An oil & gas industry strategy for Scotland, targeting higher long-term recovery rates, greater exports and £30billion supply chain annual sales by 2020 is plain commonsense.
And the document that lays out the route map and key way-points is clearly researched, well laid out and simple.
Yes, one can pick a few holes in it, but not many and I’ll come to those later.
Heavens, it surely cannot be the output of a government department or satellite quango, can it? After all, we have all become accustomed to so much incompetence in the public sector that something that makes truly good sense comes as a shock.
But that’s exactly what it is, albeit a strategy worked up in close consultation with and direct participation by the sector that it is directed at . . . Scotland’s oil and gas industry, channelled through the so-called Oil & Gas Industry Leadership Group.
The Oil & Gas Strategy 2012 – 2020 . . . Maximising Our Future, paints a vision of what is possible, so long as those involved pull their weight and work as a team.
And I’ll warrant that the industry north of the border . . . call it Scotland’s industry even if a massive chunk of it is in foreign hands . . . is in with a damned good chance of realising that vision.
The foundations are robust . . . a successful supply chain underpinned by sufficient remaining oil and gas reserves to enable the now mature North Sea to play an even more strategic role in the future of Scotland, whether independent or largely autonomous but still tied to London with concessions made regarding North Sea tax revenues.
To quote First Minister Alex Salmond, who launched the strategy before a gathering of North Sea alumni plus interested parties, “this is an industry strategy . . . that’s what the oil industry needs”.
This has been a 40-year journey with 40billion barrels produced from the UK Continental Shelf so far. There are perhaps another 20billion or so to go, and maybe more.
And the nominal value of that remaining resource? The currently fashionable estimate is around £1.5trillion (about $2.5trillion). It doesn’t much matter whether the real value turns out to be less or more; the point is that this is a hugely valuable asset. Little wonder London is less than keen for Scotland to depart the UK fold.
It’s really quite simple; regardless of the outcome of the 2014 referendum, the current First Minister sees huge value for Scotland. And this is why a six-point vision has been drawn up; call it a mission statement if you will.
They are worth reiterating, even if they have been all over the Scottish media in recent days. And the six objectives are:
o Strengthen domestic supply chain – with greater focus on resource recovery and targeting £30billion in total annual sales by 2020 versus around £16-8billion today;
o Increase proportion of sales from exports – so international activity, having risen from 31% to 46% from 2002 to 2010, reaches 60% (£18billion) by 2020;
o Identify clear priorities for innovation and accelerating technology deployment – including long-term research & development plan and greater co-ordination of public funds to support rise in recovery rates with a minimum long-term target of 50%;
o Promote new and emerging opportunities for supply chain companies – for example in offshore wind, carbon capture & storage (CCS) and decommissioning;
o Ensure sector attracts young people and supports increase in skills availability – emphasising long-term nature of industry and, through closer liaison between sector employers and with education institutions, better-identify specific needs for provision;
o Continue to promote Scotland as key location for O&G investment – through communications and support for key infrastructure projects.
Scottish Enterprise will make up to £10million available to support innovation in the sector over three years, while Scottish Development International (SDI) is to boost activities in key emerging markets, Brazil, Norway and west Africa, building on the recent establishment of an SDI base in Calgary, Canada.
In the grand scheme of things, £10million over three years is a small purse, especially when you consider what the now scrapped Energy Technologies Institute had to play with . . . £150million over 10 years. That was part of the three-strand ETI initiative that a few years ago was a key part of Scottish Enterprise’s growth strategy.
However, what is good to know is that SE is greatly expanding its portfolio of key companies from the current 100 or so to 200. David Rennie, SE’s director – oil and gas, thermal generation and CCS, has assured me that there will be no dilution of support and that more account specialists will be hired. They’re going to have to be good, very good, if SE is to make this corporate mentoring work.
However, Dick Winchester, Energy columnist and member of the Scottish Government’s energy advisory board, pointed out that SE may be missing a trick and that it should also promote strategic mergers, especially between some of the many small, specialist firms at the bottom end of the oil and gas supply chain, to create strong mini-conglomerates.
There is of course that old chestnut . . . foreign ownership of what both Winchester and I believe is far too many promising home-grown Scottish/UK energy service firms. It will be interesting to see how they fit into the grand plan.
Picking through the strategy document whilst listening to the FM extolling it’s content, by and large I liked and agreed with most of what I scanned.
However, I think the priority markets list needs refining, notably replacing Azerbaijan with the Caspian Region, because of hugely important Kazakhstan (see Page 22).
And I think Scottish Renewables should be brought into the list of key support partners in the New Opportunities section.
Nit-picking perhaps, but we need to be absolutely sure that truly clear-headed thinking and articulation lies behind the creation of what amounts to not just an eight-year plan but arguably one that recognises the need for a 30-40 years horizon.
To quote the FM: “This is a strategy for the next generation”.
