Fergus Ewing, Minister of Energy, Scottish Government
Fergus Ewing, The Scottish government’s Minister for Energy, Enterprise and Tourism discusses Aberdeen’s positioning as oil capital of Europe, its search for skilled work forces, and how Scotland is renowned for its capability to build value beyond volume.
Aberdeen is renowned for being an oil and gas capital and the city has benefited significantly from the industry. Nevertheless, one of your stated objectives has been to spread out the industry and allow the Highlands and Islands to benefit from the sector as well. What steps are you taking to make this a reality?
Aberdeen is indeed Europe’s oil and gas capital and acts as a centre of excellence for a number of sub-sectors including subsea. Many of the companies in Aberdeen are trailblazers and can genuinely claim to be among the best in the world. It’s important to make it clear that spreading the supply chain throughout Scotland must not and will not be allowed to diminish Aberdeen’s role as capital.
At the moment, the industry faces three primary concerns: the shortage of experienced skilled personnel, the price inflation of projects, and issues of production efficiency. By encouraging activities such as the training of personnel and the growth of supply industries across the Highlands and Islands, we can go some way towards easing these pressures on Aberdeen. Therefore, at the instigation of business, we agreed to set up a task force for the north of Scotland.
We have simultaneously launched a series of events to promote increased oil and gas activity across the rest of Scotland. Many oil and gas companies already operate in Scotland’s central belt, which comprises the urban populations of Edinburgh and Glasgow. Nevertheless we want to see more companies making the transition into oil and gas from other sectors such as engineering and construction. We also want to see more people, both graduates and experienced professionals, choosing oil and gas as a career path.
We need to inspire young people and professionals alike that the oil and gas industry makes for a rewarding and lucrative career and one that is going to be with us for the foreseeable future. Not many people know that an experienced diver working in the North Sea can earn twice as much as the British Prime Minister.
It is also very important to convey the message that oil and gas has a bright future and is not at all a sunset industry. Back in the 1920s, John Davison Rockefeller remarked that oil had been running out ever since he was a child. Here we all are almost a century later and the industry is still going strong. As a government, we can assist businesses in oil and gas by bringing stakeholders together and facilitating exchange of information and expertise.
What message and incentives do you have for those hesitating to become an entrepreneur in the oil and gas sector?
I don’t detect any widespread hesitancy in Scotland. On the contrary, I have met with well over a hundred companies in the oil and gas sector over the past two and a half years and have witnessed many success stories across the North Sea. Often, the SMEs have great levels of drive, possess cutting-edge products and hold high ambitions. Often they want to expand, are looking to export and are eager to learn.
The main hurdle is about finding sufficiently skilled personnel to be able to expand. Access to finance can also still be a problem. Industry suppliers at the small end can find it more difficult to access capital than the operators and big players, so we have been organising special conferences to assist SMEs to secure the financing they need to realise their projects.
Nevertheless, there is no shortage of innovative, new companies being established. Most of the start-ups are actually founded by very experienced people who have been working with the industry leaders for the past fifteen years or so and are financially secure on a personal level, but have ideas for new products, which they seek to get patented. Technology has advanced to such an extent that we are now in the midst of a new age of innovation. The real challenge nowadays tends to be about persuading project managers, who rightly have to be very conservative about managing risk, to deploy new technologies.
You recently suggested that, if the right policies are implemented, Scotland’s offshore oil industry can still be productive up to the year 2100. What makes you so confident? And what is your reply to the skeptics?
I suspect that there’s a future for oil and gas extraction in Scotland’s waters for most of the rest of the century. I feel it would be unwise to put a particular prescriptive date on it, but if you think about some of the fields that were recently announced—such as Clair Ridge, Kraken and Mariner—it becomes clear that oil extraction off Scottish waters will extend beyond 2050. You would expect that many of these developments that are planned will have a minimum lifespan of several decades. In his acclaimed book, The Prize, Daniel Yergin reveals that the history of oil has always been characterised by conservative estimates of what can be achieved for a number of very good reasons. Therefore, it personally wouldn’t surprise me if production extends considerably beyond 2050.
Ultimately the extent to which technological innovation is embraced will prove decisive in determining the longevity of Scottish oil and gas. To what extent will enhanced oil recovery (EOR) techniques be adopted? To what extent will EOR techniques be capable of being combined with carbon capture and storage (CCS)? These are important questions because, as well as having the equivalent of £1.5 trillion worth of oil reserves left, we also possess the best resource in the world to store carbon dioxide in the form of the depleted oilfields. In the US it has been demonstrated that the injection of carbon dioxide into basins can and does extract greater quantities of oil so there is an enormously exciting prospect that depleted oilfields could be used to become storage facilities for CO². Storing carbon dioxide underground on land is far from popular as Shell experienced with Barendrecht, and offshore dumps now look like the most likely option.
We currently have two projects that have the potential to lead the way in carbon capture technology. In Grangemouth, Summit Power is currently progressing with the design for the Captain Clean Energy Project using pre-combustion coal. In Peterhead carbon capture will be demonstrated on an existing gas power station.
It seems to me to be shortsighted to assume that there will not be further technological advancements. Traditionally, it has been impossible to develop heavy oil fields because of the technical difficulties in extracting heavy oil, which is very viscous. Here in Scotland, Heriot-Watt University and the Institute of Petroleum Engineering have been pioneering exciting experiments for a mature field in North America using carbon dioxide in foam form injection to reduce the viscosity of heavy oil and bring it to surface. Meanwhile, large companies are proceeding with plans to develop heavy oil fields: Statoil are working on the Mariner field, Xcite Energy on the Bentley field and EnQuest on the Kraken field. None of this could have been achieved twenty years ago, because the technology simply didn’t exist.
Our vision for Scotland is as a centre of innovation. We want to build on relationships between our universities and the industry and hope to establish a new Oil and Gas Innovation Centre (OGIC) to encourage the take-up of innovation. We believe the UKCS can become a test-bed for perfecting operations and technologies that can be realised all over world whether in offshore Mexico, West Africa, the South China Basis or West of Australia.
Scotland seeks to be the renewable energy powerhouse of Europe. What is needed for Scotland to achieve its goals for renewables?
We have already achieved a remarkable degree of success. Currently, we have 5.7 gigawatts of renewable capacity generating electricity, which is up from 1 gigawatt several years ago. We’ve attracted a lot of investment in renewables too, both in onshore and offshore wind developments, and also in hydropower, wave and tidal. This investment has helped us to become a Mecca for clean energy and it is important to continue to attract major companies with deep pockets, persistence and long-term vision that are needed for these sorts of nascent technologies.
Two significant projects have been recently announced: The MeyGen tidal stream project off the north coast of Scotland is at the forefront of world marine energy development and represents the largest tidal demonstration array in the world. Meanwhile, Aquamarine Power is launching a demonstration wave power project off the Western Isles. If the demonstration arrays are successful the projects will then proceed with commercial arrays and explore ways to bring the costs down. We’re at quite an exciting juncture, but we don’t want to celebrate prematurely.
Knowledge from the oil and gas industry does cross over into the renewables sector and the contribution from companies such as the Wood group demonstrates this. The North Sea is a challenging environment and it is clear that the renewables sector can learn much from the experiences of oil and gas companies.
As a government we are keen to ensure that nothing gets in the way of Scotland’s ambitions for renewable energy and with a referendum on independence forthcoming we hope soon to be able to do this from the driving seat rather than the passenger seat.