I’ve been living in hope in recent months that we might finally be
getting our act together on two important issues. The first being the stewardship of the oil
and gas industry and the second the development of an indigenous renewables
technology manufacturing industry.
Following the Scottish independence referendum the former will now
remain in the hands of the UK Government who say they will follow the
recommendations of the Wood Review including the establishment of the new
regulator and revising the fiscal regime.
This will be worth watching because the proposed new style regulator will
still be subject to the uncertainties and unpredictability of a Treasury that
has a huge and growing public sector debt level to deal with!
However, I don’t want to dwell on the regulatory issue until the
new setup has been properly established, the new regulator himself or herself appointed
and the promised new fiscal regime agreed. Then and only then will it be
possible to judge whether it’s going to work.
That said, I remain seriously concerned about one aspect of the
propaganda used to persuade Scotland to vote against independence. During the
run up to the referendum Ian Wood asserted very strongly that by 2050 production
will have fallen to around 250,000 bbl/day which will of course considerably
lower the tax take.
Of course, he was assuming that between now and 2050 few if any new
fields will be discovered or new technologies developed to get more out of
existing fields. In short, he’s saying
the strategy he proposed in his own review will fail and that the figure the
industry suggested and he accepted, of a potential 24 billion bbl is
unreachable or was guff all along. Strong stuff.
However, putting aside for one moment the validity or otherwise of
his argument what struck me is that if Wood is right then where’s his Plan B? Thinking locally, there are around 900 to
1,000 companies and circa 100,000 people reliant on the oil and gas industry in
Aberdeen and Aberdeenshire and on the basis of his forecast we could see most
of those gradually disappearing over the next 35 years. In fact, Wood said “…
the rundown impact will begin to be felt by 2030, which is only 15 years from
now"
So the suggestion is that the Aberdeen economy will all but
collapse as people’s jobs go and they inevitably move away. Not all will go of course. Some will have retired here and some will
stay as part of a much smaller supply chain which is still operating
internationally.
However, without wishing to be too brutal there is a very good
chance that under Wood’s scenario Aberdeen’s economy will shrink dramatically
although it may not quite reach the level it was at before the oil industry
took off in the early 70s and anyway a lot of what we did then has already gone
including shipbuilding and paper production
Of course this wasn’t inevitable. In its June 2014 paper on
reindustrialisation the Scottish Government said “Manufacturing is also vital to capturing the
opportunities from the transition to a low carbon economy. Traditional
manufacturing and engineering skills - such as in the offshore industry or
shipbuilding - are transferable to areas such as the manufacture of renewables
technology or oil decommissioning.”
In
short, it understood the potential of creating an indigenous renewables
technology manufacturing industry and to help make this happen was proposing to
set up a Scottish Innovation
Agency and critically, a Scottish Business Development Bank.
But that’s no longer on the table and without a strategy like this
Scotland let alone Aberdeen has little chance of doing anything other than
providing the opportunity for others to take advantage of those natural
resources which were made so much of during the referendum campaign. Don’t treat that statement as scaremongering.
It’s already a fact.
There is no indigenous wind turbine manufacturer, we will soon be getting
overseas built tidal turbines in the Pentland Firth and most Scottish and UK
companies involved in renewables are dependent on foreign investment with many
now even majority owned by overseas companies.
However, Wood’s answer to what he sees as Aberdeen’s looming economic
problem was to use the recent annual Northern Star Business Awards as a
platform to strongly criticise Aberdeen City Council over the “golden
opportunity” missed when plans to transform Union Terrace Gardens were
rejected.
He claimed that Aberdeen Council showed “virtually no sign” of
recognising the economic challenges facing them – and claimed it was
“unbelievable” the ambitious project was scrapped.
Now I can certainly support the former but with the best will in
the world I still do not understand how on earth spending £140m or so on revamping
Union Terrace Gardens would have any impact at all on Aberdeen’s economy and I
never have.
Personally, if I had a spare £50m burning a hole in my pocket as
Ian Wood seems to have I’d be investing some of it in a couple of university
spin-outs I’m aware of and I’d start developing some ideas around high value
added clean tech manufacturing.
I remember clearly Ian Wood saying a couple of years ago that
Aberdeen could become the Houston of the East. As I pointed out at the time
this was going to be difficult because Houston’s economy is considerably
broader based than Aberdeen’s. It didn’t have any of the electronics,
pharmaceutical and the other none oil and gas industries that Houston had when
Wood made this claim and of course it still doesn’t.
The choice is simple and here finally Wood and I are in broad
agreement. We either start putting some real effort into developing a strategy
for a post oil Aberdeen or the next generation faces a genuinely grim future.
Wood is right that we can’t expect any help from Westminster although I believe
we could have from Holyrood if the referendum had gone the other way.
But there are things we could do and we could start with
supporting AREG (Aberdeen Renewable Energy Group) which Wood to my knowledge
never has and we could revamp ACSEF which is just another glorified property
development programme. We could also
start applying some pressure to all those financial sector outfits that did so
well out of oil and gas to make some sensible funds available to entice new
industries to Aberdeen to partly replace the Scottish Business Development Bank
proposed under independence. Maybe Ian Wood would like to chuck his £50m into
that pot if it ever transpired!
©DickWinchester - first published in the Press & Journal Energy Voice and on line - Oct 2014
