Aberdeen's Energy Industry at a Crossroads

Strategic Insights -

As I sat in a hillside cafe near the new PS420mn south harbour in Aberdeen, the city's prosperous decades as the oil and gas capital of Europe were on display. The port below was bustling with ships servicing North Sea oil and gas rigs, while up the coast lay Donald Trump's new golf course and an offshore wind farm that annoys him. The US president's visit to Scotland last week, during which he castigated the UK's net zero policies, struck a chord with locals who agree with him about taxes and the UK ban on new licences for fossil fuel exploration. However, they disagree with Trump about the "windmills" that he and the UK Reform party detest. The city's energy industry sees offshore wind as its future and craves a steady transition.

Key Takeaways:

  • The UK government's industrial strategy aims to double annual business investment in clean energy to PS30bn by 2035, but making it work in Aberdeen is more complex in practice.
  • Companies like Peterson Energy Logistics, one of the biggest local suppliers, need continued work from the oil and gas industry to stay committed to the UK while they diversify.
  • Aberdeen Port estimates that only a quarter of the number of service vessels per gigawatt will be needed at any time for wind turbines compared to oil and gas rigs.
  • The largest vessel in Aberdeen last week was the Intrepid Noble rig, which was being serviced before heading to the North Sea to drill a well for DNO Norge.
  • Norway keeps granting licences and last year provided about half of the UK's gas imports, which now account for two-thirds of domestic demand as the UK's own supplies are reduced.
  • Aberdeen's Energy Transition Zone, a government-supported project, is critical to the city's growth, but business investment is crucial to its brownfield site near the harbour.
  • Once companies are lost, "it is hard to get them back," said Maggie McGinlay, chief executive of the Energy Transition Zone.
  • The Scottish government last week approved the Berwick Bank wind farm, but the city is waiting for others to support its transition to renewables.
  • Trump and Reform are hostile to the transition to wind and renewables, while the prime minister wants one but is making it harder for Aberdeen's people.

Statistics:

  • PS420mn: The cost of the new south harbour in Aberdeen.
  • 45,000: The number of locals employed in the energy sector.
  • 250: The number of jobs to be cut at Harbour Energy's Aberdeen workforce due to the "challenging domestic fiscal and regulatory environment".
  • PS30bn: The target annual business investment in clean energy by 2035.
  • 2035: The target year for doubling annual business investment in clean energy.
  • 78 per cent: The windfall tax rate on oil and gas profits.
  • 2/3: The proportion of UK gas imports now accounted for by Norway.
  • 1/4: The proportion of service vessels needed at any time for wind turbines compared to oil and gas rigs.

Sources:

  • Business Insight Energy
  • John Gapper
  • Aberdeen Port
  • Peterson Energy Logistics
  • Aberdeen's Energy Transition Zone
  • The Financial Times
  • The Scottish government
  • Trump and Reform