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Government must ‘step up and back’ energy industry transition as oil and gas demand grows – report

A new report asks if the energy industry will keep the resolve to maintain focus on the energy transition, despite demand for oil and gas growing.
A new report asks if the energy industry will keep the resolve to maintain focus on the energy transition, despite demand for oil and gas growing.

A business group has renewed demands that government must put support behind low carbon projects in the north-east that will “shift the dial” as concerns have been raised that confidence in key low carbon technologies such as carbon capture and storage (CCS) has faltered, a new report has found.

North Sea energy companies taking part in a survey said they are on track to diversify away from oil gas production but they face a “test” on how firmly they “keep the pedal pressed to the floor on the journey to net-zero”.

According to the report by Aberdeen and Grampian Chamber of Commerce (AGCC) the oil and gas industry has enjoyed a confidence boost on the back of high commodity prices which has raised a question over whether the industry can maintain its “resolve to maintain focus on the energy transition”.

Respondents confirm nearly half of their work is on track to be in areas outside of oil and gas, such as offshore wind, in just eight years.

But the number of companies who expect to be involved in CCS storage activities has fallen from 45% to 23%, according to the survey which was backed by KPMG and ETZ.

And while there is overall support for energy transition, the survey shows that more than a third of companies have yet to develop a net zero strategy – despite the “clear need for companies to transition faster”.

Confidence among oil and gas companies in the North Sea has ‘bounced back’ according to Aberdeen and Grampian Chamber of Commerce Energy Transition 35 report.
Respondents expect almost half of their business will be diversified from oil and gas by 2030. Data from Aberdeen Grampian Chamber of Commerce/ KPMG / Fraser of Allander

Meanwhile, confidence across the energy sector has “bounced back” as oil prices have rocketed – the vast majority, 84%, expect to increase revenues next year, while seven out of ten firms say they will need to grow their headcount over the next three years to cope with an increase in work – up from 52% in 2021.

However, this optimism for jobs has sparked concerns of the return of a “battle” for talent that could inflate wages and put pressure on costs which is “bad news in what is already a mature and expensive basin”.

Source: Aberdeen and Grampian Chamber of Commerce Energy Transition 35 report.

The Energy Transition 35 report found only 28% of firms surveyed believe support – from both Westminster and Holyrood – for energy transition is “visible”, and this lack of clarity needs to be tackled urgently.

The results prompted a call for the UK Government to “move immediately” to give the green light to the Scottish Cluster, which has a CCS project at the St Fergus gas terminal at its core. This was snubbed in favour of two English schemes last year, despite “Scotland’s significant supply chain and infrastructure advantages” the report said.

Nicola Sturgeon in Aberdeen. Photo by Kenny Elrick

The report adds that First Minister Nicola Sturgeon should fulfil her oft-mentioned ambition of transforming the north-east into the “net zero capital of Europe” by delivering, alongside Westminster, green freeport status for the region.


Read more: Who are Scotland’s runners and riders in the race for green freeports?

Likewise, the report highlighted concern over the political environment amid ongoing discussions around a possible windfall tax, and calls for fiscal stability for the sector to allow firms to invest.

Does the industry have the resolve to maintain focus on the energy transition, despite demand for oil and gas growing?”

Martin Findlay, KPMG

Martin Findlay, senior office partner of KPMG UK in Aberdeen, said industry must keep “both eyes” on the region’s future prosperity.

He said a key question was “does the industry have the resolve to maintain focus on the energy transition, despite demand for oil and gas growing?”

KPMG’s Martin Findlay.

“Producers and companies throughout the supply chain remain committed to the transition but individually they must remain focused on the long-term objective,” he said.

“That is the only way firms will succeed, workforces will grow, and the planet will thrive.

“Keeping both eyes firmly on the future will allow Aberdeen to prosper as a major player on the global energy stage and continue its long tradition as a powerhouse for the local and UK economy.

“The test facing firms now is how firmly to keep the pedal pressed to the floor on the journey to net-zero.”

Russell Borthwick, chief executive of AGCC, urged governments to “step up” and further called on Sturgeon to “plant that flag” for a green freeport in Aberdeen and Peterhead.

35 years of flagship research

“This long-running survey – one of the chamber’s flagship pieces of research – has followed Scotland’s energy sector through good times and bad, but never in its 35 editions has so much changed so quickly,” he said.

Russell Borthwick, chief executive of Aberdeen and Grampian Chamber Of Commerce. Photo by Chris Sumner.

“It shows the energy transition is in action, but we need the UK and Scottish governments to step up and back the transformational schemes that would shift the dial on our move to a lower carbon future.

“Westminster needs to accelerate carbon capture at the scale this country will need to meet its carbon reduction targets. The Scottish Cluster including St Fergus must be backed.

“We also need the Scottish Government to back the north-east’s bid for a green freeport.

“During a recent visit, First Minister Nicola Sturgeon said she wants this region to become the net zero capital of Europe.

“She now has a chance, via a compelling collaborative freeport bid, to plant that flag firmly in the ground.”

Cause for optimism

Maggie McGinlay, chief executive of Energy Transition Zone, said: “The results highlight a range of positive trends emerging that provide cause for optimism.

ETZ chief executive Maggie McGinlay. Photo by Kenny Elrick/DCT Media

“Whilst the Scottish and UK Governments have set out a wide range of welcome measures designed to support accelerated diversification toward new energies, there is still some uncertainty as to how this support can be accessed so this report is valuable in highlighting the need for greater clarity of vision and purpose from our policymakers in this regard.”

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