Words seemingly louder than actions as UK and Scottish Governments contrive to strip Aberdeen of its global energy hub status

Both of our governments appear to be hell bent on destroying Aberdeen’s once unshakable status as a global energy capital with a recent series of awful policy decisions.

Following on the heels of the Energy Profits Levy and earlier placing of the Acorn CCUS plans on the backburner, the last few days have brought two further nails in the coffin of the UK’s once world-leading energy sector.

Raising the question: “What more can our two governments do to shaft the North-east of Scotland”?

Excuse the Eurovision reference (something else this region bid for and didn’t win…do you see a theme emerging?), but it seems perhaps we can characterise overall energy related strategy when it comes to the North-east of Scotland as ABBA. (Anywhere But B****y Aberdeen).

Just 24-hours after the Scottish Government told the world it doesn’t want any more oil and gas exploration in the North Sea, it appears that they are also turning their backs on ambitions to make our region a global green energy capital.

As recently as November, the First Minister’s told delegates at the SNP Conference in Aberdeen that she wanted to see the North East being the net-zero capital of the world. Yes, the world.

However, that’s a status that needs to be earned, not just assumed, and recent decisions from Westminster and Holyrood risk not just this ambition but in the here and now, vital investment in our energy sector that will provide energy security and protect thousands of jobs.

One lever that had been jointly in the hands of Scottish and UK governments to accelerate the energy transition was to confirm that the compelling North East Green Freeport bid- and with it over £8bn of GVA and more than 30,000 jobs - had been successful. But in their wisdom, the status has been awarded to Cromarty and Forth. Maybe they thought they were announcing the shipping forecast?

The long awaited energy strategy from Scottish Government is one which looks an awful lot like economic suicide. Betraying the North Sea oil & gas industry and the tens of thousands of workers dependent on it.

Of course we welcome the steps outlined in it to develop renewable energy and cut consumption. No one is in denial about the direction of travel but a transition is, by definition, a change of state over time.

Awarding future exploration and operating licences is a matter reserved to Westminster, but this announcement added to UK government’s Energy Profits Levy will act as another major blow to sector confidence and investment in the North Sea.

The energy sector is being squeezed dry with the blunt instrument that is the EPL resulting in some of the highest tax rates in the world despite oil prices being back at pre-Ukraine conflict levels meaning that the sector is not making the claimed ‘exceptional excess profits’.

This is leading to de-investment in the North Sea at exactly the time we need it most. Both to ensure our future domestic energy security and that we take advantage of our natural resources and early mover advantages in renewables activity.

The promised green jobs are not yet available at scale so a premature end to oil and gas operations will mean we lose both the investment, supply chain and skills needed to ensure we retain the very companies that have the expertise and capital to make this a reality.

In fact we are already seeing and hearing very real examples of them simply taking this to places where more favourable regimes are in operation.

One senior industry figure told us in the last few days that some of their investors currently viewed West Africa as less of a basket case than the North Sea. If that is not a wake up call for UK policy makers, then goodness knows what will be.

The Scottish Government strategy says “..unlimited extraction of fossil fuels is not consistent with efforts to decarbonise”… and that “maximum economic recovery is no longer government policy”. I think most people would largely agree on both points and I am yet to hear a single voice calling for ‘unlimited extraction’.

The case that does need to be more clearly made, however, is that as we transition and more of our energy needs can be provided from renewable sources that we aim to provide sufficient domestically produced oil & gas to avoid the need to import.

We are already producing significantly less oil and gas here than in the past but consumption remains high. This has left us ever more reliant on energy imports from other parts of the world. We have gone from being a net exporter of energy just 20 years ago to importing 38% of the energy we used in 2022.

Meantime, it continues to be required for people to travel, heat and power their homes and for the manufacture of many everyday goods. To keep the lights of the nation on.

The simple fact is that approximately 73% of our national energy needs today are still met by oil and gas. Consumer demand cannot be switched off overnight. By 2050, the International Energy Agency projects that global demand for these sources will fall by 80%, but even then there is currently no future scenario where there is not a requirement for some oil and gas.

The UK Climate Change Committee accepts this will be a part of our energy mix beyond 2050 and an opinion poll last year showed that 85% of people in Scotland believe that the oil and gas we still need in the UK should be produced in the UK.

We have a clear choice. To produce as much of our required supply as possible domestically, with full control over the regulatory environment in which it is extracted, protecting and creating high value jobs. Or to import an increasing amount of our energy, with the heavier carbon toll and supply risks that shipping it from other parts of the world carries. The latter option makes little economic sense, and even less environmental sense.

Meanwhile Norway- held up as an exemplar small nation in Europe- is currently increasing its oil and gas output to meet current demand but most importantly to help finance its energy transition activities. Putting them ahead of us in the race to new zero.

Aside from energy security and supply, let’s look at the economic and social value of the sector which has unlocked over £350billion of tax revenues since the 1970s.

Currently in the North-east of Scotland alone, 45,000 people are directly employed in the offshore energy sector. One of the scenarios of mistiming the transition is that this figure could fall by an eye-watering 17,000 by 2030. And that doesn’t include the resultant loss of induced employment. That is the price to this region of getting it wrong.

Nicola Sturgeon was recently quoted as saying “I grew up in the 1980s during de-industrialisation – when a Tory government failed to plan for it, and left communities and individuals on the scrap heap. The legacy of that is still with us. We mustn’t repeat those mistakes”.

The catalogue of recent decisions suggests those lessons have not been learned and that our governments are prepared to oversee the economic decline of this region in the same way as Lanarkshire, South Yorkshire and other places suffered in previous decades.

The £500m Scottish Government Just Transition Fund over ten years is very welcome but is a mere drop in the ocean compared to the tidal wave of social and economic damage that will result from a premature end to North Sea operations.

It’s not too late. Surely, our policy makers will understand that it is a better use of public resources to invest in existing strengths rather than creating a 21st century post-industrial blackspot that will take decades and many billions of pounds to regenerate?

Both governments must now work together to bring forward an additional green freeport. The Westminster legislation stating that “..further awards may be made if bids are particularly strong”.

Also they need to fast-track the Acorn carbon capture and storage project in Peterhead and seriously reconsider their mistakes on oil and gas taxation and policy.

If they allow the prize of becoming a global green energy hub slip away from Aberdeen, Scotland and the UK, they will never be forgiven for this catalogue of errors.