Yesterday saw the publication of the Government’s long-awaited Industrial Strategy but what did it hold for our region?
AGCC had previously submitted the views of our members into the consultation process including a joint paper developed with OEUK and Opito proposing a co-designed Industry-People-Place approach to the future of our energy sector.
The document regularly references threats to our security. Surely then, given current global events, we should be looking to reduce and not increase our dependency on energy imports.
Lots of talk of “clean” energy but oil & gas was almost totally conspicuous by its absence. Domestically produced fossil fuel is more than 4 times “cleaner” than imported equivalents, so therefore, should be included in the definition…and play a more central part in our Industrial Strategy.
Good to hear that Government admits its recent approach has been too interventionist with too much regulation and that their role should be creating the conditions to let business drive growth and productivity. And also positive that they want to form an enduring partnership with business, but many of their current policies and behaviours don’t back this up.
It acknowledges that bridges to the future need to be built to ensure that people and communities in areas where industry is changing are not left high and dry. However, this is exactly what we are currently seeing happen to our world class North Sea workforce and the places they live and work due to current energy related policy. In the same paragraph, it says government has been too reluctant to change course to mitigate exposure to global volatility. Iran, Ukraine, US et al is surely the perfect storm therefore to justify a change in licencing policy and the removal of EPL. The Strategy clearly states that the headline corporation tax rate will be capped at 25%. Eh, last time I checked, North Sea oil & gas operators paid 78%.
The government’s independent advisers, the Climate Change Committee, say as the UK moves to meet its climate targets on schedule, UK homes and businesses will still use between 13 and 15 billion barrels of oil and gas to keep the lights on and the country moving. This is baked into Carbon Budgets but current forecasts suggest the North Sea will produce less than 4 billion – meeting less than a third of that need.
An independent study produced for OEUK by energy experts Westwood Global Energy Group, finds that up to 7.5 billion barrels of oil and gas could still be produced from UK waters – around double current government estimates. This additional production could add £165 billion in economic value (totalling £385 billion) if the UK meets half its oil and gas demand from domestic sources, supporting jobs, investment, and public services across the country. Surely, this is a no-brain Industrial Strategy ‘quick win’?
High growth ‘superstar’ businesses are, of course, a big part of the future but the strategy must not lose sight that backing and retaining existing companies to do business in the UK is every bit as important. Currently internationally mobile capital and project resources are being deployed in other energy regions around the world, meaning it won’t be here to accelerate and deliver green energy projects.
Encouraging to see various references to speeding up planning and simplifying regulation- this is especially vital in relation to renewable energy and grid/storage projects but as we’ve seen previously, easy to say and more difficult to do. And refreshing that Government is prepared to look beyond our shores in the pursuit of the best talent by setting up a Global Talent Taskforce.
The North-east of Scotland is referenced on a number of occasions including it being a ‘critical minerals cluster’, the government’s commitment to the Acorn CCUS project, ETZ, Investment Zone and Aberdeen’s role as a place that can enable a smooth and successful energy transition- but it can only deliver given the right conditions and policy interventions.
On the flip side, no mention was made of our region under the ‘strengthening connections between and within our city regions and clusters’ heading. We need to re-double our efforts to ensure faster rail connectivity south to/from Aberdeen, fully grasp the opportunity of increasing cross-border rail freight to support our key industries (including energy, CCUS and food, drink, agri & fisheries) and ensure that re-opening rail connectivity to Peterhead, St Fergus and Fraserburgh is a government priority.
In terms of unleashing the economic potential of Life Sciences clusters, the Glasgow-Edinburgh-Dundee triangle gets a mention but very disappointingly, not Aberdeen.
Nor - despite a recent government press release on the topic - was Aberdeen listed as a location that will be part of the relocation of Civil Service roles (including 50% of UK-based senior civil servants) to towns and cities across the UK to “work with frontline workers and local leaders”. Darlington, Manchester and York are the only places that get a mention, so we need clarity on that commitment too.
But overall, a very encouraging intervention from Government…if they listen to and work with business to deliver on the promises within and use the strategy as a fast catalyst for change.