New First Minister must ensure we build on our oil and gas heritage
Energy policy is a big opportunity for the new First Minister and for Scotland: Let’s take it together, writes David Whitehouse is CEO of Offshore Energies UK
The spotlight is firmly on Holyrood with the news that Humza Yousaf is the new First Minister.
Picking up the mantle from Nicola Sturgeon, he is now faced with the challenge of addressing how the country will meet its existing energy needs, while ensuring energy security, and overseeing the country’s drive to net zero by 2045. Building an intelligent, creative and collaborative partnership with the offshore energies sector will be key to driving success.
Energy policy is a global challenge – not just one facing Scotland. However, given that around 95% of the UK’s total oil and gas production comes from Scotland, with the sector contributing £16bn a year to the Scottish economy and supporting over 90,000 jobs in the country, developing an effective energy policy will be a major challenge for the new First Minster.
Get it right and energy policy is a huge opportunity for Scotland.
This means focusing on how we build on our existing strengths to develop cleaner energy projects but also ensuring that we anchor jobs and opportunities here in Scotland. The transition must ensure that no-one, and no community is left behind.
A draft of the Scottish Government’s Draft Energy Strategy and Just Transition Plan, which seeks to map out a net zero energy system in Scotland, was published in January.
Offshore Energies UK, with our members drawn from over 400 companies, welcomes the focus on long term planning and on collaboration across governments and with the sector.
However, by Holyrood’s own assessment, the Plan may remove £7bn from the Scottish economy by 2030, and this economic value is not expected to be recovered even by 2050. This would have disastrous repercussions for the tens of thousands of jobs and communities that depend on revenue from the North Sea. We simply cannot let that happen.
The offshore energy sector fully supports our ambitious climate goals, achieving net zero by 2045. Today, 75% of the UK’s energy needs are met by oil and gas – powering some of the 23 million homes running on gas boilers and 32 million diesel and petrol cars on our roads today.
And in Scotland alone there are still around 129,000 homes, mainly in rural areas, reliant on oil. As we build a cleaner future there is no simple choice between oil and gas on the one hand and renewables on the other – the reality is that we need both.
So, while we still need hydrocarbons, why would we import them from abroad when there is a home grown supply in the North Sea? Last year alone, the UK imported a shocking £117bn worth of energy, which is more than double the amount spent in 2021.
This is a worrying trajectory: We cannot guarantee that foreign producers are upholding the same high environmental and safety standards enforced in the UK – while billions of pounds and hundreds of jobs flow out of the country.
Of course, we need to reduce emissions from our operations. Our members working to electrify offshore platforms and reduce emissions, while already investing to accelerate the expansion into renewable sources. Oil and gas producers in the North Sea have cut flaring in half over the past four years, according to the North Sea Transition Authority, and we have reduced methane emissions by 20 per cent since 2018.
We should cherish our oil and gas industrial base. This is the platform on which we can build the secure, affordable, zero carbon economy in Scotland and the UK with real benefits to our communities.
We need an energy strategy that breaks down barriers and misconceptions – there is no division between oil and gas jobs and green jobs - it’s the same people.
There is no division between the oil and gas supply chain and renewable supply chain -it’s the same companies. We can only achieve our net zero goals by working together.
We’re already seeing traditional oil and gas companies diversify into renewables. BP and Shell are among the biggest investors in the ScotWind offshore wind project which, at 25GW, is one of the largest commercial licensing rounds for offshore floating wind in the world. Harbour Energy and Shell are key partners working on the Acorn Carbon Capture and Storage (CCS) project, which has the potential to create 2,000 direct and indirect construction roles and 300 long-term jobs. CCS will be a vital part of the energy transition as the large-scale storage of carbon will help decarbonise many industries across the country.
But we are currently importing the transition. The windfarms that we are so proud of are not built in the UK, not built in Scotland. The UK is leading the world in offshore wind, and has the 6th largest Installed wind capacity in the world. Yet none of the top 10 turbine manufacturers are based in UK, or manufacture in the UK.
Offshore Energies UK is committed to work in partnership with government to build investor confidence and ensure more of the value chain associated with the energy transition is anchored in the UK.
LONG TERM PLANNING
Industry is the platform for making more in Scotland and the UK. We need long term planning, and investment in critical infrastructure such as the national grid and our ports. Our sector is committed to delivering high value jobs and building world-class businesses, so this opportunity needs to be embraced by all.
It’s right to be ambitious but if we are to really achieve our net zero ambitions, there needs to be more progress on reducing demand. It makes no sense to reduce our home-grown production if we are not driving down demand.
The Scottish Government has allocated £1.8 billion over the next 5 years, but the cost of bringing Scotland’s 2.8 million homes up to scratch cost has been estimated at up to £33 billion.
The draft Plan seeks to have 1,000,000 homes converted to low energy heating by 2030, predominantly through the use of heat pumps.
In the last 7 years there have been around 2,000 heat pump installations per year. For the remainder of the decade that needs to increase to 200,000 per year. We need bold plans to deliver on those targets.
We need bold plans to ensure that this shift creates jobs and we don’t simply import our needs. The energy strategy is lacking the detail on how to achieve those plans, but we can help.
For an overall energy strategy to really deliver, it must address the investment climate. It is estimated that over a 1.3 trillion pounds of investment will be required to decarbonise the UK economy.
That is a staggering amount of investment required over the coming decades. The bulk of that investment will come from private companies, but private companies have choices on where to invest. Across the world, in Europe, Asia, and critically the USA, policy is in place to attract the investment necessary. We are in a global competition for energy investment and Scotland and UK are falling behind.
The oil and gas industry in the UK is struggling to attract investment, this needs to be urgently addressed.
Over 90% of UK producers say they have been negatively impacted by the windfall tax and are scaling down their plans for the North Sea. Many are looking to invest elsewhere.
This super tax is hitting all offshore companies hard, large and small, not just those who make headlines, and it’s hitting their supply chains. The oil and gas industry supports 90,000 jobs in Scotland and, based on research conducted by Robert Gordon University, we estimate that 90% of this workforce have medium to high skills transferability.
If we undermine our existing oil and gas producers, we undermine our ability to drive a home grown energy transition, and we will continue to simply import the transition with a bad outcome for jobs and our communities.
As First Minister, Humza Yousaf has a big job on his hands. I want to work with the Scottish Government on a plan which, ultimately, works for the people, businesses and communities of Scotland.
We need more ambition to ensure that we build on our oil and gas heritage, and anchor high value jobs and manufacturing here in Scotland while meeting our climate goals. I’m confident that the First Minister will share these objectives.
David Whitehouse is CEO of Offshore Energies UK, the leading representative body for the UK’s integrating offshore energy industry