09 Apr Balance paramount in U.K.’s energy transition
Deirdre Michie, CEO, Offshore Energies UK, outlines the key hurdles facing the country’s move towards a more diverse energy mix and what needs to be done to bring Scotland’s dream of being a low-carbon energy hub to life.
How significant is Scotland’s hydrocarbons industry?
Oil and gas is a significant sector for Scotland and the U.K. as a whole. There are approximately 71,000 jobs across Scotland in the sector. It contributes around $27 billion in gross value added and currently represents 12 percent of the gross domestic product. Historically, Scotland has been a key hub for driving the oil and gas industry to where it is today. Our sector has massively developed the supply chain and played a key part in setting up other oil and gas sectors around the world. There is an industry saying that wherever you go in global oil and gas sectors you will hear a Scottish accent. The Scottish sector also provides jobs and the security of energy supply for the U.K. The sector paid out $487 billion in production taxes over the last 50 years, and similar amounts in terms of investment.Although we are an industry that is in decline, it is important we continue to receive support. The U.K. still needs the oil and gas sector to control reduction of our emissions in line with set targets while retaining jobs and skills that will be needed for the diverse energy mix of the future. We should make use of our local supply of oil and gas rather than importing it from countries that have not made similar commitments to reduce production emissions by 50 percent by 2030 and 90 percent by 2040 and reach net-zero greenhouse gas emissions by 2050. By optimizing what we have, we are reducing emissions at a global level. However, it is challenging. These kinds of things will not happen instantly. However, we are committed to delivering the shift as quickly as we can in a way that takes communities with us. We will not leave people behind as we try to deliver what is technically, commercially, and physically challenging. We need everyone to pull together; we need industry, the Scottish government, the U.K. government and companies to come together to tackle these serious issues in a positive way.
There is a concern about investor confidence. This is something we are trying to address by reinforcing that our basin is still a very good place in which to invest, especially companies adapting and branching out into low carbonenergies. The ScotWind leasing round was a great example of how the Scottish basin is changing. Many operators and supply chain companies won auctions and will be working alongside renewable companies to develop this exciting new energy. We must keep in mind that we need the existing assets to help build these emerging energies. Investment in our industry can help bring about our ambitions to build a low-carbon center of excellence in Scotland. As we go through the energy transition, we are seeing the industry changing; many of our members are embracing the energy transition. Skills and expertise in the oil and gas industry will underpin the transition in carbon capture and storage, hydrogen and offshore wind sectors as Scotland pivots towards having net-zero greenhouse gas emissions by 2045. Our priority is having a managed transition, one that focuses on optimizing skills, leveraging expertise and correctly balancing security of supply.
Can you give us an overview of Offshore Energies UK role in the energy industry?
Offshore Energies UK represents the changing offshore oil and gas energy sector. We have been formally known as Offshore Energies UK since February 14, 2022. We have over 400 members that include all operators and a significant part of the supply chain. Many are focused on oil and gas and many on transitioning to new energies. Our role is to support our members as they evolve by extending our remit into carbon capture and storage, hydrogen and offshore wind. We were one of the first industrial sectors in the U.K. to come out in support of the government’s commitment to reach net-zero carbon dioxide emissions by 2050. We developed Roadmap 2035, a blueprint for how the oil and gas industry can continue to support the security of energy supply for Scotland and the U.K. while underpinning the transition. The North Sea Transition Deal is a catalyst to help drive this forward.
How significant is the North Sea Transition Deal signed in 2021?
The deal is groundbreaking. It shows a government working with the oil and gas sector to ensure ongoing security of energy supply while accelerating the energy transition. There are five elements to the deal. Part of it is a focus on decarbonizing supply. We need to reduce the carbon footprint and emissions from all offshore assets and deliver those reductions by our set targets. Key to this will be the electrification of our assets, operational improvements, new technologies and using different fuels. A key hurdle is that we are not linked to any electrification network such as in Norway. Another focus of the deal is on the oil and gas sector’s role in stimulating the hydrogen economy, which is exciting. There are five industrial clusters around the U.K. that are looking to develop carbon capture and storage, and some of our members are key to these developments. Aberdeen is focused on turning itself into a hydrogen city. Transforming the supply chain is key to a successful transition and an important driver of new energies. The North Sea Transition Deal also focuses on people and skills. As the sector transitions, people also need to transition. Oil and gas workers need to be confident there is a future for them in adjacent energy sectors and within the oil and gas industry. Between now and 2050, 50 percent of the energy used by the U.K. will still be oil and gas. Balancing opportunities in the oil and gas sector and those in adjacent sectors is crucial. It is critical we deliver and implement the deal and reduce our footprint.
For what reasons is the world seeing an increase in gas prices?
The gas price crisis that the world is currently facing is a stark example of why we must secure a local energy supply as we go through the transition. The crisis is a mix of global supply and demand issues. The gas markets were historically quite regionalized but are now more part of a global market with the increase in LNG cargoes. The fact that we have domestic resources is very important. We are a net importer as a country, but we should make the most of our gas and the jobs and security of supply it brings. We need to reduce the amount that we import by producing as much as we can locally. We still need oil and gas to keep the country running. Significantly impacting high commodity prices is not something any one country or industry can do themselves; it is a global market issue. The reasons for the gas price increase include lack of investment and activity in the sector during the pandemic, which led to a tightening of supply as demand began increasing. We have been here many times before. We should learn these lessons as we go forward. Planning in place of just reacting is crucial.
What is the oil and gas sector doing to raise interest in attracting future professionals and support?
Our role is to reinforce opportunities in the industry. One can come into this sector and have an extraordinary, diverse and stimulating career. Offshore Petroleum Industry Training Organization is our skills body. It plays an enormous role in going to schools to speak with the next generation of professionals and inform them of what the sector does, its positive contributions and where the next opportunities are. We are increasingly seeing a shift in narrative towards inclusion of new energies, which is attractive to many people. Our passionate request is that people look towards this industry as one that wants to bring solutions to the table. By joining this sector, you can be a part of providing solutions that will be fundamental to the future of the planet. It is quite a big offering in terms of a career opportunity.
Engaging the next generation in the fossil fuels industry is a challenge. One way is going out to inform them about the positive aspects of what we do. Within the sector today, the younger generation are some of the most passionate, committed and inspiring people who understand that the sector is playing a positive role and will continue to make major contributions in our future. Our younger generation are positive ambassadors for our sector and play a major role in informing others about the positive role the sector plays. Negativity towards the sector comes from a noisy minority, which is important to remember. When we do polls, we find the majority of people are neutral or positive about the sector. Most see it as having a constructive role going forward.
What is being done to introduce more diversity in the U.K.’s energy industry’s workforce?
We are below the national average in terms of the gender pay gap and number of females in the sector, especially in senior and technical positions. A couple of years ago we launched a task force to shine a spotlight on what is going well and what we need to improve on. There are some fantastic practices in the sector and amazing role models who are doing amazing things. We wanted to highlight what is going well and what more we can do to get a better balance. Last year we commissioned Robert Gordon University to conduct a survey to get a baseline. They reported a diversity, equity and inclusion index of 7.1 out of 10 for the sector, which is a relatively good starting point. The study broke the sector down into different elements of gender, sexuality, disabilities and ethnicities to try to understand particular categorical issues and how we can address them. We were impressed by the amount of enthusiasm and commitment from people wanting to make a difference in this initiative. It has been great to see them getting into action.