75% of North Sea firms to move into renewables

About 75% of North Sea oil and gas contractors anticipate moving into renewables work in the next three to five years, according to the 33rd Oil and Gas Survey conducted by Aberdeen & Grampian Chamber of Commerce’s Research Chamber in partnership with the Fraser of Allander Institute and KPMG UK.

That’s the highest level recorded since the question was first asked in 2015.

“On average, they believe oil and gas will account for less than three quarters of their business activity by 2025 – down from the current average of 86%,” said the report.

The findings, which cover the six months to April 2021, show contractor confidence in the UK Continental Shelf (UKCS) has significantly improved from a net balance of -76% reported six months ago to +6%.

“This is a welcome rise from the expected forecast reported six months ago where 58% of contractors expected the outlook to worsen,” said the report.

“When combined with almost half (49%) of contractors saying they plan to hire new talent in the coming year, the research shows that the industry remains resilient and proactive in embracing change.

“The challenges faced over the past year are however reflected in the reduced level of reported activity in production and exploration work.

“The net balance reported for production related activity of -15% indicates a continued overall decline, although this has eased from the -47% reported in 2020.”

When asked about plans to reach net zero, 27% of firms have set their own carbon neutral target with 3% already having achieved it and 38% indicating that whilst they are committed to being carbon neutral they have not set a deadline for achieving it.

For those that have, ambitions range from 2030 to 2050 in terms of completion.

Martin Findlay, senior partner at KPMG in Aberdeen, said: “As we emerge from the pandemic, we’re facing a new set of climate-related challenges, driven by policy makers and an increasingly impatient public.

“With that in mind, it’s incredibly reassuring that our survey found contractor confidence in the UKCS has significantly improved from -76% six months ago to +6% today.

“The common misconception is that oil and gas is the cause of much of the climate crisis we face, when it’s actually often the driving force behind a potential renewables revolution.

“75% of contractors interviewed for the survey told us they’re likely to become more involved in UKCS renewables work over the coming three to five-year period.

“That’s the highest level recorded since the question was introduced in 2015.

“Contractors also told us oil and gas activity would account for less than three quarters of their business activity by 2025 – down from the current average of 86%.

“The industry is on the cusp of transformation and much of our findings reflect the collective sense of anticipation. It certainly feels that in Aberdeen we are heading towards the ‘new normal’ after a long period of reliance on carbon-based energy sources.”

Shane Taylor, policy manager at Aberdeen & Grampian Chamber of Commerce, said: “The survey results showcase a sector that is gearing up to deliver the energy transition in practice but one that is doing so from a relatively fragile position, both in terms of confidence and activity, as it looks to rebuild from the enormous challenges faced in 2020 and the market disruption driven by the pandemic.

“Given that the majority of our fieldwork predated the announcement of the long-awaited North Sea Transition Deal in late March, we expect the outlook to strengthen as government and industry look to invest in the sector’s pivotal role in achieving our net-zero ambitions.

“Not only is it clear that firms in the sector are taking steps to cement their commitments, it also seems likely that fast-movers in this area will be able to gain a real competitive advantage as net-zero ambitions become a more tangible part of the procurement process.

“These substantive changes to the way firms operate may well be just as transformative as their wider diversification efforts to local economies.

“In particular, the significant shifts in office usage and ways of working make it clear that the Chamber’s wider asks for a business rates review, reflecting the impact of the pandemic, need to be taken forward by government to reduce upfront costs and ensure that it’s attractive for firms to take up office space and invest in town and city centres.”

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.