Maximising the future of Oil & Gas
An oil & gas industry strategy for Scotland, targeting higher long-term recovery rates, greater exports and £30 billion annual sales by 2020, was published by the First Minister today.
Alex Salmond unveiled the industry blueprint at Hydrasun, a fast-growing Aberdeen-based company providing fluid transfer, power and control products to the oil & gas sector and other industries, which employs around 600 people today compared to 200 ten years ago.
Oil & gas is the largest industry sector in the UK, contributing almost a fifth of all corporation tax paid to the UK Treasury and supporting 440,000 jobs – nearly half of them in Scotland. Over four decades, 40 billion barrels of oil equivalent (boe) have been recovered from the North Sea, delivering £300 billion in revenues to the UK Government. The wholesale value of reserves remaining to be extracted is estimated to be up to £1.5 trillion.
The strategy – developed and to be delivered by industry, Scottish Government and public sector partners – aims to build on four decades of unprecedented economic success to secure future growth at home and abroad. It identifies six priorities for action to:
- Strengthen domestic supply chain – with greater focus on resource recovery and targeting £30 billion in total annual sales by 2020
- Increase proportion of sales from exports – so international activity, having risen from 31 to 46 per cent from 2002 to 2010, reaches 60 per cent (£18 billion) by 2020
- 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 per cent
- Promote new and emerging opportunities for supply chain companies – for example in offshore wind, carbon capture & storage (CCS) and decommissioning
- 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
- Continue to promote Scotland as key location for O&G investment – through communications and support for key infrastructure projects.
The First Minister also announced that Scottish Enterprise will make up to £10 million 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.
“Oil & Gas is one of Scotland’s greatest industrial success stories, having transformed the economic well-being of the UK over the last 40 years. With as much as £1.5 trillion of oil remaining to be extracted from reserves around these islands, an increasingly buoyant export sector now reaching 100 different countries, and emerging opportunities to deploy the sector’s vast expertise in other offshore projects, the industry has a bright future.
“The strategy identifies key actions which can maximise future opportunities, for example, by helping the industry secure the necessary human capital and skills, by supporting innovation and technology deployment to boost recovery rates, by assisting more companies into new markets and by delivering investment in key infrastructure.
“Clearly the industry requires a stable taxation and regulatory regime to provide confidence and encourage long-term investments, something the Scottish Government has consistently supported – indirectly and directly in discussions with Ministers in London – and which we will continue to do so in the future. We will continue to work closely with the sector to deliver excellent services, drive growth and support the on-going success of an industry that has powered the economies of Scotland and the UK over the last 40 years, and which can continue to be a key driver of prosperity in these islands well into the middle of this century.
“I am particularly grateful to the Oil & Gas Industry Leadership Group (ILG) – co-chaired by Melfort Campbell and our Energy & Enterprise Minister Fergus Ewing – for leading the development of this Strategy and for the key role it will play in delivering it. I’m also delighted to meet the management and workers at Hydrasun – an exciting Scottish growth company who exemplify the spirit of enterprise and innovation that exists across the sector and which the Strategy aims to drive forward still further.”
Mr Campbell, chief executive of Imes Group, added:
“The ILG very much welcomes this strategy and believes that it is of interest and benefit to everyone in Scotland. It is proof that we are living in a new age of technology-led development of the North Sea, which will lead to international opportunities worldwide, not only for the existing supply base but also provide opportunities for excellent long-term employment for our school and college leavers, graduates and those looking for new careers. Over the coming years Oil & Gas, our most buoyant industrial sector, will continue to provide opportunities for new people and companies to get involved and benefit from what will be a sustained period of investment in the North Sea and Atlantic margins.”
Scottish Enterprise (SE) currently supports more than 200 ‘account-managed’ companies in the O&G sector - 175 of them in Aberdeen and the North East. It now aims to engage a further 100 firms over the next three years.
SE Managing Director, Operations, Paul Lewis said:
“The oil & gas sector has a crucial role to play in Scotland’s future economic success and it’s vital that industry and public sector partners continue to work together to ensure we capitalise on opportunities for its future growth. We’ve already seen an impressive increase in international sales from the oil & gas sector supply chain, for example, which were recently valued at over £7.6 billion. The challenge now is to increase this activity at an even faster rate by supporting more companies to enter new markets and fulfil their growth ambitions. The strategy clearly sets out what we need to do to achieve this and further build on the world-renowned success which Scotland has demonstrated in the sector.”
Bob Drummond, Chief Executive of Hydrasun, said:
“This Strategy for the oil & gas industry is highly relevant for Hydrasun. As a company, we are very focussed on continuing to grow international business and to further developing our skilled workforce.
“We achieved a 30 per cent increase in overall sales for the financial year ending March 31, 2012, with international business contributing to over 40 per cent of total sales. Over the past few years overall international sales have grown from £5.7 million in 2005 to £31.2 million for the financial year ending March 31, 2012. Hydrasun currently exports to over 50 countries and has international operational bases established in Azerbaijan, Kazakhstan, Brazil and The Netherlands as well as a further presence in West Africa, US Gulf of Mexico and the Middle East - further internationalisation of the business is a key element of our future growth strategy. We remain focussed on the importance of attracting young people and to further developing skills within the industry which has also been highlighted as another key area of the strategy.”
‘Oil & Gas Strategy 2012-2020: Maximising our Future’ is available here.
Images of the launch will be sent to picturedesks. To request copies email firstname.lastname@example.org
A video of the launch will be posted later at the Scottish Government Youtube page.
SE directly supports more than 200 ‘account managed’ companies in Scotland’s O&G sector, providing a range of assistance such as advice on exporting, overseas and other new market research, introductions to potential customers, mentoring, and support for new and expanded premises. It will now target 100 new firms for similar support over the next two years. Through its ‘Companies of Scale’ programme, SE offers intensive, tailored support to help businesses, such as Hydrasun, achieve rapid growth.
Total oil and gas supply chain sales from the Scottish market increased by 2.1 per cent in 2010-11 to reach £16.3 billion. International sales, at £7.6 billion, accounted for a record 46.4 per cent of total sales. Further information can be found at the Scottish Enterprise website.
The Scottish Oil & Gas Industry Leadership Group (ILG) is chaired by the Minister for Energy, Enterprise and Tourism Fergus Ewing and Chief Executive of the Imes Group Melfort Campbell OBE. Its membership is made up of companies, academics, colleges, skills bodies as well as the Scottish Government, Scottish Enterprise, Highlands and Islands Enterprise and the UK Government.