Written by Paul Wheelhouse:
The oil and gas industry makes a very significant contribution not only to our economy, but also to energy security, employment, skills and is a key driver of innovation.
As part of my regular engagement with the industry, I’m visiting Aberdeen today to hear first-hand the great work being done to lay the foundations for a vibrant industry for decades to come.
In recent weeks there has been a number of encouraging developments across the industry. For example, the latest Oil and Gas Authority (OGA) licensing round saw 25 licenses awarded to 17 companies, demonstrating the interest that continues to exist in the North Sea.
We have also seen production from the Maersk Oil operated Flyndre field come on stream this week, and Hurricane Energy announcing that analysis indicates that the Greater Lancaster Area is the largest undeveloped discovery in the North Sea, with a one kilometre deep reservoir with up to one billion barrels of recoverable reserves.
However, the industry’s supply chain continues to face a range of challenges. Therefore, this is an appropriate moment to reflect on how best to steward Scotland’s oil and gas assets in the North Sea and to the west of Shetland. In doing so, we need to not just think in terms of production and revenues, but also in recognising the value of the industry through its contribution to the wider economy.
This means taking a more considered approach to the contribution the sector can make over the long-term, both directly and indirectly through supply chain activity and capitalising upon export markets and how to ensure the sector is sustainable and supports inclusive economic growth.
There are around 1,500 oil and gas supply chain companies across the UK, contributing over £7 billion to the economy annually. Sales from Scotland’s oil and gas supply chain alone are estimated to be £23 billion per year, with over half of these being international. This is in addition to the £15 billion of exports of oil and gas products themselves.
The Scottish Government established the Scottish Energy Jobs Task Force which has identified the need for a clear long-term vision for the oil and gas industry which all stakeholders, the workforce, investors and policymakers can get behind.
The economic prize at stake is very significant in scale. By maximising economic recovery and increasing our share of the global oil field services and technology markets the value of the North Sea industry in terms of turnover for the Scottish economy could increase by 50% over the next 20 years.
With confidence across industry beginning to tentatively increase, it is important that both Scottish and UK government’s work towards a long term vision for the sector, which is based on stability and the total value of North Sea activity, and not focused on short-term revenues.
The domestic supply chain must be presented with the opportunity to be innovative, developing the technology and capabilities necessary to tackle the challenges ahead and benefit from the opportunities remaining.
Alongside the training support provided by our £12 million Transition Training Fund, our enterprise agencies have provided £12.5 million to support innovation and business resilience in the Oil and Gas sector last year.
Last month we also announced a £5 million Decommissioning Challenge Fund, which opened last week for expressions of interest.
The opening of the Oil and Gas Technology Centre is further demonstration that Scotland’s oil and gas industry has a bright future and confirms Aberdeen’s position as the world’s leading location for oil and gas technology development, attracting foreign investment and generating export led growth. Innovation is critical if we are to maximise recovery of the remaining reserves in the North Sea.
The Scottish Government will do everything in its power to support the thousands of highly-skilled men and women working in the oil and gas sector who contribute so much to our economy.
They deserve nothing less.
Paul Wheelhouse is the Minister for Business, Innovation and Energy in the Scottish Government.