ABERDEEN, Scotland – It’s easy to see how vital oil is to Aberdeen, a venerable port city on the northeast coast of Scotland. Step out of the gate of the small international airport and you are rocked across the road by the roar of helicopters carrying crews to oil rigs scattered across the North Sea.
Drive through the city and you’ll pass expansive office parks with oil company logos, the home of some of Scotland’s 71,000 engineers, geologists, drillers and more who work in the oil and gas industry. Overall, the industry accounts for around 7 percent of Scotland’s economic output.
Yet the Scottish oil and gas industry is struggling.
British North Sea oil production has been declining steadily for two decades, and last year’s production was around a third of its 1999 peak. Natural gas production in the region is also declining – a problem in recent weeks as gas prices have skyrocketed, pushing up utility bills. Jobs related to the offshore oil industry have fallen by nearly 40% in the past five years, according to Oil and Gas UK, a trading group.
Once the mainstay of the Scottish economy and a crucial source of government funding, the oil and gas industry “is simply not the source of revenue it once was,” said Malcolm Forbes-Cable, vice chairman of the energy consultant Wood Mackenzie.
In fact, the looming costs of shutting down and dismantling thousands of wells and hundreds of rigs, recently estimated at 46 billion pounds ($ 68 billion), are starting to outweigh their earnings prospects.
Then last month, under pressure from environmentalists, the Scottish Prime Minister – his most senior elected official – urged the UK government to review licenses already granted for offshore oil fields still in the planning stages. The official, Nicola Sturgeon, called on UK Prime Minister Boris Johnson to reassess projects “in the light the severity of the climate emergency we are currently facing.
This decision sent shock waves through the industry, as approval of such licenses is usually a given. Mr Johnson has the last call, but oil executives say the blockade of new oil fields, the halt of up to 18 developments and much of the £ 21bn of investment planned over the next five years , could spell the end of the industry.
Ms Sturgeon’s prime target is an oil field known as Cambo, west of the Shetland Islands, in UK waters considered to be the most promising resource. Majority owner Siccar Point Energy, a private company whose backers include asset management giant Blackstone, says it has already spent $ 190 million on the ground and that it would create 1,000 direct jobs. Climate protesters, arguing that immediate action is needed to tackle global warming, have made shutting down the Cambo project a rallying cry. (Mr Johnson has previously said the government ‘can’t just tear up contracts.’)
Mr Forbes-Cable said Ms Sturgeon ‘walked a tightrope’ between the jobs and investments Cambo would produce and the Scottish Green Party, which opposes North Sea oil drilling and needs support in his campaign for another referendum for Scottish Independence.
The current natural gas price crisis in Britain and around the world could strengthen the industry’s case for further development. Despite declining North Sea production, Britain is still Europe’s second-largest oil producer after Norway, an attribute that may now seem more valuable than a few months ago.
Ms Sturgeon and Mr Johnson also want to be seen as tackling climate change as Britain prepares to host a major United Nations climate conference, COP26, in Glasgow in November.
Questions about the future of Scotland’s oil and gas industry point to trends that have been visible for years. Last year, UK exploration and drilling investment fell to just £ 3.7 billion, the lowest in real terms since the early days of oil production in 1973, according to the industry group.
Finding new sources of new, well-paying jobs will be difficult but vital for Scotland’s economic and social health, said Mairi Spowage, director of the Fraser of Allander Institute at the University of Strathclyde.
“We don’t want to repeat the mistakes of the 1980s,” she said, when the loss of heavy industry like coal and steel in Britain caused homelessness and poverty to skyrocket. unemployment.
Business and Economy
For many, the growth of renewables in Scotland, especially the windmill fleets along its coastline, may provide a path to gradually replace oil and gas. Globally, offshore turbines still account for less than 1% of electricity generation, but the company attracted $ 29 billion in investment in 2020, or 8% of the world’s total renewables, according to Heymi Bahar, analyst at the International Energy Agency.
And a pilot wind farm off the fishing port of Peterhead, just north of Aberdeen, represents a new frontier for this area.
Rather than resting on the seabed, these turbines float, anchored by cables to the top of long vertical structures called spars. Because they float, they can be placed further out to sea, beyond the depth of about 200 feet considered the practical limit for most turbines.
This not only opens up a larger expanse of ocean where the machines can be placed, but it allows them to take advantage of the stronger, more stable winds typically found farther from land.
The $ 230million offshore wind farm off Peterhead, floating in water about 300 feet deep, outperforms any UK offshore wind farm in the ratio of the energy it pumps to its theoretical capacity – about 54%. The reason is the stronger and more stable wind.
“We can go into deeper water, with higher wind speeds,” said Ben Lawson, operations and maintenance manager for the wind farm, majority owned and operated by Equinor, the Norwegian company. “The importance of the success of this project should not be underestimated.
Indeed, it paves the way for large-scale multi-billion dollar wind farms off the coasts of countries like California, Japan and France, where there are significant markets for electricity but the waters are too deep for conventional offshore machines.
“These are all areas we are working on,” said Sonja Chirico Indrebo, vice president of floating wind at Equinor.
Aberdeen sees an opportunity. It is building a new £ 350million port with special docks designed to support the enormous weight of the turbine components as well as oil rigs brought in for decommissioning.
“Once in a lifetime you have the opportunity to work on a new port,” said Dave Meekham, the construction manager, as he inspected the 35-foot-high breakwater.
The idea is that the design, construction and operation of floating structures will require skills similar to those required to build and manage drilling rigs and offshore drilling rigs.
“If done correctly and in collaboration between industry and government, it will create the next big industry for Scotland over the next 50 years,” said Jim McDonald, University Principal and Vice-Chancellor. de Strathclyde and Scottish Government’s Energy Advisor.
The Scottish government is also in the process of selecting companies for new offshore wind leases which could lead to an estimated investment of £ 30bn.
All the major European oil giants, including BP, Total, Equinor and Royal Dutch Shell, are participating. And some did not hesitate to telegraph that a victory for them would help keep salaries in their Aberdeen offices which are otherwise threatened by the decline in oil and gas. BP said that if it got the acreage it wanted, the company would establish Aberdeen as the hub of its growing offshore wind business, creating 120 jobs.
The dream is not just to build wind farms off the coast of Great Britain, but to develop the expertise to supply the world with wind power equipment, just as the Aberdeen region has done in the industry. oil industry, where it is a world leader in subsea technology.
The elders, however, warn that while oil and gas skills can come in handy in floating wind turbines, businesses are also different.
The offshore workforce for the turbines is much smaller, for example, because the new technology means “everything is automated,” said Allan MacAskill, a former BP executive, who recently completed a floating wind farm. off Aberdeen.
Paul de Leeuw, director of the Institute for Energy Transition at Robert Gordon University in Aberdeen, said the energy industry could end up with more jobs by the end of the decade. But Scotland and Britain as a whole must prioritize the use of locally made equipment (many components of the turbines that line Britain’s coasts have been built elsewhere) and ensure that the decline in oil and gas is slow enough that companies continue to invest enough to maintain jobs.
“If you don’t do these things,” he said, “we might end up with fewer jobs than today. “