• Companies operating in the sector expect approximately 50% of their activity will come from outwith oil and gas by 2030.
  • 52% of firms plan to increase their core headcount over the next three years.
  • Only 24% of companies believe that government support for the transition is currently visible or accessible to their business.

Companies in the UK’s oil and gas sector expect their businesses to transform substantially across the next decade, with firms predicting that on average, the share of their business outside of oil and gas will jump from 21% today to 47% by 2030, according to a new industry report -The Oil and Gas Transition Survey.

This is the 34th edition of this vital barometer of activity and sentiment among operators and supply chain companies based in this region working in the energy sector and Aberdeen & Grampian Chamber of Commerce (AGCC) is delighted to partner once again with KPMG UK and Fraser of Allander Institute to deliver the findings which focus on the challenges the industry faces as it looks to take a leading role in energy transition.

The overall headline findings suggest that UK’s oil and gas sector is pressing ahead with diversification, but skills shortages and concerns over lack of visibility around government funded initiatives appear to be creating blockages for net zero ambitions.

Companies in the UK’s oil and gas sector expect their businesses to transform substantially across the next decade, with firms predicting that on average, the share of their business outside of oil and gas will jump from 21% today to 47% by 2030.

When it comes to general industry conditions, the research illustrates a mixed picture, with confidence and activity in the domestic sector trending below levels observed in international markets. However more businesses are now working at optimum levels than in the last survey. And pleasingly, we are seeing large increases in the value of renewables work.

Overall, the sector continues to be positive about the future, with 69% of companies expecting revenue to rise in 2022.

Similarly, three quarters of companies report being either ‘moderately’ or ‘extremely’ optimistic about Aberdeen, Scotland and the UK playing a leading role as a future energy hub.

The vast majority of respondents believe that strong sustainability credentials are critical to their long-term success.

The survey shows that the industry continues to take its commitments to decarbonise seriously. 80% of firms indicated that strong sustainability credentials were critical to their long-term future. With over half having already developed a strategy to reduce their carbon footprint and 30% of businesses have linked this to time-bound targets, ranging from 2030-2050, to become carbon neutral.

But interestingly, less than a quarter of firms surveyed believe that COP26 has acted as a net zero accelerator, suggesting that this is already a work in progress.

When it came to implementing their own diversification plans, businesses outlined a range of workforce challenges. These included identifying skills gaps, attracting new employees and retraining costs.

Companies were actively pursuing solutions to these issues, with 62% investing in retraining existing staff, 47% focusing on graduate recruitment and 31% seeking to rebrand or reposition their company to be more attractive to new recruits.

The research suggests that additional action is needed to support firms in the sector to attract and retain the key talent which will drive the transition.

Companies reported that they were losing more staff that usual to roles outwith the sector (39%) and to retirement (26%), underlining the importance of programmes like the Energy Skills Alliance which aim to create a true ‘all-energy career proposition’.

Commenting on the results, Martin Findlay, office senior partner at KPMG in Aberdeen, said: As we cautiously emerge from the pandemic, the direction of travel is clear amongst oil and gas companies who are gearing up for a decade of rapid sustainable transformation.

“Fluctuations in energy demand throughout the pandemic, coupled with mounting pressure from governments and consumers have given rise to more acute questions around energy use and how the oil and gas industry should evolve.

“Positively, most oil and gas firms are now doing far more than paying lip service to sustainability with the vast majority believing that strong sustainability credentials are critical to their long-term success. Despite this, two in five of those we surveyed have not committed to carbon neutral targets. Two years ago, that figure might not have come as a surprise, but today it jars.

Without clear plans to transition to an integrated energy sector which involves oil and gas and renewables, with viable solutions on transportation and heating, many firms are now facing a clear fork in the road – evolve and thrive or be left behind.

“It’s clear the industry is on the cusp of transformation, and with many businesses having already chosen their path – and heading towards a greener future, the question is how many more will follow and how quickly.”

Russell Borthwick, chief executive at Aberdeen & Grampian Chamber of Commerce, said: “The results illustrate that firms in the sector envisage the transition picking up pace rapidly over the next decade.

“The industry is clearly committed to taking a leading role in delivering the UK’s net-zero ambitions, with the majority of businesses committed to achieving net zero. 30% of firms have set a clear target for doing so, which compares favourably with data on the wider Scottish economy.

“While companies in the sector are actively engaging in the transition, they are also facing some significant barriers. Firms are less confident about their ability to secure skilled talent in areas outside of oil and gas, and SMEs in the sector will require more support to identify and develop the skills they require to transform their own businesses.

“Only a quarter of companies stated that government assistance to support them in making the transition was visible or accessible to their business. This underlines the importance of providing firms across the supply chain with the vital support they need to diversify into new activities and deliver a just transition.”