For decades it has been the powerhouse of not just the north-east economy, but the UK’s as well.
And while the North Sea still has a bright future, despite its current difficulties, there is a realisation that the region must add other strings to its bow to continue to thrive.
Key to the process of breaking free of the heavy reliance on oil and gas will be a raft of projects which will be kick-started by public sector investment in the shape of the long-awaited City Regional Deal (CRD).
Unveiled earlier this year by Prime Minister David Cameron, the £250million pot of cash fell somewhat short of what the local authorities in Aberdeen and Aberdeenshire, as well as business leaders, had been hoping for.
But, augmented by another £254million from the Scottish Government, it still represents a golden opportunity for the region.
The chief beneficiary of the CRD cash will be the proposed Oil and Gas Innovation Centre in Aberdeen, which was allocated £180million of the Scottish and UK governments’ joint £250million funding package.
The centre’s potential benefits to the north and north-east economy are clear.
It will offer a practical and specific range of initiatives designed to start delivering benefits almost immediately.
Four “solutions centres” should be operating by 2017, focussing on how to reach “small pools” of valuable oil and gas in the North Sea, well construction and asset integrity.
The fourth centre, and a possible fifth one, will also tackle North Sea decommissioning and “big data” – how technology can be exploited to serve the industry more effectively.
Professor Paul de Leeuw, director of the Oil and Gas Institute at Robert Gordon University, helped spearhead the bid for the technology centre.
He said: “We are one of the leading oil and gas centres in the world. We don’t have a national centre for oil and gas like other countries do.
“What we haven’t got is a delivery mechanism to take these ideas forward and get them to market. This is what this money is aimed at, actually helping some great work already done and finding the execution mechanism for it.
“If you combine how we maximise economic recovery of oil and gas in the UK, how we make sure we maintain as many oil and services companies here with export capabilities, also how we keep as many high value jobs in the UK, you see we need far more technological innovation to deliver all of these. This became a very compelling case for government and industry alike.”
But while the innovation centre will meet the pressing needs of the oil and gas industry – and ensure its continued viability – it does not actually diversify the economy away from the sector.
The two local authorities and their private sector partner, Opportunity North East (One), remain at the drawing stage board for a number of projects which will galvanise other areas of the economy.
These include coming up with a funding scheme to develop the much-needed roads and surrounding access infrastructure to support the planned £415million development of Nigg Bay into an extension of Aberdeen harbour – an essential step in not only building capacity for the burgeoning decommissioning industry, but also bringing in international cruise ships to deliver a boost to tourism in the region.
Some of the remaining CRD money will be pumped into on innovation in a similar way to the Oil and Gas Centre, but aimed at biopharmaceuticals and food science.
The case for the establishment of a biopharma innovation centre is strong in a sector which is often overlooked in the north-east.
What the CDR partners highlighted was that Aberdeen is already home to the second-largest cluster in the UK for biologics – drugs for diseases which are derived from micro-organisms.
And it is now on the verge of exploding in terms of importance.
Andy Porter, professor of biotechnology and the director of the Scottish Biologics Facility (SBF) at Aberdeen University, is excited about the potential.
The scientist, who is renowned for founding Haptogen – one of the UK’s most successful biotech start-ups which was sold to Wyeth in 2007 – said: “We are coming in for quite an exciting time for life sciences in Aberdeen in the next few years.
“Aberdeen has established itself as a centre for commercial drug discovery in Scotland.”
He points to three major companies in the region – all associated with Aberdeen University – which have raised millions from investors and have or are near to delivering treatments for Alzheimer’s, cystic fibrosis and irritable bowel syndrome (IBS).
The largest of these is TauRX, based in Aberdeen and Singapore, along with Novabiotics and 4D Pharma.
Another area of expertise which will be supported by some CRD cash is in agri-food research.
Taking in the region’s massive farming as well as food and drink industries, this will be boosted along with Aberdeen University’s Rowett Institute for Nutrition and Health.
The Rowett is renowned for its world class research as well as its practical work with industry, including its pioneering of the “Fuller for Longer” range of ready meals for retail giant Marks & Spencer.
Essential to these being fully funded is the completion of a business case, which will ensure that government investment delivers a return.
Jenny Stewart, KPMG partner and head of infrastructure and government in Scotland, has helped cities across the UK deliver proposals which have won billions from government to support copper-bottomed projects which underpin city region deals.
The key to this is proving that the upfront government funding will be paid back in increased tax revenues for the government.
She said: “The expectation is investment would be made and economic benefits are delivered. That is the basic principal.
“The idea is to demonstrate economic growth.
“What the city deals look at is all tax income over a wider area.
“For every extra pound of GVA growth you would normally expect to take an extra 38p in tax income. If you are generating economic growth you are therefore generating tax income.”
The CRD partners have confirmed they are developing “fully developed” business cases for further projects and further details on the CRD will be agreed in March.
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