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Brighter outlook for the North Sea oil and gas industry

With mounting pressure to tackle climate change ringing out around the world, it is never going to be easy for the North Sea oil and gas industry. The COVID-19 outbreak and slump in commodity prices last year led to a wave of redundancies; one estimate suggests that 12,000 workers lost their jobs in just nine months.

However, the 33rd Oil & Gas Survey from the Aberdeen and Grampian Chamber of Commerce – produced in partnership with Fraser of Allander Institute (part of Strathclyde University) and accountants KPMG – suggests that confidence is starting to make a comeback. Nearly two-fifths (39%) of respondents reported that they were more confident than a year ago, although 33% said they were less so.

Significantly, three-quarters of oil and gas supply chain firms said they expect to become more involved in renewable energy in the UK over the next three to five years – the highest level recorded since the question was first introduced in 2015. Contractors are now predicting that oil and gas will account for 68% of their activity by 2025, down from 86%.

The success of the vaccine roll-out, coupled with the international oil and gas production curbs that helped lift and stabilise commodity prices, along with the North Sea Transition deal that was signed with the UK Government in March, have improved the mood. As part of the pact, the industry agreed to set near-term emission targets in return for financial support for companies willing to participate in decarbonisation projects.

Another factor that is helping to concentrate minds is that 37% of the firms taking part in the survey said that they would be ‘evaluating’ their suppliers’ carbon footprints when awarding or renewing contracts. A polite way of saying that those who move furthest and fastest to cut emissions will gain real competitive advantage.

Commenting on the report, Martin Findlay, senior partner of KPMG Aberdeen, best summed it up by saying: “The common misconception is that oil and gas is the cause of much of the climate crisis we face, when it’s actually often the driving force behind a potential renewables revolution.” He also said that the industry was “on the cusp of transformation” and that the latest survey pointed to “a collective sense of anticipation about energy transition.”

From our point of view as a company that has already achieved carbon negative status, the report demonstrates two further things: first, that the momentum towards tackling climate change is now unstoppable; and two, that it is remarkable what can be achieved when everyone involved pulls in the same direction at the same time.