facing unprecedented challenges. Fluctuation in the oil price has hit companies with extreme uncertainty, particularly those working in the supply chain, while the rate of new well exploration has nosedived. At the same time, the industry needs to prepare for the decline in production to ensure the economic benefits and highly skilled jobs the sector has brought to Scotland are not lost. All this while finding ways to reduce its carbon footprint and use its skills and engineering knowledge to help develop low-carbon, and renewable, technologies.
These are the challenges at the heart of the Scottish Affairs Committee’s report into the future of the oil and gas industry. We believe that the best way for the Government to support the industry through these challenges is to agree an ambitious sector deal, which if backed by a combined investment of £176m from industry and government could deliver £110bn for the UK economy, with Scotland being one of the main beneficiaries. This funding would support three centres of excellence focused on transformational technology, underwater innovation and decommissioning.
It is crucial that this sector deal is forward thinking and sets up the industry to meet these challenges head on. That’s why our report outlines the following priorities for the sector deal:
First it must capitalise on the opportunities arising from decommissioning. The North Sea is not only going to be the first major basin to go through large scale decommissioning, it is also, without doubt, one of the most challenging decommissioning environments. As one witness told us: “If you can decommission a rig in the North Sea you can decommission on anywhere”.
Scotland has an unmissable opportunity to export its decommissioning knowledge to the rest of the world, and therefore we’ve called for the sector deal to be accompanied by Government decommissioning export strategy to anchor a global decommissioning industry in the North East of Scotland. The sector deal also needs to deliver on reducing the cost of decommissioning, which will both give Scottish firm an advantage against its competition and reduce costs for UK taxpayers, as half the cost of decommissioning will be met by the Treasury through tax relief.
Secondly, the sector must find ways to transfer its unique expertise to other sectors of the economy, so these are not lost when oil production stops. We heard that’s there almost no end to the opportunities available, with sectors including aerospace, data analytics, marine and offshore engineering, digital manufacturing, satellite technology, and offshore wind all open for skill and technology transfer. We were particularly taken by the opportunities in the renewable sector and call for the sector deal to contain specific and measurable proposals for how it will improve skill and technology transfer to this sector.
Finally, the sector deal must bring forward proposals for how the sector will address its carbon footprint, both in the process of producing oil and gas and by finding ways to reduce the emission from using oil and gas. We were particularly struck by the importance of carbon capture technology for the long-term future of the industry, with the Committee on Climate Change telling us that without this technology, decarbonisation of the sector would have to happen much faster slower and be costlier.
This is one area where the Government looks to be ahead of industry, with the Government having announced £45m of funding for carbon capture innovation, with more being potential available from Industrial Strategy Funds. We believe the industry needs to step up its contribution in this area and that the sector deal must contain proposals on how industry will support the development of carbon capture technology and measure progress.
The oil and gas sector has a bright future ahead of it, but only if the Government acts now to help the industry secure it. I hope that the Government and industry rise to the challenge of our report, and secure Scotland’s future as a global leader in energy technology for decades to come.