David Rennie, International Sector Head, Oil & Gas, Scottish Enterprise, UK
“Historically, government and the oil & gas industry only interact around taxation issues, but since the Scottish Government does not have taxation power, our discussions with the industry are focused around other strategic issues. We were able to focus on how we could help in terms of international strategy, infrastructure, building skills sets, industry image, the supply chain, and helping SMEs, among other issues,” David Rennie, International Sector Head of Oil & Gas, Scottish Enterprise, UK.
In developing the Oil and Gas Strategy 2012-2020, how challenging was it to bring together the Industry Leadership Group? What was the challenge in aligning the agendas of the group members?
It was not a major challenge convincing oil & gas industry and stakeholders to come together. About two to three years ago, there was a feeling in the industry that following a focus on developing the renewables sector, we also needed to take a fresh look at oil & gas. Clearly there is room for both sectors in the Scottish economy, and creating this strategy was a way to reaffirm the importance of oil & gas.
The strategy is meant to be a forum to bring together industry, government, and agencies on a regular basis to discuss issues around infrastructure, human resources, innovation, and supply chain. The first step was to convince high-level stakeholders to participate, while step two was ensuring that the industry was very involved in the elaboration of the strategy. We wanted to create an industry-led strategy, with the Industry Leadership Group acting very much as a sounding board for advice. The industry really embraced this aspect and felt that government was truly listening to and responding to their concerns.
Historically, government and the oil & gas industry only interact around taxation issues but since the Scottish Government does not have taxation power, our discussions with the industry are focused around other strategic issues. We were able to focus on how we could help in terms of international strategy, infrastructure, building skills sets, industry image, the supply chain, and helping SMEs, among other issues.
The strategy is setting a scale of ambition and focusing on maximizing recovery and creating value. Now that the strategy is two years old, we have brought new people and new issues on board and have strengthened it even more.
A pillar of the O&G Strategy is Innovation. What is your response to such concerns that Scotland is still very much still at the investment rather than innovation stage of economic development?
I agree. There have recently been very large investments with new projects, especially near the West Shetland Islands, and in subsea activity. We need to anchor the supply chain here in Scotland, which we can do by having very innovative companies, and there are many companies like this in Scotland. However, encouraging more innovative companies is essential, as is creating stronger ties between universities, academia, and innovative companies.
Subsea is also an extremely innovative and technically demanding industry, but for very obvious reasons the industry is rather risk averse. Companies oftentimes prefer to wait for the second mover advantage, and there is thus a certain reluctance to complete field tests. Normally it takes 14 years to get an idea to market in the UKCS, whereas this period is much shorter in Norway. We are now working for solutions to decrease this period.
Scottish Enterprise works with over 300 oil & gas companies in Scotland through an account management process, with many support mechanisms for innovation. Last year, we provided over 4million USD of innovation money, which we hope will unlock additional expenditure. These innovation grants and support are targeted mainly at smaller companies. Currently, we are trying to increase our amount of innovation funding and to stimulate more interest in our services.
In addition, there is the Scottish Investment Bank, the Scottish Loan Fund, and a myriad of services that we can offer for investment and equity services. We offer grants, loans, and have even taken equity shares in businesses. Our Scottish Manufacturing Advisory Service advises manufacturing companies in the oil & gas industry regarding efficient processes, factory layout, better stock management, and supply chain.
Meanwhile, we also offer Regional Selective Assistance, a discretionary grant scheme, which supports both Scottish companies and inward investors to expand or invest in certain key areas of Scotland.
Scottish Enterprise is now helping many smaller companies throughout Scotland who are expanding and moving into the oil & gas sector, especially in the defence and marine industry. We are also working with Oil & Gas UK to give information on procedures, safety, and the industry in general to newcomers. The whole focus is about widening, deepening, and embedding the supply chain in Scotland.
Finally, the Industry Technology Facilitator (ITF), headed by Patrick O’Brien, brings together 32 members, mostly operators and contractors. Its goal is to share technology challenges and problems, so that companies can be more easily matched to solutions, either from other companies, associations, or academia. This organization also opens the door to joint industry projects and is even international since it now works in the Middle East and has an office in Houston.
One of the objectives for O&G strategy is to increase international sales up to USD30 billion. What are the key priorities for Scottish Enterprise today to achieve this?
In terms of oil & gas Scotland, just under half of the supply chain sales currently go to international markets (approximately USD15 billion), whereas ten years ago this figure was less than one third. Some companies do not have much experience with exporting, and Scottish Enterprise offers a team of advisors and account managers to help with international expansion plans and general international advice. Overall, we want to help Scottish companies better understand various international markets.
Scottish Enterprise also has 28 offices in over 20 countries, including Brazil, and Saudi Arabia, and we’ll shortly be opening one in Ghana as well. These offices ensure we can give our companies feet on the ground support and make it easier to sign contracts, find out what types of suppliers are needed locally, and facilitate contacts.
In addition, we take Scottish companies overseas via stands, exhibitions, and trade missions, in particular OTC and Offshore Europe. We have also created a number of oil & gas guides for doing business in various international markets. We will soon be releasing an Africa report to complement the already existing Australia and Brazil reports, while also sponsoring events related to these guides.
Finally, the Global Scot Network is a very influential network of senior leaders, who are either Scottish or have a particular affinity with Scotland. These influential members have a proven track record and can help Scottish companies abroad, especially smaller companies who are looking for information, advice, or contacts. For example, at OTC many Scottish companies take advantage of one-on-one sessions with Global Scots.
How do you think Aberdeen is seen on the international oil & gas scene? What challenges do you see facing Aberdeen as the oil & gas capital of Europe?
I think Aberdeen is viewed in a very positive light. There is a story that wherever you go in the world in the oil & gas sector, you will find a Scottish accent and I think there is an element of truth in this. Generally, people involved in the oil & gas community know about Aberdeen and know that if you can drill with the conditions that companies face in the North Sea—30 feet waves, intense winds, and hundreds of degrees of depth—you can drill in a lot of places. Furthermore, the related technology that is produced is exportable anywhere.
Even if the UKCS is now a mature market, there is still a feeling that it has a long future with high investment, technology, and increasing advanced oil recovery technology. Aberdeen is open for business with a high quality supply chain, academic expertise, quality of life, and many international companies, among other strengths.
Aberdeen, however, is facing several challenges that many other oil & gas cities face. For example, we are facing a human resources challenge because there are not enough people with experience to meet the industry’s needs. People have to be trained or retrained from other sectors, especially the military and marine sectors.
John Pearson of AMEC once said that in fifty years time the oil and gas sector in Scotland will be the supply chain because there will be very little remaining production. So, a big challenge will be keeping the supply chain in Aberdeen to ensure business here in this highly mobile, competitive industry. Companies will be exporting 90 percent of their business, so it will be important to understand why they still need to be in Aberdeen. The supply chain thus needs to be embedded enough and the skills sets highly developed enough to anchor these companies in Scotland, even with expanded international activities.
A final set of challenges include finding the best technologies to retrieve the remaining 15-24 billion barrels of oil, opening access to more infrastructure, encouraging more industry to collaborate more as suggested by the Wood Report, and bringing about more regulation. There would certainly not have been over USD15 billion in investment last year from companies if they did not believe there was a future in Aberdeen and they did not see the value here. We constantly receive queries from companies already present on the market that are looking to expand their activities even more.