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Maximising the Return from Oil and Gas in an Independent Scotland

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4. Scotland's Oil and Gas Strategy

Chapter Summary

The central objective of Scotland's Oil and Gas Strategy is to maximise economic recovery through:

  • Developing the domestic and international supply chains
  • Supporting industry in exploiting new market opportunities in new sectors
  • Encouraging more rapid commercial deployment of innovative technologies
  • Improving skills provision - attracting young people to the industry
  • Promoting the industry and Scotland's place as a destination for new investment.

4.1. In May 2012, the Scottish Government and its agencies published Scotland's Oil and Gas Strategy to 2020. This strategy was developed in collaboration with the industry, and clearly sets out the Scottish Government plan to support the long term development and sustainable growth of the offshore sector in Scotland[39].

4.2. The economic benefits to Scotland of maximising resource recovery are hugely significant. At present, recovery rates in the North Sea average around 40%[40]. In Norwegian fields the equivalent recovery rate is 48%. If recovery rates in Scottish fields could be increased to the level achieved in Norway, this would lead to a substantial increase in output, jobs, and tax revenues.

4.3. Maximising economic recovery in the UKCS will play a key role in extending the lifespan of the North Sea and the tax revenue from production. Oil and Gas UK estimates that Improved Oil Recovery (IOR) - through optimal management of reservoirs, wells and facilities - could add between 1 and 4 billion boe. In addition, it is estimated that Enhanced Oil Recovery (EOR) techniques could add 6 billion boe[41].

Progress

Supply Chain

4.4. The Scottish Government is making substantial progress on delivering our strategy commitments to industry. For example, we are committed to further developing the supply chain with a view to it becoming increasingly focused on the opportunities of resource recovery and more aware of innovation to drive company growth. That is why we are:

  • increasing the number of companies our agencies directly account manage, supporting industry to make the developments and connections which will allow them to expand and become more productive; and
  • continuing to work with operators and contractors to identify further supply chain opportunities across all parts of Scotland, and we continue to work with trade associations and others to identify additional candidates for account management.

Internationalisation

4.5. Companies based in Scotland have opportunities to utilise their knowledge and products on a global stage, given the world-class expertise and comparative advantage which resides in Scotland's oil and gas sector. The Scottish Government wants to support increased opportunities for growth in overseas markets, while also ensuring that Scotland remains a primary location for future investment. That is why we are:

  • increasing our presence in a number of potential growth markets for oil and gas, including Brazil, Norway, Canada, Australia and West Africa; and,
  • continuing to engage with companies on investment and reinvestment opportunities, which includes potential locations across Scotland.

Innovation

4.6. The Scottish Government views innovation as central to a more prosperous and productive oil and gas sector. Through the development of new products and new processes, the industry can not only meet the specific challenge of enhanced and improved oil recovery, for example, but it can also strengthen Scotland's comparative advantage. That is why we are:

  • progressing with a series of planned calls for our £10 million innovation fund. The second call has been announced on Well Integrity - with the first call on Asset Integrity receiving 20 applications currently being assessed;
  • working with the Funding Council to develop an Oil and Gas Innovation Centre; and
  • continuing to work with the private and public sectors to develop a framework for a more coherent approach to provide support for oil and gas technology.

Skills

4.7. The Scottish Government believes that the sector provides many opportunities for our young people. Therefore, to ensure the sector attracts young people and the industry communicates a clear and strong message on future skills needs, we have launched Energy Skills Scotland, which will work directly with employers and education providers to ensure a cohesive response to the demand for a skilled workforce. Energy Skills Scotland will:

  • support the establishment of a new Oil & Gas Academy of Scotland (OGAS) - a collaboration between Aberdeen University, Robert Gordon University, Banff and Buchan College and Aberdeen College;
  • work with businesses, colleges and universities across Scotland to address a range of skills needs in the energy transmission, renewables and carbon capture and storage industries; and
  • provide a focal point for industry to access skills support for oil and gas, renewables, thermal generation, grid transmission and carbon capture and storage (CCS). It will build on activities already developed from the Energy Skills Investment Plan and work with employers and partners across the sector to identify and address emerging skills priorities.

Oil and Gas Production in Scotland's Low Carbon Future

4.8. The twin Scottish Government objectives to develop a low carbon economy and maximise resource recovery in the North Sea are complementary over the long-term. A successful oil and gas sector is a prerequisite for the diversification of the energy supply and the growth of the market for low carbon goods and services.

4.9. As countries such as Denmark show, there is no contradiction between making use of substantial, in its case, gas reserves, while leading the transition to a low carbon economy. The oil and gas industry has an important role to play in that transition, and the hydrocarbon-rich nations have a responsibility to lead the transition to a low carbon economy. The Masdar city in Abu-Dhabi provides an example of how low carbon objectives can be supported.

4.10. In terms of skills we also have a unique opportunity in Scotland where the expertise gained from half a century of exploitation of oil and gas in the waters around Scotland gives a particular advantage in the development of offshore renewable technology.

Collaboration with Industry

4.11. The Scottish Government's way of working is built on listening, engaging and responding to the needs of individuals, communities and businesses. In every area of policy, the government is strengthening opportunities for partnership so that everyone can benefit from increasing sustainable economic growth.

4.12. Productive links between the Scottish Government and the oil and gas industry are an example of our approach to government, and are an essential component of the sector's development in Scotland. The First Minister has established the Scottish Energy Advisory Board (SEAB) for open and informed engagement between Scottish Ministers, the energy industry and other relevant bodies. An Oil and Gas Industry Leadership Group reports to the SEAB on progress on the six priorities of the Oil and Gas Strategy. This will continue to provide the apparatus for meaningful discussion of both fiscal and oil and gas policy issues post-independence.