Scotland’s oil industry is fading as wind energy attracts

ABERDEEN, Scotland – It’s easy to see the importance of oil to Aberdeen, a time-honored port city on the north-east coast of Scotland. As you step out the door of the small international airport, you will be struck from across the street by the roar of helicopters carrying crews back and forth to oil rigs dotted across the North Sea.

Ride into town and pass sprawling office parks with oil company logos, home to 71,000 engineers, geologists, drills and others in Scotland who work in the oil and gas industry. Overall, the industry is estimated to account for 7 percent of Scottish economic output.

But Scotland’s oil and gas industry is in trouble.

Oil production from the British North Sea has been declining steadily for two decades, and production last year reached around a third of its 1999 high. Natural gas production in the region has also been falling – a problem in recent weeks as gas prices have fallen Soaring, which drove up utility bills. According to Oil and Gas UK, a trading group, jobs related to the offshore oil industry have fallen by nearly 40 percent over the past five years.

The oil and gas industry, once a pillar of the Scottish economy and a vital source of government funding, is “just not what it used to be,” said Malcolm Forbes-Cable, vice president of energy consultant Wood Mackenzie.

Indeed, the looming costs of decommissioning and dismantling thousands of wells and hundreds of platforms, which were recently valued at £ 46 billion ($ 68 billion), are beginning to outweigh their earnings prospects.

Last month, following pressure from environmentalists, Scotland’s first minister – his elected chief official – urged the UK government to reconsider the licenses it had already issued for offshore oil fields that are still in the planning phase. Official Nicola Sturgeon urged British Prime Minister Boris Johnson to reassess the projects “in light of the severity of the climate emergency we are now facing”.

The move has caused shock waves through the industry as the approval of such licenses is usually a matter of course. Mr Johnson has the last call, but oil managers say blocking new oil fields, which will effectively halt up to 18 developments and planned investments of £ 21 billion over the next five years, could be a death sentence for the industry.

Ms. Sturgeon’s main target is an oil field called Cambo, west of the Shetland Islands, in British waters, which are considered to be the most promising resource. The majority owner, Siccar Point Energy, a private company that has backed wealth management giant Blackstone, says it has already spent $ 190 million on the field and that it is would create 1,000 direct jobs. Climate protesters arguing that immediate action is needed to combat the warming atmosphere have made stopping the Cambo project a rallying call. (Mr Johnson previously said the government “cannot just dissolve contracts.”)

Mr Forbes-Cable said Ms. Sturgeon “walked a tightrope” between the jobs and investments that Cambo would produce and the Scottish Green Party, which is against oil drilling in the North Sea and whose support she is campaigning for another Scottish referendum Independence.

The current crisis in natural gas prices in the UK and around the world could strengthen the industry’s case for further development. Despite the decline in North Sea production, the UK is still the second largest producer of oil in Europe after Norway, a property that may seem more valuable now than it was a few months ago.

Ms Sturgeon and Mr Johnson would also like to be seen tackling climate change as the UK prepares to host a major United Nations climate change conference, COP26, in Glasgow in November.

Questions about the future of the oil and gas industry in Scotland have highlighted visible trends for years. Last year investment in British exploration and drilling fell to just £ 3.7 billion, the lowest in real terms since oil production began in 1973, the industry group said.

Finding new sources of well-paying new jobs will be difficult, but will be vital to Scotland’s economic and social health, said Mairi Spowage, director of the Fraser of Allander Institute at the University of Strathclyde.

“We don’t want to repeat the mistakes of the 1980s,” she said as the loss of heavy industries such as coal and steel in Britain skyrocketed homelessness and unemployment.

For many, the growth of renewable energy in Scotland, particularly in fleets of wind turbines along the coast, could provide a way to gradually replace oil and gas. Globally, offshore turbines still make up less than 1 percent of electricity generation, but the business attracted $ 29 billion in investment in 2020, 8 percent of the world’s total renewable energy volume, according to Heymi Bahar, an analyst with the International Energy Agency.

And a pilot wind farm off the Peterhead fishing port, north of Aberdeen, is setting a new frontier for this field.

Instead of sitting on the ocean floor, these turbines float, anchored with cables on long vertical structures called spars. Because they swim, they can be placed farther out at sea, beyond the approximately 200 feet depth that is considered a practical limit for most turbines.

Not only does this open up a larger ocean for the machines to be placed in, but it also allows them to take advantage of the stronger and more steady winds that are generally further away from land.

The $ 230 million wind farm off Peterhead, which floats about 100 meters in the water, surpasses all British offshore wind farms in the ratio of the energy it pumps to its theoretical capacity – about 54 percent. The reason is the stronger and more even wind.

“We can go into deeper water and higher wind speeds,” said Ben Lawson, operations and maintenance manager for the wind farm, which is majority owned by Equinor, the Norwegian company. “It is not to be underestimated how important the success of this project is.”

In fact, this opens the way for large billions of dollars worth of wind farms off the coasts of places like California, Japan, and France, where there are large markets for electrical power but the water is too deep for conventional offshore machinery.

“These are all areas that we are working on,” said Sonja Chirico Indrebo, Vice President, Floating Wind at Equinor.

Aberdeen sees an opportunity. It is building a new £ 350 million port with special docks to support the enormous weight of the turbine components and the decommissioned oil platforms.

“Once in a lifetime you get the opportunity to work on a new port,” said Dave Meekham, the plant manager, as he inspected the 10-meter-high breakwater.

The idea is that designing, building, and operating floating structures requires skills similar to those required for building and managing offshore platforms and drilling platforms.

“If done right, and with industry-government collaboration, it will create the next big industry for Scotland in the next 50 years,” said Jim McDonald, University of Strathclyde Rector and Vice Chancellor and Energy Advisor to the Scottish Government.

The Scottish Government is also in the process of selecting companies for new offshore wind leases that could result in an estimated £ 30 billion investment.

All of the major European oil giants including BP, Total, Equinor and Royal Dutch Shell are participating. And some aren’t shy of telegraphing that a victory for them will help keep payrolls in their Aberdeen offices, otherwise threatened by the decline in oil and gas. BP has announced that it will establish Aberdeen as the hub for its growing offshore wind business, creating 120 jobs when given the space it desires.

The dream is not only to build wind farms off the UK, but also to develop the expertise to supply the world with wind equipment, much like the Aberdeen region did in the oil industry, where it is the world leader in subsea technology .

Old hands warn, however, that knowledge of oil and gas can come in handy with floating wind turbines, but businesses are also different.

For example, the turbine offshore workforce is much smaller because new technology means “everything will be automated,” said Allan MacAskill, a former BP executive who recently completed a floating wind farm off Aberdeen.

Paul de Leeuw, director of the Energy Transition Institute at Robert Gordon University in Aberdeen, said the energy industry could end with more jobs by the end of the decade. However, Scotland and the UK as a whole must prioritize the use of locally made equipment (many components for the turbines on the UK coast have been built elsewhere) and ensure that the decline in oil and gas is slow enough for companies to continue investing enough to keep jobs.

“If you don’t do these things,” he said, “we might end up with fewer jobs than we do now.”

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