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Interview

with Tom Smith & Rita Stephen, Chairman & Development Manager, ACSEF

16.06.2008 / Energyboardroom

Could you please introduce the ACSEF to the readers of OGFJ and exactly what role it plays in Aberdeen and the region?

Rita: ACSEF is a dynamic public/private Economic Development partnership responsible for the development of a vision for the future economic prosperity of the region.

Over the last two years, we have engaged with 1200 local companies at CEO level, so as to learn about their priorities for the economy and where they see it going. We gathered CEO’s views through a series of questions, such as why choose Aberdeen as a place to do business, what keeps them here, what would make them leave, and what projects should be delivered over the next 10 years in order to maintain Aberdeen’s position as the jewel in the crown of Scotland’s economy. The answers to these questions helped us determine our priorities which were brought together in a Manifesto, published in 2007, followed by an Action Plan in 2008. The Action plan identifies the key actions highlighted by the business community and public sector, with the purpose of encouraging investment in the region.

In this context, ACSEF has identified 4 key priority industry sectors which will most contribute to the future of the region’s economy: energy, life sciences, food & drink, and tourism. In addition to these strategic sectors, there are two overarching priorities which are to maintain the region’s high quality of life standards and to achieve economic growth at 2.5% G.V.A per year.

We want to be one of the most successful regional economies in Europe and top of the quality of life “league table”, making this a place where people choose to work, live study and visit. The key objective in terms of quality of life is to position Aberdeen in a global context, allowing comparison with other regions and to track our progress.

These are challenging times for the global and UK economy, with sub-prime worries from the US affecting global financial markets and high food and energy prices fueling inflation. How would you say that Aberdeen and the region are holding up?

Rita: Aberdeen has traditionally outperformed the rest of Scotland’s economy, and this continues to be the case today. Wage levels are still well above the average, and the crisis in the housing market, for example, has been much more moderate than in the rest of the UK. People are not feeling the downturn as much in Aberdeen, and this is thanks to the oil and gas industry but also to other parts of the economy which are performing well.

Tom: It would be wrong to consider that Aberdeen will be completely insulated from the national and global economic issues, yet it is true that we have the fortune of having an economy with oil and gas as the main driver. In addition to the UK offshore oil and gas industry being very busy now, many companies in the northeast of Scotland are benefiting from buoyant international oil and gas markets.

It has been several years since the UKCS passed its production peak and has entered a different phase of its oil and gas lifespan. How successful is Aberdeen’s industry in reinventing itself to the reality of a mature basin?

Tom: The UKCS’ evolution into a mature region has not been overnight; this has been a long process through which the industry itself has also evolved. As many issues related to maturity have emerged, we as an economy and industry have been building towards that position. In this regard, Aberdeen companies have developed the specific competencies, skills and capabilities for mature fields which can be applied in other ageing markets around the world. Indeed, one of the main trends over the last decade in Aberdeen’s oil and gas industry has been the internationalization of business. In particular, many companies in the region have specialized in subsea technology, creating what is arguably the world’s leading concentration of subsea engineering skills. Since the UKCS is a relatively high-cost basin, for a variety of reasons, it is essential that we focus on the high-end added-value segment of the industry.

Rita: In fact, Aberdeen has been a knowledge-based economy for over 500 years, Aberdeen University was established in 1495 and indeed Aberdeen had 2 universities at a time when all of England only had 2. This region has never relied much on big factories or production yards for its economic activity. Over the last several decades, Aberdeen has become the epicenter of the UK’s oil and gas industry, and we believe it is going to remain a very important sector for at least the next 30 years. New technology is constantly developed here and we are world leaders in specific expertise areas like subsea. Indeed, in the district of Westhill just outside of Aberdeen we have the greatest concentration of subsea engineering companies in the world. Global companies in the oil and gas industry continue to recognize the expertise and skills developed here in Aberdeen, and increasingly choose Aberdeen as their headquarters for their entire eastern hemisphere activities.

We are very confident about the future of Aberdeen’s oil and gas industry, which will remain technology-based and continue its success in exporting the mature basin expertise to other oil-producing countries having passed their peak. These expectations are reflected in ACSEF’s action plans, regarding the importance of anchoring the oil and gas industry in Aberdeen and the need to further internationalize local companies’ operations.

While the supermajors have gradually shifted their focus to bigger opportunities abroad, small and medium sized companies have been taking over and become key to the UKCS’ future. What role does ACSEF see them playing and are you doing anything in particular to attract them to Aberdeen?

Tom: ACSEF has not singled out particular types of companies, in general we are striving to make this an attractive place to invest and live for everyone. It is true that there are many new entrants who are bringing a different dynamic to the oil and gas industry, but we will still need the supermajors for big challenges like developing the West of Shetlands. Both types of companies are very important to our future and we hope to create the right environment so that they can continue investing in Aberdeen and its region.

Rita: It is also worth noting that in terms of the oil and gas industry, this area is much more than just an offshore province. Besides upstream, we also have extensive downstream and gas processing infrastructure in and around Aberdeen city. New technologies in both conventional and non conventional oil are being developed in Aberdeen. Scottish technology mostly developed here in Aberdeen, is currently being deployed in every deep water development in the world. Despite the fact that we have decades of productive, economic life in the UKCS – we are nonetheless already looking at “life after oil”. Interestingly, a high percentage of the new entrants in the region’s oil and gas sector are Canadian, apparently due to similarities and cultural affinity between Scotland and their country.

One of the strategic objectives set by Aberdeen’s government is to promote the region as a preferred location for international companies to set up their headquarters. What is being done in this regard and what recent examples would you highlight?

Rita: This is one of ACSEF’s key objectives, it not only relates to oil and gas companies. Although this sector is very important, our role is to promote the region as a great place to live, work and do business for different strategic sectors. We offer companies of all types the full package in terms of quality of life, skilled workforce, education facilities, etc. Having said that, Aberdeen is going from being the oil capital of Europe – already a considerable achievement – to a global energy hub. The city has recently invested 10 million pounds in an international energy academy run by OPITO. And of course, there are many big names like Total, Shell, Schlumberger, Halliburton, Acergy and Technip which have made significant investments over the last several years.

There is a lot of talk in Aberdeen about anticipating the inevitable end of the North Sea’s oil and gas production and therefore developing other energy sources, based on the technological expertise developed for the oil and gas industry. Which sources of energy represent the biggest opportunities in this regard and what are the main initiatives?

Tom: Oil and gas companies have started transferring some of their technological know-how to other energy sectors, particularly in the marine area. To date, the alternative energy sources which are being developed are wind, wave and tidal stream. But the cross-fertilization is not limited to the energy sector. In fact, technology for underwater oil and gas operations are now being applied by the defense and medical sectors. Aberdeen has actually become a global centre of excellence for remote medicine diagnosis thanks to this.

Rita: There is one initiative in the energy sector which is particularly interesting to consider called ‘Energetica’. It came about following discussions with different members of the local energy sector, in which they were asked about the main priorities for long term development of this area in Aberdeen and its region. They responded that it was essential to be able to showcase the existing technology and develop new skills at an International Oil & Gas Academy, and also by creating a Global Training Centre. The private sector came up with the general concept, and a masterplan is currently being developed, consisting of the creation of a 30 mile ‘energy lifestile corridor’ between Aberdeen and Peterhead. The idea is for it to have more than just companies, integrating energy-efficient housing for example, new technology development Although oil and gas is still predominant, society is already thinking of where are future energy will come from, and this area is well placed to become a major hub of energy research and business in Europe.

Aberdeen and its region have big ambitions which go beyond the UK. How are you promoting this part of Scotland which may not be so well known or appreciated by those abroad?

Rita: ACSEF has recently launched a promotional 16 minute DVD promoting Aberdeen, through four main axes for different categories of public: live, explore, achieve, and learn. It is an important communication tool, together with our website, since it is true that in the region there are usually more vacancies than people to fill them. So we do need to attract people with the right skills to the area, and in the current context we see an opportunity to bring people in from other parts of the UK more affected by the economic downturn. In the past we have been successful in working with recruitment agencies in UK cities like Manchester and Newcastle, but also abroad in Eastern Europe, in order to interest people to come live and work in Aberdeen. It has been interesting to see how it is often easier to sell Aberdeen internationally that to our neighbors in Scotland and the rest of the UK. People tend to not appreciate what is happening at their doorstep and take certain things for granted.

Tom: If we have been guilty of one thing in the past, it has been to consider that our competition is Dundee or Edinburgh, Dublin or London. In today’s context, our real competition is more likely Dubai, Sydney or Hong-Kong. We need to raise our game locally because the competition is global, it is not simply about the North Sea anymore. I think that looking at the national level, we have not been punching our whole weight, and this is something we are also addressing. Aberdeen is the UK’s oil and gas center of gravity, but we need to leave inward thinking behind and play the global game.

What is your final message to the readers of Oil & Gas Financial Journal about Aberdeen City and Shire?

Rita: Aberdeen City and Shire is open for business.

Tom: We have a clear vision of the future in terms of what we want and how to get there. I am very confident about the region’s future and ability to remain a global player in oil and gas and other sectors as well. We are planning to face the challenges while we are going through a good moment, not waiting for a crisis to react like many do.

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