Over the years, the bi-annual Energy Transition Survey has provided a window into the health of the North-east’s oil and gas sector, and in more recent times, charted its course towards a more sustainable future.
Once again, the survey has been a collaborative effort led by the Aberdeen and Grampian Chamber of Commerce in partnership with KPMG and ETZ Ltd and aims to capture the sector's mood and provide invaluable insights into its transformation.
This edition tells us that most companies expect continued revenue and profitability growth and there has been an uptick in confidence in UK opportunities. There has also been a surge in companies operating at optimum levels compared with last time. A relatively stable (slightly increasing) oil price has likely helped, and respondents still report 70% of activity involving fossil fuels.
How we transition in the coming years will have huge knock-on impact for supply chains, the environment, jobs and skills, and the economy locally and nationally. Positively this survey tells us the sector continues to diversify, with respondent’s predicting an equal 50:50 split between oil and gas production and alternative activities by 2030. This will happen through a mix of actions including decommissioning, offshore wind, carbon capture and storage, and hydrogen.
Though 63% of respondents are taking on more energy transition work, this figure shows a slight decline since the last survey, suggesting strategies may be shifting.
These latest findings are published as the industry faces an important test: will it maintain focus on the energy transition, despite improved market conditions for oil and gas and some policies turning in its favour?
In the six months since the last survey, much has happened to impact the region’s energy mix. This includes financial support for the Acorn CCS project, and more recently the Statera Kintore Hydrogen project receiving government backing.
UKCS exploration continues to be prominent on the UK Government’s agenda, as demonstrated with the approval of the Rosebank Field and the award of 27 new exploration licences were announced. Additionally, annual oil and gas licensing rounds will be mandated with the carbon impact of new developments versus imported LNG (Liquefied Natural Gas) being considered, as announced in the King’s Speech this month. While in September the Prime Minister revised target dates and commitments within the Government’s Net Zero strategy.
It will be important to understand how recent policy announcements will affect the sector's outlook, but what is more critical is that the sector remains focussed on the big picture and the ultimate prizes to be won. Reaching Net Zero can deliver a host of benefits for consumers and the economy as a whole: a cleaner environment, lower bills, and warmer homes. A strategy that has the transition at its heart will also be key to attracting and retaining talent, but it requires a huge effort. If we take the foot off the pedal, we risk never fully realising the great opportunities for jobs and investment in our region.
The North-east has huge potential to be a driving force in facilitating the transition to a lower-carbon economy and a Net Zero future. With lots of questions over the political situation in the short term, businesses who want to win in the future need to keep making decisions for the long-term outlook of the sector. That means remaining focussed on the journey to Net Zero and what their role in it will be. Because ultimately, that is the only destination.
Thank you to those who contributed to the survey and to those who engaged in discussions throughout the process.
Rob Aitken – Director, KPMG Transaction Services, Aberdeen