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Creation of Aberdeen as a global energy centre of excellence could generate over $600bn in revenues

The UK continental shelf could generate in excess of $600bn1 in new revenues through a combination of fresh funding and investment, fiscal certainty and targeted incentives, greater public and private sector collaboration, and a more coordinated approach by industry and education according to a new report from PwC in Aberdeen.

The report, ‘Northern Lights: a strategic vision of Aberdeen as a world-class energy capital’, outlines the positive actions that industry, financial, public sector and academic stakeholders will need to take together if they are to secure the coveted position as one of the global energy capitals of the next 40 years, delivering excellence and providing a lasting legacy for Aberdeen.

It also delivers a cautionary note: Aberdeen may be reaching a crossroads. Stakeholders should collaborate more to build on the city’s 40 year track record in oil and gas, without which there is a risk that the opportunities within reach may slip away, leaving the future prosperity of Aberdeen much less certain as oil and gas reserves inevitably decline.

Mark Higginson, senior partner, PwC in Aberdeen comments:

“We have a remarkable - and potentially unrepeatable - opportunity to position the city as an international energy centre of excellence for the next 40 years.

“However, this isn’t simply going to fall to Aberdeen by right. We need to shape our own destiny and the journey must start now, with everyone focussed on a single, definitive strategy that embraces core objectives of maximising oil reserves, exploiting the new frontier areas West of Shetland and the Arctic, becoming a talent magnet and more effectively serving the needs of industry, and viewing clean energy not as a consolation prize but as a complement to oil and gas revenues.

“The public sector has a clear role to play in showing leadership and helping to balance the competing views and interests of various stakeholders as well as helping improve the city’s image and desirability as a place to live and work. The Government also should view the UK continental shelf as an opportunity for investment and not simply as a ‘cash cow’ and also acknowledge the need for an attractive, transparent and stable fiscal regime.”

Consolation prize or golden opportunity?

Although there is plenty of life left in the UK Continental Shelf, the move towards cleaner sources of energy is gathering pace. It is crucial that the Aberdeen oil and gas industry harnesses its wealth of offshore engineering knowledge, skill sets and experience if Scotland is to maintain its reputation as a centre of excellence for the energy industry.

With a Scottish government target of 100% of gross electricity consumption to be supplied by renewable sources by 2020, the report demonstrates that this is not a consolation prize but a viable sector that can complement existing operations in the long term.

The UK and Europe currently leads in wind and wave technology however there is no co-ordinated approach to attracting renewables to Aberdeen and few firms are currently focussing on what role they will play in this sector. Consequently there is a risk that the rest of the world could quickly grab this opportunity and it will be too late. Industry needs to move fast.

Decommissioning is another obvious area where significant experience of hostile North Sea environments and a wealth of transferable skills could enable Aberdeen to take the lead, exporting its know-how to other parts of the world.

Jonathan Shelley, energy director, PwC in Aberdeen, comments

“The response by the industry, including investors and oilfield services companies, to both the substantial renewable and decommissioning rewards that can be reaped in future years has been sporadic. The investment opportunity exists now to become a key international player in these markets and Aberdeen needs to grasp this with both hands. We can’t afford to be in the slow lane.”

Global energy academy – think career, think energy, think Aberdeen

Recruitment and retention of talent is a major issue for the industry – a global PwC survey revealed that 66% of CEOs fear they won’t have the right people to compete effectively as recovery in the industry takes hold. A key issue is a mis-match between the qualifications gained in education and the technical, industry specific and softer skills needed by the industry. Competition for limited talent in a global pool is also fierce and the industry needs to project itself as offering a long-term career that is exciting, vibrant, challenging and progressive.

One solution is to enhance the collaboration between industry and academics through the creation of an Aberdeen Energy Academy.

Learning from innovation in locations such as Houston, Singapore and Silicon Valley, where a virtuous circle of commercial and academic advancement has been generated, the Academy has the potential to create courses that would appeal to the next generation and serve the future needs of the industry.

Mark Higginson, senior partner, PwC in Aberdeen, comments:

“There are already some excellent examples of collaboration between local companies and universities however, this is not the norm. Developing a co-ordinated approach would generate greater impetus and a longer term solution.”

To view the full report click here

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