The future of the oil and gas industry Contents

5Preparing for transition

74.We heard from Claire Perry, Minister of State at BEIS, that the North Sea has the potential to produce oil and gas for another 30 – 40 years,137 and will continue to make an important contribution to the economy during this time. However, Sir Ian Wood, Chair, Opportunity North East, emphasised the importance of using this time to support diversification in preparation for the cessation of production. He believed that the North East of Scotland has “20 to 30 years” to make this transition and that “if we don’t, we are going to have a very, very sad north-east of Scotland in 30 or 40 years’ time.”138 This transition may have to happen sooner to meet that UK’s climate change ambitions.

75.During this inquiry we heard there are two main, and often overlapping, ways the sector is looking to prepare for this transition; by supporting companies to continue working in the oil and gas sector by expanding in new markets and exporting expertise into other basins, and by supporting companies and individuals to transfer their skills and technologies into other sectors.

Improving export performance

76.As was discussed in previous chapters, the sector believes that there is significant potential for firms in the oil and gas supply chain to export their expertise in decommissioning, and technology developed to exploit smaller and more difficult to access reserves, to other basins. In both these cases it is argued that the industry in Scotland had a competitive advantage from the fact it is the first large basin to reach this stage of maturity and will have experience in maximising late-life production and decommissioning in hostile environments that will be valuable to other basins when they reach a similar stage of maturity.

77.Another area related to the oil and gas sector where it has been argued that the UK has an opportunity to use its expertise to increase its exports is the subsea sector. The oil and gas sector deal proposes the establishment of a Centre of Excellence in underwater innovation which would seek to support the UK underwater sector in securing a 5% share of a global industry. which is worth £44bn. Trevor Garlick, Opportunity North East, told us that:

This idea of us having a world-leading position in the subsea and underwater industry is one that we all know about in the north-east. Not everybody knows that in the country and sees us as a world leader, but we are a world leader and we want to sustain our position as a world leader and use that to get into more international growth.139

78.Neil Gordon, Chief Executive Officer, Subsea UK, highlighted the range of activities covered by the underwater sector, saying that it covered offshore wind, wave, tidal, deep sea mining, aquaculture, marine science and defence.140 He said that the centre of excellence would bring a more “cohesive” approach to supporting the sector, particularly the supply chain, with its role including:

approaching markets in a cohesive way, helping to get the right training and the right skills, helping to get training that can cross sectors, helping to drive the right innovations and maybe apply for the right sort of research and bring the right kind of partnerships together.141

Mr Garlick also stressed that if the UK didn’t capitalise on this opportunity other countries would, saying that he had been “shocked” by how far ahead Norway was on its own subsea proposals.142

79.We welcome the sector deal’s proposal for a centre of excellence in underwater innovation and its focus on expanding the sector’s export performance. This is one of many areas in which the offshore oil and gas sector has the potential to improve its export performance, with decommissioning and late-life extraction being other areas of expertise. We ask that the Government outline how it will integrate these different areas of focus to provide a cohesive and unified strategy to promote the sectors’ export. The Government must move quickly in these areas to ensure that the UK does not fall behind other countries efforts.

Transferring skills and technology

80.Professor Jim Watson, Director, UK Energy Research Centre told the Committee that “there is a lot of scope for skills transfer, particularly with the growth of offshore renewables” Sir Ian Wood spoke to the us about the work that Opportunity North East was doing with Scottish Enterprise on diversification, which involves working with companies with transferable skills to encourage them to consider other opportunities in related industries, including renewables.143 Friends of the Earth Scotland argued that central to any transition should be the “protection of the people who work for the sector by using their skills in the process of de-carbonisation, with the sector seeking to redeploy and if necessary to re-train and upskill its workforce.” It gives examples of opportunities in de-carbonisation of transport, energy efficiency in buildings and the modernization of production industries.144

81.Willie Reid, Director, Strathclyde Oil and Gas Institute emphasised the importance of technological transfer—saying there were potential applications in “asset integrity, aerospace, power generation, electricity generation, grid systems offshore […] data analytics, life extension, marine and offshore engineering, […] digital manufacturing, engineering and design, applied physics, satellite technology, [and] offshore wind”.145 Colette Cohen, CEO, Oil and Gas Technology centre argued that sharing technology supports the transfer of knowledge and expertise between different industries.146

82.There was some discussion about the value of skill and technology was onshore oil and gas extraction (fracking). Professor de Leeuw said that while a decision on whether or not to allow fracking in Scotland was a political decision the skills needed to do this work “were out there”147 and would be a “powerful addition to the portfolio.”148 Colette Cohen, CEO, Oil and Gas Technology Centre, said that fracking would provide “increased opportunities for the workforce [and] for the technologies and skills we already have.”149 However, Paul Wheelhouse, Minister for Energy, Connectivity and the Islands said that the position of Scottish Government on fracking was “to have a preferred policy that would prevent fracking happening in Scotland.” He said that this was based on evidence the Scottish Government has commissioned from KPMG which said there would be “minimal employment impact in Scotland” that would “not offset the loss of jobs that will come in the offshore oil and gas industry” and that he did not believe it would justify the “very substantial” additional climate change emissions.150

Skills transfer

83.Skills transfer is an area in which both the UK and Scottish Government are already active. The Scottish Government submission argues that Scotland’s “well-established oil and gas sector and a proud engineering heritage which will help our transition to a low carbon, sustainable economy.” In 2015 the Scottish Government established its Energy Jobs Task Force (EJTF), with the aim of “retaining and growing talent and skills in the industry, identifying and implementing support to people who were facing, and continue to face, redundancy and enhance partnership and collaboration.”151 As part of this work it launched a £12 million Transition Training Fund (TTF) in 2016 to support individuals and help the sector retain talent. The fund initially aimed to support 3,000 participants over three years.152 The latest figures show that 3,735 funding applications have been approved.153

84.As of November 2018, 48% of people who had been supported by the scheme had transitioned into new sectors, with main sectors being “skilled trades”, “transportation” and “renewables and other engineering”.154 More recently, the Scottish Government launched its Just Transition Commission, one of the aims of which is to advise on how to “plan, invest and implement a transition to environmentally and socially sustainable jobs, sectors and economies, building on Scotland’s economic and workforce strengths and potential.”155

85.Whilst welcoming the TTF the RMT Unions said in their evidence that it would “not be sufficient” to address the cost and complexity of facilitating a smooth skills transfer between the oil and gas and renewable sectors, and that a more coordinated approach from both Governments was required.156 Professor Watson, Director, UK Energy Research Centre, argued that TTF’s success in helping workers transfer to the renewable sectors had been limited and that there was insufficient demand and opportunities in the renewables sector:

I think the numbers in Scotland are around 58,000 [workers] in the low-carbon and renewable industries directly and in their supply chains, and 115,000 for the oil and gas industry plus supply chains and so on. There is a two to one difference. That illustrates the fact that you need to do the supply push on skills and help people with transfer and retraining, but you also need to do something about the demand in terms of growing the market for the renewables industries as well.157

86.Claire Perry, Minister of State at BEIS emphasised the importance of skills transfer, saying that Government was working with the Oil and Gas Technology Centre which has energy integration and transition as a theme of its work and was trying to “signpost” and “challenge” the industry to look at overlaps with decommissions, subsea technology and offshore wind.158 Emily Bourne, Director for Energy Development and Resilience, BEIS, said the Government was working with OPITO, the industry sector skills body, to look at the transferability of qualifications between different areas of the energy sector to address a situation where “someone who is qualified to work in oil and gas would have to undertake some new qualification to move into renewables.”159

87.“People and skills” is one of the supporting objectives of the oil and gas sector deal. The sector deal proposal says that this area of work will focus on “developing the next generation of workers, retaining and re-skilling existing workers and exporting the industry’s skills”. The deal proposal says that it recognises that industry’s activity in this area “could be even more effective with better collaboration between this sector and those from related sectors such as nuclear, renewables and other heavy industries” and calls on BEIS and other public bodies to: engage with OPITO’s (sector skills body) workforce review; review funding mechanism and outreach work; develop the energy skills passport; support the sector in tackling barriers to cross sector collaboration; and enhance provision of skill development. It also commits the industry to working collaboratively to standardise role types and to “continue to develop the most compelling materials to inspire and engage young people” who are considering careers in STEM subjects.160

88.We welcome the efforts that both Governments have made to support skills transfer from the oil and gas sector to other industries. It is essential that the skills of people who have made Scotland’s oil and gas industry so powerful are not lost as the industry prepares for the future. We recommend that in agreeing the sector deal proposal the Government ensure that it contains specific and measurable outcomes on increasing skills transfer to new sectors, with clear commitments for action from both industry and Government.