As Scotland’s oil and gas sector faces the difficult road ahead, a refresh of the Industry Leadership Group (ILG) strategy gives us renewed hope and focus for the future.
That’s the message from the ILG which, through consultation with all parts of the sector including trade bodies, operators, contractors, SMEs and other stakeholders, we have reviewed and refreshed our industry strategy to help:
• increase Scottish and international supply chain sales by up to £30 million and £16 billion by 2020 respectively;
• support the UKCS to meet its 80 per cent production efficiency target by 2016; and
• increase R&D spend to position Scotland in the top five global markets for innovation and technology development for the sector.
To achieve this, we’ve identified six key areas of development – domestic supply chain, international supply chain, innovation, investment, new opportunities and people & skills – to help bring about the transformational change needed to sustain our sector in the long term.
The supply chain plays a crucial role in the success of the strategy. In a globally competitive environment it is the strength of our supply chain which will be the long-term source of our competitive advantage.
Developing strong leadership at individual, company and industry levels will be at the core of bringing about this transformational change we require.
Over the last year we’ve seen an incredible collective effort to support the industry and its supply chain, in particular through the Energy Jobs Taskforce, however as the oil price continues to fall and investment levels continue to drop it is evident that even more still needs to be done.
Innovation will play a key role in this journey, not only through finding new, better and more efficient ways to deliver but also through developing new, innovative technologies. To achieve the cost reductions and efficiency enhancements needed there needs to be effective support for the full spectrum of innovation across all the activities of the industry. Whilst research led by demand foresighting is vital it can be many years before the benefits of technology advances are felt. A real effort is needed to make sure the commercial models promote investment in operational demand led innovation, with the broadest possible base of subject matter experts able to invest in and deliver the ability to significantly reduce the costs and enhance the efficiency of UKCS production.
The Scottish Government, through its enterprise agencies actively encourages innovation and last week, in response to the continued downturn, Scottish Enterprise announced it had reprioritised £10 million towards supporting oil and gas innovation. The budget has been allocated to help reduce the risks associated with carrying out research and development by providing access to specialist experts to help kick-start projects.
In addition, through its Scottish Manufacturing Advisory Service, Scottish Enterprise continues to support companies to create efficiency savings and this year alone has seen 34 new projects started, 15 of which are now complete and have delivered over £1 million of value added benefits for the companies.
Innovation, however, can’t be done in isolation and collaboration between suppliers, operators and contractors as well as academia will be key. The Oil and Gas Innovation Centre will play an important role here as we develop new behaviours and attitudes to innovation.
Investing in innovation also plays a fundamental role in increasing Scotland’s competitive advantage and with it, helps create new opportunities overseas.
International activity already plays a key role in the industry’s success and, as the price of oil continues to affect investment in the UK Continental Shelf (UKCS), there’s never been a more important time for companies to maximise the benefits it can bring.
Scotland’s supply chain currently trades in over 135 countries across the globe and in 2013/14 delivered international sales of £11.2 billion, accounting for 50.3 per cent of the total Scottish oil and gas supply chain sales.
We must continue to grow this investment and maximise the opportunities in markets such as North America, the Middle East and Asia.
With over 50 years of working in some of the toughest environments in the world, Scotland and Aberdeen have already built up a strong reputation across the globe for excellence. In fact, it’s said that no matter where in the world you go with oil and gas you’ll hear a Scottish accent. That said, as international competition grows we must ensure Scotland continues to remain relevant, attractive and successful both to anchor the supply chain here for the long term and cement our reputation globally.
The announcements last week by both the UK and Scottish Governments announcing over £500 million of investment towards the City Region Deal and wider infrastructure improvements in the North East offers significant opportunities to support this important area.
The ILG has set out a clear action plan to support the delivery and success of the strategy. From developing proposals for a new oil and gas technology centre, as outlined in the new Aberdeen City Region deal, to developing an informal peer support scheme to help new exporters, we are committed to supporting the industry in Scotland.
Last year was tough. This year we expect it to be tougher, but by recognising the challenges and responding collaboratively to the opportunities, the sector has the strength, and experience, to not only survive, but to thrive.
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