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Government sidesteps Committee's call for Scottish oil and gas sector deal

9 May 2019

The Government's response to the Scottish Affairs Committee's report on the future of the oil and gas does not directly address the Committee's call for a sector deal, and instead states that the Government's relationship with the sector is already “well-established.”

The Committee today publishes the Government's response to its report on the future of the oil and gas industry. The Government sidesteps addressing the Committee's headline recommendation of an ambitious sector deal to ensure Scotland's energy industry can navigate the challenges of its future and continue to prosper.

Chair's comments

Chair of the Committee, Pete Wishart MP said:

“Though there are some positive noises from the government, such as their enhanced funding for carbon capture and storage technologies and the recently announced centre of underwater engineering, we are disappointed by its reluctance to give a clear answer about whether it will implement an over-arching sector deal that would truly transform the oil and gas industry in Scotland. A sector deal would provide the coordinated approach needed to support transition to a new clean energy industry. The last thing the industry needs now is continuing uncertainty, so I have written to the Minister to press for more clarification on the Government's stance on a sector deal.”

Sector deal

The Committee recommended an oil and gas sector deal that has the detail and ambition needed to support the industry's challenging future and reflect the Government's climate change targets by setting out a coordinated way for the sector to transition to green energy production. However, the Government response merely “acknowledges” the Committee's support for a sector deal and argues that the Government already has a “well-established relationship” with the sector.

The Government suggests that a phased approach to funding and supporting the sector may be preferable to a formal deal. The Chair of the Committee has written to the Energy Minister, Claire Perry MP, to press the Government for more detail on its approach to supporting the industry, including its stance on a formal sector deal and to ask how it will ensure its phased approach does not lead to areas of less immediate economic benefit to the sector, such as work on energy transition and carbon capture, being neglected in favour of the areas of the deal that promise a more immediate economic return.

Climate change and new technologies

The Committee's report outlined that one of the biggest challenges facing the industry is climate change and called on Government and industry to take a visibly more proactive approach to limiting the sector's carbon footprint. The Government's has responded positively to the Committee's recommendations for increased support for carbon capture, usage and storage (CCUS) technologies.

In particular, the Government highlights its enhanced funding for CCUS innovations through the BEIS
call for funding applications for feasibility studies, industrial research and experimental development.

The government recently announced its support for a new underwater engineering centre at Aberdeen, which would bring together industry and academia from across the UK to develop new technologies which would enable the sector to move towards a low carbon economy. The Committee called for this in its report, however suggested it should be part of a more structured sector plan.

Decommissioning and skills transfer

The Committee's report recommended that decommissioning – the process by which oil and gas infrastructure is shut down, or reconfigured, after oil and gas production ceases – should be made a central part of a sector deal. While the Government response acknowledges that decommissioning expertise presents a global economic opportunity for Scotland's industry, little tangible progress has been made. The Government response points to the launch of a call for evidence on decommissioning in spring 2019, however this announcement had already been made in the 2018 Budget, marking a significant delay in opening the consultation.

Additionally, the Government does not make it clear whether it supports the Committee's recommendation to set measurable targets for skills transfer as oil production ceases and industry professionals seek new work in clean energy technologies. The Chair of the Committee asks the Minister to provide more information on what the Government is doing to support decommissioning and skills transfer as the sector prepares for its future.

Commenting on the response, Pete Wishart MP said:

“Though the oil and gas industry will have a challenging future, these new circumstances could bring
significant opportunities and help the Government meet the UK's climate change targets.  If the economic potential of decommissioning and cleaner energies is to be harnessed, the Government must act now by providing strategic vision, and support for the industry.”

Further information

Image: PA