Scottish oil and gas strategy plans for bright future

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By a Newsnet reporter

The SNP has hailed the publication of a new oil and gas strategy for Scotland, saying it will ensure the industry continues to prosper.  The plan will target higher long-term recovery rates, greater exports and £30 billion annual sales by 2020. 

First Minister Alex Salmond introduced the Maximising Our Future plan at Hydrasun, a fast-growing Aberdeen-based company providing fluid transfer, power and control products to the oil and gas sector and other industries.  The company has seen its workforce treble over the past decade from 200 employees to 600.

Oil and gas is of vital importance to the Scottish economy.  It constitutes the largest industry sector in the UK and accounts for almost 20% of the total corporation tax received by the UK Treasury, although UK Government figures do not deem this revenue to be Scottish in origin and Scotland has no oil fund like that of Norway.    

Throughout the UK, the oil and gas industry supports over 440,000 jobs, of which about one half are in Scotland.  During the past 40 years of oil production, around 40 billion barrels of oil equivalent (boe) have been recovered from the North Sea, creating £300 billion in revenues for the UK Government.  The value of remaining reserves is estimated to be in the region of around £1.5 trillion, of which well over 90% lies in Scottish waters.

The new strategy published on Tuesday – developed and to be delivered by industry, Scottish Government and public sector partners – aims to build on four decades of unprecedented economic success in order to secure continuing growth in the oil and gas industry over the coming decades.

The plan identifies six key priorities for action:

  • Strengthening the domestic supply chain – with greater focus on resource recovery and targeting £30 billion in total annual sales by 2020
  • Increase proportion of sales from exports – so that 60% is exported outside the UK by 2020.  International exports have risen from 31% to 46% of the total between 2002 and 2010.
  • Identify clear priorities for innovation and accelerating technology deployment – including long-term research and development plan and greater co-ordination of public funds to support rise in recovery rates with a minimum long-term target of 50%.
  • Promote new and emerging opportunities for supply chain companies, in offshore wind, carbon capture and storage (CCS), and decommissioning.
  • Ensure sector attracts young people and supports increase in skills availability – emphasising long-term nature of industry and, through closer liaison between sector employers and with education institutions, better-identify specific needs for provision
  • Continue to promote Scotland as key location for investment in the oil and gas industry – through improved communications and support for key infrastructure projects.

Speaking at the launch, the First Minister also announced that Scottish Enterprise will make up to £10 million available to support innovation in the sector over three years, while Scottish Development International (SDI) is to boost activities in key emerging markets, Brazil, Norway and west Africa, building on the recent establishment of an SDI base in Calgary, Canada.

Mr Salmond said: “Oil and gas is one of Scotland’s greatest industrial success stories, having transformed the economic well-being of the UK over the last 40 years.

“With as much as £1.5 trillion of oil remaining to be extracted from reserves around these islands, an increasingly buoyant export sector now reaching 100 different countries, and emerging opportunities to deploy the sector’s vast expertise in other offshore projects, the industry has a bright future.

“The strategy identifies key actions which can maximise future opportunities, for example, by helping the industry secure the necessary human capital and skills, by supporting innovation and technology deployment to boost recovery rates, by assisting more companies into new markets and by delivering investment in key infrastructure.”

Commenting after attending the launch of the report in her constituency, Maureen Watt, SNP MSP Aberdeen South and North Kincardine and co-convener of Holyrood’s oil and gas cross-party group, said:

“The oil and gas industry is extremely important to Scotland’s economy, particularly in the North East where the industry is flourishing, and I am happy to see that the strategy presented today recognises this fact.

“These proposals will help to maintain the success of the oil and gas industry in future years by continuing to promote Scotland as a key location for oil and gas investment.

“The strategy also identifies clear priorities for innovation and I am confident it will ensure the oil and gas industry in Scotland continues to prosper.

“I was delighted the First Minister chose to unveil such an important scheme in Aberdeen, where the oil and gas industry makes up a significant number of jobs.

“With up to £1.5 trillion worth of resources remaining to be extracted, the oil and gas sector will continue to be a key driving force in Scotland’s economy.

“It is essential that instead of squandering these remaining resources as the Treasury has done in the past, they are invested for the future in a Scottish oil fund so that future generations continue to benefit from Scotland’s resources.

“That will only happen if Scotland gains the powers of a normal, independent country and people only need to look to our neighbours in Norway to see how important developing such a fund is to our future.”

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A copy of the strategy ‘Maximising our Future’ can be downloaded here.