Written evidence submitted by Port of Aberdeen (NRG0007)
1. What impact will the UK Government’s approach to net zero have on Scotland’s oil and gas industry?
- What state of readiness is the oil and gas sector in for the net zero transition?
The oil and gas industry’s transition to a net zero future is already well underway, both in terms of reducing and mitigating emissions from oil and gas production and in terms of moving into renewable energy.
Offshore Energies UK’s Emissions Report 2023 states:
“The UK offshore oil and gas industry has reduced production emissions by 24% compared to 2018, and we estimate that emissions from production in the UK fell to the equivalent of 14.28 million tonnes of CO2 in 2022. This compares with the 2018 figure of 18.9 million tonnes.
The reductions are in line with the sector’s targets under the North Sea Transition Deal, in which the industry committed to reduce emissions 10% by 2025, 25% by 2027, and 50% by 2030.”
Meanwhile, many of the North Sea’s major energy operators have diversified into renewables and are making multi-billion-pound investments in the next generation of Scottish offshore wind developments, as well as pioneering major hydrogen and CCUS projects.
- Is the scaling up of the clean energy sector keeping pace with the decline of jobs and investment in the oil and gas sector, or does the UK Government need to do more to close this gap?
Bringing offshore renewable energy projects to scale in the North Sea is taking longer than originally envisaged, while the managed decline of mature oil and gas assets is proceeding more rapidly than anticipated, largely driven by a challenging fiscal environment in the context of EPL.
The UK Government could do much more to support the sequencing of the transition by addressing barriers to the scale-up of offshore wind in areas such as planning and consenting, infrastructure and connectivity, and by recognising the ongoing role of oil and gas in our energy mix and the contribution of the sector to supporting jobs, economic growth and productivity, directly and indirectly.
Port of Aberdeen currently supports 12,500 jobs, predominately in the local and regional supply chain, and generates £1.5 billion GVA for the national economy. This has the potential to increase to 17,500 jobs and £2.4 billion GVA if the expanded port reaches its full potential.
Oil and gas operations currently generates almost 65% of its revenue with only 1% from renewables, despite offshore wind accounting for 10% of vessel traffic and growing.
Offshore wind has the greatest growth potential and Port of Aberdeen is well positioned to support major ScotWind and INTOG projects. However, these are not expected to deliver significant scopes for ports until 2028 at the earliest and are more likely to slip into the 2030s.
If the rate of transition away from the established oil and gas sector is not carefully managed to ensure that existing demand for fuel products is catered for from UK Continental Shelf sources rather than foreign imports, at a pace that links closely to the development of renewable alternatives, then Port of Aberdeen, and organisations supporting the energy transition across the North East of Scotland, are unlikely to fulfil their potential in terms of job creation, economic benefit, and their own transition to net zero.
The significant risk of major detrimental economic impact is outlined in the Scottish Government’s draft Energy Strategy which forecasts a £9 billion annual GVA reduction in Scotland.
2. What UK Government interventions will be necessary to maximise the ability of oil and gas workers to find jobs in clean energy?
A coordinated effort to reskill the oil and gas workforce for renewable industries and other high growth, high productivity sectors will be critical, such as focused investment in training programs for new and existing workers and will require partnership between both Scottish and UK governments, industry, and academia.
The UK Government has a key role to play in creating the conditions in which foreign and domestic investors are likely to make positive investment decisions. Investment in infrastructure, connectivity, a stable fiscal environment and a more streamlined planning and consenting process (on and offshore) would all help maximise the potential for new job creation.
3. Are Scotland’s energy industry and associated supply chains well-placed to transition to clean energy generation, or is more support needed?
Ports have a critical role to play in accelerating offshore wind deployment. Catalysing investment in large-scale world-class port infrastructure will be vital to delivering projects and securing the largest possible share of supply chain jobs, growth and know-how for Scotland.
Ambitions to accelerate offshore wind deployment need to be matched with commensurate investment in port infrastructure, as well as suitable incentives (e.g., tax, business rates, planning) to encourage the offshore wind supply chain to locate in Scotland.
For example, there are synergies for locating high value manufacturing for offshore wind near port facilities and Port of Aberdeen’s South Harbour is located adjacent to the Energy Transition Zone. However, there must be an attractive economic environment for these organisations, often based overseas, to locate their facilities in areas like this.
In this regard the proposed North East Scotland Investment Zone will be an important catalyst and driver for progress.
4. What actions should the UK and Scottish Governments take to ensure the necessary generation and transmission infrastructure to support the development of Scotland’s renewables sector?
Accelerating the deployment of offshore wind hinges on robust generation and transmission infrastructure. Immediate investment in grid expansion and modernisation is needed to ensure resilience and scalability.
Port of Aberdeen is investing £55 million over 10 years to become the UK’s first net zero port by 2040. Shore power is critical to reducing emissions from client vessels in the near term and has the potential to reduce the port’s total emissions by 50%.
There are currently three projects ongoing to install shore power at nine berths with first power in March 2025. However, moving from demonstrators to wider deployment requires further public and private sector partnership, as well supportive incentives and legislation.
The Department for Transport-funded ‘Port Zero’ feasibility study established scenarios to decarbonise South Harbour through on-site renewables and storage, as well as grid power to serve a new shore power system as a minimum.
A number of challenges were also identified that would require government partnership and / or intervention:
The project is estimated to provide social benefits of reduced CO2 emissions, with a value of £202m and improved air quality benefits valued at £95.7m when compared to the counterfactual. Total estimated project costs are £43m although the local Distribution Network Operator (DNO) may absorb around £13m of these costs and grant funding being required for a proportion of the remaining costs.
5. How can GB Energy, and other ways of backing industry (including funding), most effectively support employment, economic growth and the development of clean energy supply chains in Scotland?
GB Energy should prioritise funding mechanisms that enable ports and supply chains to support the accelerated deployment of offshore wind and drive sustainable economic growth.
Enhanced incentives to attract global energy companies to Scotland, particularly in manufacturing and technology sectors, will maximise supply chain benefits, which are crucial to the longer term economic vitality of the region.
Port of Aberdeen welcomed the UK Government’s commitment to invest £1.8bn in UK ports and it’s £8.3bn of funding for GB Energy.
However, our initial discussions with Ministers and officials point to this funding being on a commercial loan basis. While this may suit some, Port of Aberdeen has recently invested £420 million to significantly expand its capacity and capability with Aberdeen South Harbour. Approximately half of this cost consists of loans from the European Investment Bank and Scottish National Investment Bank.
This means that any major future developments, such as further dredging of South Harbour for offshore wind or widescale deployment of shore power will require supportive partnership with government, whether through grants or another financial mechanism.
To summarise, greater state support is required for ports and the wider maritime industry to decarbonise and support the wider drive for energy security.
6. How should GB Energy work with the Scottish Government and other Scottish bodies to identify appropriate funding and other mechanisms?
GB Energy should work closely with the Scottish Government, groups such as SOWEC, and local stakeholders like Port of Aberdeen to align funding strategies and accelerate project delivery.
Collaborative frameworks that streamline planning, financing, and regulatory processes will be key. A shared investment strategy between UK and Scottish Governments would unlock critical infrastructure projects, port development for offshore wind.
7. What does a just transition look like for workers and communities across Scotland’s highland and island communities, and what role might community energy and community benefits play in this?
Like the Highlands and Islands, the workers and communities of North East Scotland have much to gain from the transition to renewable energy, but also face attendant risks if, investment in infrastructure and connectivity fail to materialise and job opportunities consequently fail to emerge. The North East economy is highly dependent on the energy sector, and it will be important for individuals and communities that the potential emerging opportunities are realised.
8. Can the UK learn lessons from international examples about how to effectively manage Scotland’s energy sector transition?
Scotland can learn from Norway, which is continuing to support its homegrown oil and gas sector while growing renewables. Norway’s approach includes robust government support, clear long-term policies, and strong collaboration between public and private sectors, as well as sequencing that optimises the emerging opportunities in renewables and reducing GHG emissions from existing production without mothballing their hydrocarbon production prematurely.
January 2025