1Introduction
1.The offshore oil and gas industry is central to Scotland and the UK’s economy and energy security. In 2017, oil and gas production contributed around £17 billion to the UK’s balance of trade.1 In 2016, oil and gas production was estimated to have been worth £9.2 billion to the Scottish economy,2 with the sales value of oil and gas produced in Scotland in 2017–18 being estimated at £20 billion.3 The oil and gas industry supports approximately 300,000 jobs across the UK, around 45 per cent of which are based in Scotland.4 It provides a large portion of the UK’s energy and it is forecast that two-thirds of the UK’s energy will continue to come from oil and gas by 2035.5
2.Scotland is at the forefront of the worldwide oil and gas industry, and is estimated to have nearly 60% of oil reserves in the EU.6 A large proportion of the UK’s oil and gas fields are located off the coast of Scotland; North Sea oil and gas exploration and production has created a valuable Scottish industry as well as “internationally-renowned” offshore engineering expertise.7
3.According to Oil and Gas UK, the industry is “emerging from one of the most significant and challenging downturns.”8 While oil and gas production from the UK Continental Shelf (UKCS)—the region of waters surrounding the UK where oil and gas is produced—has seen modest increases in recent years, the long-term trend is for production to decline.9 Similarly, while the oil price has shown signs of recovery from its fall from over $110 per barrel in 2014 to a low of below $30 per barrel at the start of 2016,10 Tony MacKay, Professor of Energy Economics, has said that these “fluctuations have caused serious problems for the oil industry in Scotland “ and that is “continuing uncertainty over future oil prices.”11
4.In addition to these economic challenges the sector needs to; prepare to adapt to reduced production levels in the medium term; get ready for a rise in decommissioning activity, and support individuals and businesses transition into new markets and sectors. The sector also needs to respond to the ambition of both the UK and Scottish Governments to significantly reduce carbon emissions.
Our inquiry
5.We launched this inquiry to explore how the oil and gas sector in Scotland can best respond to these challenges—both how to make the most of its remaining reserves in a difficult and volatile economic context, and how it should prepare itself for the decline and eventual cessation of production to ensure that the high value and skilled employment the sector provides will continue.
6.During the course of the inquiry we received 33 pieces of written evidence. We held six evidence sessions where we heard from academics, sector bodies, unions, energy and climate change specialists, experts in decommissioning, and regulators as well as the UK and Scottish Governments. We also visited the Oil and Gas Technology Centre in Aberdeen, where we held a roundtable with industry and sector groups. We are grateful to everyone who took the time to contribute to this inquiry.
1 Oil & Gas UK, Economic Report: Facts and Figures, 2017
3 Scottish Government, Oil & Gas Production Statistics, September 2018
5 Oil & Gas UK, Economic Report: Facts and Figures, 2017
6 Scottish Government, Oil & Gas Production Statistics, September 2017
7 Scottish Government, Scottish Energy Strategy, December 2017
8 Oil & Gas UK, Economic Report, 2018
Published: 4 February 2019