Written Evidence submitted by Decom Mission (NRG0028)
Scottish Affairs Committee / GB Energy and the net zero transition / Call for evidence
Decom Mission submission
Decom Mission is a Not for Profit trade association, specialising in decommissioning and end of life asset management in the energy sector, including the oil and gas, nuclear and renewable industries. The organisation represents both asset owners and service providers in the supply chain and is governed by an independent Board of Directors, it also works closely with relevant regulators and third parties and was previously known as Decom North Sea.
Introduction
Decom Mission is an independent, not for profit trade association that supports decommissioning across oil and gas (O&G), nuclear and renewable industries.
There are common challenges and opportunities in all three industries and economic activity that will take decades and centuries to close out. Within the UK this is currently worth more than £5 billion per annum and employs an estimated 25-30,000 at any one point in time.
Decommissioning is, in effect, the final lifecycle phase of an energy asset and part of the social licence to operate an oil or gas platform, a refinery, a nuclear power plant or even a wind or solar farm. It also ensures the reuse and recycling of materials.
Decom Mission advocates for best practice, the development of a thriving supply chain, recruitment and retention of a skilled workforce and innovation. Previously known as Decom North Sea the organisation is reliant on membership fees to fund domestic and international activities.
This submission is made by the Executive Team and is based upon formal and informal consultation with member companies, most of whom are either based or operational in North East (NE) Scotland.
Summary
As a cross-industry body, we are uniquely positioned to assert on the importance of decommissioning as part of the Energy Transition, creating economic activity that develops and retains skillsets and sustains the Supply Chain as it attempts to decarbonise in line with Net Zero (NZ) targets. Decommissioning of the energy infrastructure of the twentieth century is an enabler to the development of a post hydrocarbon economy in the twenty first century.
A significant number of Scottish jobs are associated with oil and gas and nuclear decommissioning, either permanently or on a project basis, largely based in NE Scotland, Caithness and Dumfries and Galloway and supported by other jobs across the UK.
Whilst this may be a positive message, there are significant challenges – most of which relate to the decline in domestic O&G production, continual changes in fiscal and energy policy and the implementation of an accelerated push to renewables. Confidence and cashflow is being threatened as the pace of policy change outstretches the ability to source and deploy capital, retrain workforce and find tangible, profitable work in renewables.
Whilst many supply chain members of Decom Mission have established services in the renewables market, most are still reliant on O&G activity to derive revenue and now seek work overseas in order to sustain their business as this declines in the UK Continental Shelf (UKCS).
There is a significant lack of awareness as to the scale of the challenge that lies ahead for the Scottish economy as we make this transition and few if any initiatives are currently offsetting the negative impact of policy decisions.
Failure to support and create a Just Transition may have consequences like the closure of steel and coal industries. An integrated policy framework which recognises that energy production and consumption, hydrocarbons and renewables are interconnected and that a NZ transition will take decades is urgently needed to avoid possible negative impact and maximise positive outcomes. GB Energy is touted as reducing energy costs and creating energy jobs, but in the absence of firm, communicated goals and objectives is currently at risk of being distrusted or ineffective.
Once NZ construction activity has peaked studies indicate that renewables will employ less persons in lesser skilled jobs than in comparison to O&G and nuclear activity. However, opportunities also exist in broader decarbonisation of industry, commerce and housing. Capital, skills, governmental support, training and education all need to be redirected in this integrated framework.
In conclusion there is a need for broader engagement, wider distribution of funds and a greater concern regarding jobs in order to maximise these opportunities, be they in decommissioning, decarbonisation or greenfield projects. Decom Mission hopes to play an active role in a renewed approach to these issues and welcomes all engagement.
1) What impact will the UK Government’s approach to net zero have on Scotland’s oil and gas industry?
Development of O&G resources in the UK Continental Shelf (UKCS) has resulted in considerable wealth and employment generation through the last forty years. World leading engineering, project, operations and maintenance and decommissioning capabilities have been developed. Entire regions of the UK have benefitted from enhanced employment and a global industry. The resulting supply chain have capabilities and specialisms that can be deployed in greenfield, brownfield and decommissioning projects, in O&G, nuclear and renewable industries. However it is also needs a policy environment that has consistency and pragmatism built in. Both of these have been lacking in recent years, regardless of administration.
Net Zero (NZ) policies have had both positive and negative impact on the Scottish O&G industry for a number of years, encouraging capital, persons and resources to be redeployed towards a renewables market that does not currently have adequate volume, pace or confidence to fully employ available capability. Within the last decade policy decisions have largely moved ahead of reality in the supply chain, where oil and gas activity, either domestic or international, still provides the bulk of recent and current revenue for many companies.
It is important to remember that hydrocarbon reserves are finite, and that UKCS production has been in decline for approximately twenty years. More recent policy implementation, namely extension of the Energy Profits Levy (EPL) is now resulting in a rapid, unplanned acceleration of the decline of the basin.
Removal of policy instruments that recognise historic and current reliance on oil and gas, ignores this fact in the assumption that the renewables market is already balancing energy demand and offers fruitful work for all.
Whilst NZ projects are being implemented and the UK holds a market leading position in regards to development of wind resources, a gap is emerging between targets, and by result, new supply chain opportunities and the accelerated decline in domestic O&G activity. Policy makers seem both disinterested and unconcerned by the risks that this present.
This gap threatens both employment and cashflow and has been reported upon by bodies such as the Energy Transition Institute of Robert Gordon University in Aberdeen. This reflects observations made of member companies belonging to Decom Mission. Inflationary cost pressures and changes to fiscal policy have reduced free cash for Research and Development and access to capital for investment that will support the NZ transition. As a result policy decisions designed to support renewables and discourage domestic O&G production are in turn reducing supply chain revenue and the ability of the existing supply change to adjust for the future.
Should renewables projects fail to be realised in a fast enough manner net employment may decline and Gross Value Add (GVA) will be impinged. This will have regional and national consequences for North East (NE Scotland) and beyond. Greater emphasis is needed upon principles of a Just Transition by both the UK and Scottish Governments.
There are significant opportunities ahead – however there is a need for a more realistic, stable and independent energy industrial policy that recognises the crossover between O&G and renewables energy production and consumption, associated revenue for the supply chain and future skills and employment needs. Better, more accurate goals and bridging plans are needed. Funding needs to be better targeted, with improved accountability.
Decommissioning is a bridge activity, ensuring continued employment, retaining skills and supply chain capacity and capability, even building export potential and the enablement of a circular economy. An integrated model across O&G, nuclear and renewable decommissioning with Scotland has strong net outcomes. Greater understanding of these activities, the supply chain that deliver them and the ability to assist with broader decarbonisation is required. And yet this, like other areas remains unfunded, poorly understood and rarely engaged upon by policy makers. This creates limitation for smaller bodies such as Decom Mission that arguably can realise more effective outcomes than larger bodies.
- What state of readiness is the oil and gas sector in for the net zero transition?
Climate change and the need to decarbonise energy production in the UKCS has been a theme of discussion since the Wood Review in 2014, with increased emphasis in the pre-COVID10 years. In this period asset owners (“Operators”) and the supply chain were positioning to enable this alongside the development of renewables.
However, in a post COVID19 world and, principally since 2021 the UK O&G industry has been subject to fiscal uncertainty and capital flight, leading to deferred projects and decreasing activity. Confidence has radically declined, just as the industry and its supply chain is being asked to facilitate the NZ transition and renewables build out. Recent extension of the Energy Profits Levy has in effect accelerated this decline, weakening both readiness and willingness.
Both UK and Scottish Governments need to recognise that a successful and sustainable Energy Transition relies on the continued prosperity of established industries and their supply chains, such as O&G production, in order to meet future investment needs and changes in service capabilities.
Policies that endanger an existing industry prior to its replacement being fully mature are at risk of naivety. Fabrication yards, marine services, engineering and manufacturing that has developed around the O&G industry cannot simply transfer to a new industry without adequate planning, cashflow and sustainable volumes of work. These providers require a diverse portfolio of clients and industries, which include O&G and renewables, in order to sustain business and enable the transition.
Whilst governmental policies may seek to support only the NZ transition it is a current reality that the larger proportion of jobs in the energy sector remain within O&G production and civilian nuclear. It is for this reason that principles of a Just Transition need to be taken seriously.
At the same time questions should be asked of preCOVID19 industry commitments such as the North Sea Transition Deal (NSTD), which offered substantial capital investment in the UKCS that does not seem to have materialised. Have these aided or distracted from efforts to be ready for the future?
- 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?
Employment trends in UK O&G have been downward since the mid 2010’s, as evidenced by various surveys and published data. This reflects decreasing domestic production, increasingly harsh fiscal policy and capital drain that is prioritising O&G activity in other nations. Meanwhile renewables deployment has accelerated since the late 1990s, creating new employment and business opportunities.
Based on observations made by our members the decline in and O&G activity, (and by extension employment) would appear to exceed the realisation of net zero projects and activity, despite ambitious targets to establish new wind and solar resources. In other words, despite rapid expansion of UK renewables production supply chain businesses are struggling to wholly replace lost O&G revenue with tangible, long term renewables activity. In order to counter this the UK O&G supply chain is increasingly reliant upon export of O&G capabilities.
The resulting “gap” has been well defined by work completed by the Energy Transition Institute of Robert Gordon University, principally through reports published in September 2023 and May 2024 respectively. The former offers a stark warning as to the narrow timeframe in which decline of one industry can successfully align with ascendancy of the other. Outside of these timeframes it is likely that any transition will not be just. This is particularly true for NE Scotland, where one in five jobs is reliant on offshore energy.
2) What UK Government interventions will be necessary to maximise the ability of oil and gas workers to find jobs in clean energy??
Building on the observations made in the work published by the RGU ETI it is important to recognise that current skillsets in O&G are orientated towards operations and maintenance, or decommissioning. In other word, operating expenditure (OPEX). By comparison NZ activities are more likely to be CAPEX/construction orientated in the short term, with OPEX opportunities in the longer term. It is therefore important to realise that the two industries are not directly compatible in terms of skills and employment.
When combined with the decline of O&G activity it is important that there is common understanding of the changes required, the nature and timing of this change and wide range of persons that will be impacted, both positively and negatively.
Recommended interventions include;
3) Are Scotland’s energy industry and associated supply chains well-placed to transition to clean energy generation, or is more support needed?
O&G development and production in the UKCS has created a globally recognised centre of excellence in the NE of Scotland and an extended supply chain that reaches across Scotland and the whole of the UK. Significant wealth and GVA has been created in the last four decades and is now used to access considerable export markets. Experience in offshore environments and disciplines such as electrical, mechanical, project, health, safety and environmental and subsea capabilities mean that many supply chain companies and workers will find themselves well positioned for clean energy generation opportunities in the UK and beyond.
However, the pace of change and the resulting gap, as highlighted previously, means that further support will be needed to ensure that this is both a Just Transition and one that creates meaningful employment throughout Scotland.
Market support to the existing O&G supply chain has been removed by UK and Scottish governments through climate related policy decisions. The timing of these may well be ill suited, just as a need for assistance is possibly peaking in line with NZ targets and a decline in O&G activity. Meanwhile the UK has failed to enact sustainable, long-term investment in manufacturing and other capabilities for the NZ roll out and is now competing in a global market for capital, people, investment and technology. This is despite the rapid deployment of renewables in the UK, which has largely been based on technology and investment from outside of the country.
As a result of the above we currently find ourselves in a position in which our dominant supply chain is reliant upon a declining market and does not have sufficient confidence or volume of work in the new market place to justify the required investment for change.
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?
Timely creation of renewed infrastructure to support will require combined public and private investment and effort. This is known to industry and to the UK and Scottish Governments and is already embedded in policy commitments, especially under the most recent UK government. Positive examples include establishment of the National Energy System Operator (NESO).
Projects such as Eastern Green Link 2 (conducted by Scottish and Southern Energy and partners) indicate both the scale and nature of investment required to enable decarbonisation of energy production and the distribution of this energy across the UK.
As decommissioning specialists it is not appropriate for Decom Mission or its members to offer detailed commentary on specific steps in this regard. We do however offer two observations;
1) There are substantive opportunities to enable the realisation of a circular economy and lessen the environmental impact of future infrastructure buildout by recycling and reuse of materials decommissioned by the O&G and nuclear industries. In excess of 3 million tonnes of steel is anticipated as being realised from these activities in coming decades. This represents more than one years worth of feedstock to the proposed electric arc furnaces to be developed by Port Talbot in Wales, by Tata Steel
2) The O&G supply chain, in being largely orientated towards operations and maintenance activity in offshore environments is often ill-suited to work in construction of required NZ infrastructure. Incentives and guidance will be required in order for many of these companies to change service offerings and reskill
Given the right solutions, put in place via an integrated framework it is possible to see a future in which much of the existing supply chain or its workforce can assist with the NZ transition. It is important to remember that niche specialities such as decommissioning will also be part of this equation, offering cross industry activity with significant time and volume.
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 remains poorly defined. Its impact is hard to gauge until further information is provided in regard to its intent, funding, timescales and objectives. It is therefore difficult to assess how it can assist with regards to employment and supply chain growth.
In recent years funding has repeatedly been allocated to larger organisations but with little noticeable impact to jobs, supply chain capability, a Just Transition and projects for NZ build out. Repeated promises of new technologies and new businesses by these funded bodies have yet to match expectations, whilst other parties such as Decom Mission, working in tangible, existing markets remain unfunded. Larger trade bodies dominate industry engagement whilst more niche advisors struggle to be heard, running the risk of limited feedback to policy makers.
Monies should be more widely distributed, into integrated models that recognise the ongoing decline in O&G activity and an apparent lag between this and meaningful renewables activity to offset it. These should address workforce awareness of the impending change, more realistic timeframes for NZ implementation, greater detail definition of pending opportunities, accurate targeting of reskilling and broader, understanding of possible socioeconomic change as job types and volumes change.
Policy decisions that prohibit market support of O&G activity need to be revisited to assist the existing supply chain in the transition towards the renewables market. A blanket removal of Scottish Enterprise and other support has been detrimental to the O&G supply chain in a time at which it is potentially more exposed than it has ever been.
Policies should also be altered so that funding awards can be for OPEX as well as CAPEX. Limiting this to capital only projects prohibits organisations such as Decom Mission from building teams that can assist with transition and instead creates a distorted means of market intervention that is land and buildings focused.
Like other parts of the UK further incentives must be given to increase Research and Development (R&D) activity that helps owners deliver projects more readily and the establishment of innovative, future ready services with the supply chain.
These actions require an integrated model in order to be successful. It is unlikely, based on current announcements, that GB Energy can fully meet this need.
6) How should GB Energy work with the Scottish Government and other Scottish bodies to identify appropriate funding and other mechanisms?
As above, little is known of the purpose, objectives and funding of GB Energy. It is therefore challenging to know if it can have a meaningful role in the identification of funding opportunities and other intervention.
Instead, attention should be given to existing, core providers such as Skills Development Scotland, local authorities, tertiary education providers, Zero Waste Scotland and research bodies such as Advanced Manufacturing, National Decommissioning and National Subsea Centres operated by Strathclyde University, University of Aberdeen and Robert Gordon University respectively.
Funding needs to enable the awareness raising, reskilling, R&D and investment needed to maximise opportunities in NZ and address the likely gap in revenue between declining O&G and emerging renewables markets.
This needs to be integrated into a wider, funded Just Transition model that is based on independent advice drawn from academia, industry bodies and government agencies at both Scottish and UK level. This model should strive for greater collaboration between public and private sectors, with an emphasis on services and technologies that will be needed in the future, in a similar vein to the O&G expertise that NE Scotland and the UK acquired as a result of the development of the UKCS since the 1970s.
Bodies already awarded funding or sector support should be subject to greater scrutiny. Concerns abound as to the outcome and deliverables of many bodies that have obtained significant funding or promises from the UK and Scottish Government, such as the NSTD. Few if any investments appear to have been implemented as part of this and little if any pressure or accountability seems to be being derived.
Smaller trade bodies, such as Decom Mission deserve similar funding and engagement given to that of larger bodies as we offer specialist, supply chain orientated support that is more directly related to employers. By means of example training and employment support is required to build and maintain a workforce that can tackle opportunities across O&G, nuclear and renewable decommissioning, which could be recognised as a standalone industry, able to access government and local authority support. Without an integrated workforce and supply chain, potential cost savings and innovations will be lost and future export capability impacted.
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?
Whilst diversification of the Highlands and Islands economy is understandably important it should be acknowledged that the economy of NE Scotland is dominated by the O&G industry and at far greater risk of unemployment, reduced GVA and reduced tax intake should the shift to NZ be poorly managed. It is critical therefore that a Just Transition model is implemented for the NE and other regions at the same time.
Decommissioning of nuclear facilities at Dounreay creates another hot-spot of employment, but is frequently discounted from Just Transition programmes – a situation that needs to be revisited.
In a post-hydrocarbon economy, if developed with a community model in mind, renewables and associated hydrogen production could result in local funding and energy solutions that are better than at present. These could potentially fund retraining, decarbonisation of the broader economy and subsidise energy costs for rural communities, all of which are frequently ignored with current NZ policy at Scottish and UK level, which typically focuses on development of renewable assets.
As cited elsewhere in this response both the UK and Scottish governments need integrated energy policies that acknowledge the overlapping nature of hydrocarbon and post-hydrocarbon energy production, opportunities in decommissioning and a proper, funded Just Transition model that enables the workforce to navigate inevitable change. Training and reskilling will be critical, with bodies such as Skills Development Scotland flagged for further investment. Roles that are currently offshore in O&G could well be replaced with onshore jobs that help insulate properties, install heat pumps and enable decarbonisation. Linkages need to be made between government agencies, local authorities, trade associations and education. Training and awareness on the level and scale of pending change is also required.
Within Scotland it is crucial that this be extended to an integrated programme that address change and opportunity in both the O&G and nuclear industries.
7) Can the UK learn lessons from international examples about how to effectively manage Scotland’s energy sector transition?
Decom Mission frequently works, unfunded, alongside UK Department of Business and Trade and Scottish Enterprise to support and promote export opportunities in energy sector decommissioning. UK expertise is widely sought. International markets for O&G decommissioning alone are worth an estimated $12-15 billion per annum. Strong bi-lateral trade already exists for nuclear decommissioning between the UK and Japan.
Throughout engagements made in 2024 the UK is seen as a leader in both decommissioning and NZ implementation. Rarely do conversations flag learnings that can be imported by return to Scotland and the UK. In this manner the question reflects a misunderstanding of current market position and the importance of export to our existing supply chain. That said there are specialist areas where lessons could be learnt, such as creation of a circular economy and improved sustainability.
It should be remembered that current UK and Scottish government policy prohibits export support of green and brownfield O&G services. This goes counter to the fact that the supply chain will need time and capital to make a transition to NZ activities and is currently still reliant on these activities, even more so as domestic O&G is currently subject to a policy led, accelerated decline.
January 2025