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7. Energy: a key sector of the Scottish economy
Energy is a key sector of the Scottish economy. We have world leading technology and skills in extraction of oil and gas and related supply chains, and in production of equipment for power generation. The Scottish based utilities who supply electricity and gas- and who also generate electricity and own the electricity grid - make a major contribution to growth and employment. As indicated in previous sections, there are increasing business opportunities and strength in renewable energy, in clean energy from fossil fuels and in energy conservation.
Oil and gas
Although the North Sea is a mature sector, there will be opportunities for investment for many years to come. Oil & Gas UK highlight that so far around £390 billion (2007 money) has been spent on exploration and development of reserves in the North Sea. Investment is high, a sign of the confidence in the continuing attractiveness of the North Sea as a location for exploration and production. The North Sea has produced around 36 billion barrels of oil equivalent (boe) so far. Current estimates suggest that the reserves remaining in the UK Continental Shelf ( UKCS) range from 16bn to 38 bn boe although the actual level of reserves recovered will depend on a range of factors including price, technology and the rate of further discovery.
While the North Sea is a mature sector, we should not accept that the rate of decline in recent years, which has been in the range of 5% to 7% per annum, should be seen as inevitable. Our aim should be to at least slow the rate of decline and maximise recovery using technologies such as Enhanced Oil Recovery as appropriate. This will require consideration of a whole range of fiscal and investment levers to ensure that long-term investment and deployment of the latest technology in the North Sea continues to be an attractive option.
The Scottish oil and gas industry, particularly in terms of the supply chain is a world-leader in many areas. We are ambitious to maximise the opportunities that such a position will provide. Along with the sector itself, Scottish Enterprise's Energy Team is playing a leading role in the continuing promotion and development of the energy supply chain in Scotland.
The skills and knowledge developed in Scotland since the development of the North Sea are a key strength for Scotland. Many of these skills will continue to play a vital role in developing our future, both within oil and gas but also through their transfer and adaptability to other sectors such as renewable energy. The oil and gas sector employs around 480,000 people across the UK, with over 100,000 skilled jobs in Scotland directly employed by the industry (an estimated 4% of Scottish workforce).
The Scottish Government should have greater responsibility over oil and gas resources and will continue to press our case. Based on average oil and gas prices in 2008/09 to date, initial Scottish Government estimates indicate that North Sea revenue may be in the range of £4 to £5 billion higher than the initial Treasury forecast in the UK Budget of £9.9 billion. The issue of Oil and Gas revenues will form an important part of the National Conversation.
Through the Deputy Chairmanship of Scottish Government Minister, Jim Mather, we also play an active role in PILOT, the UK joint industry/government taskforce which addresses issues that are vital for the oil and gas industry's future success.
Coal
Scottish opencast coal output remains healthy - in the range of 5 to 8 million tonnes per annum over the last 10 years, during which time output in England has fallen significantly. There remains almost 30 million tonnes of coal at consented opencast sites in Scotland and we support the continued extraction of coal. In tandem with the continued development of clean coal technology this will offer a long-term future for coal-based electricity generation. Scotland has the expertise and the necessary infrastructure in this area. We still stand ready to take a European lead in clean coal technology. This will present a massive opportunity to export this technology world wide, especially to countries such as India and China which have an ever expanding energy sector and where clean coal technology has a particular relevance.
The Scottish Government is represented on the UK Coal Forum which beings together the industry, electricity generators, unions, equipment suppliers and others involved in the industry in order that important issues facing the industry can be discussed.
Renewable energy
The main economic benefits to date from the growth of renewable energy have been in the areas of construction and consultancy services relating to the construction of wind farms. We continue to pursue, mainly though Scottish Development International, investment in research of manufacturing capacity and associated supply chain. The skills and knowledge that have been built up in the oil and gas sector sectors are also of potential value to the long-term development of the sector, in particular in relation to offshore development.
Renewable Energy can perhaps be considered still to be in its early stages of development with its full potential for contributing to economic growth still to be realised. Major opportunities for growth and employment still remain ahead of us through the development of new technologies in such areas as marine, tidal and offshore wind. The opportunities for Scotland in these areas are clear and considerable. Other sections of the overview provide more detail on the support we and other agencies are already providing in these sectors.
Supporting business
Scottish Enterprise and Highlands and Islands Enterprise ( HIE) play an active role in promoting the continued growth and prosperity of the various energy sectors in Scotland. HIE is focused almost entirely on renewable energies, while Scottish Enterprise is engaged with both the academic and industrial sectors of oil & gas, conventional power generation, grid management, and most forms of renewable energies. Strategic support and advice is provided to companies in a number of ways.
Although Scotland's energy businesses are already successful outwith the domestic market, assistance is required to support continued growth and sustainable business development in global markets. Focused in-country research is undertaken to map Scottish strengths with market requirements, and to provide five year forecasts of capital and operational investments in more than 70 countries. Tailored programmes are then developed by Scottish Development International ( SDI) to assist market penetration.
Research, development, demonstration and commercialisation of new technologies remains a fundamental aspect of support, including stimulating greater energy research collaboration between Scotland's universities, and also with industrial institutes. Support ranges from conceptual and feasibility studies, through Proof of Concept and Enterprise Fellowship programmes, joint industry projects and similar.
Diversification and the transfer of skills and expertise is promoted strongly by Scottish Enterprise and HIE. Research into emerging sectors is undertaken and the findings disseminated to energy businesses, with support through account management to prepare for new opportunities. Support for cross sector collaborative projects is also provided e.g. oil & gas to offshore renewables.
The strengthening of key energy sectors and the development of supply chains is extremely important. Scottish Enterprise and HIE work very closely with bodies such as Subsea UK and Scottish Renewables to drive support for young companies and facilitate joint industry projects.
Scotland's Energy Industries
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