Written evidence submitted by Offshore Energies UK (OEUK) (NRG0038)
Call for Evidence: GB Energy and the Net Zero Transition
Offshore Energies UK is the leading trade body for the UK’s integrated offshore energy industry. Our membership includes over 400 organisations with an interest in offshore oil and gas, carbon capture and storage (CCS), hydrogen, and offshore wind. From operators to the supply chain and across the lifecycle, our members safely produce fuel, power, and products to the UK. Working together with our members, we are a driving force supporting the security of energy supply while helping to meet net zero energy commitments across the UK.
OEUK and our members are committed to working with the UK Government, industry, and regulators to help deliver net-zero by 2050 in an efficient, affordable and timely manner. As a sector, we are equally committed to producing the cleaner oil and gas that the UK will continue to need in the decades to 2050 and beyond – with lower emissions than imported options. Achieving this will bring economic and environmental benefits across the breadth of the UK.
The offshore energy industry is a fundamental pillar of the UK economy - supporting hundreds of thousands of jobs and contributing billions of pounds to the exchequer annually whilst powering homes and businesses across the breadth of the country. Our sector has the potential to spend almost £200 billion over this decade in homegrown energy production and decarbonisation, with the expanding industry continuing to support hundreds of thousands of jobs across the UK. The majority of this could be spent in offshore wind, CCS, and hydrogen in the right investment environment. The companies investing in and supporting nascent opportunities like floating offshore wind and CCS will require the cashflow from a stable and predictable oil and gas business to help fund these opportunities.
The UK has a significant opportunity to be an energy transition leader whilst retaining its core function of supporting energy security. To do this though, we need long-term stable and competitive policy that gives investors, companies, and supply chain the confidence to commit to the UK.
1. What impact will the UK Government’s approach to net zero have on Scotland’s oil and gas industry?
The journey to net zero is an opportunity for Scotland and the UK. The UK can be a green industrial power, offering high-quality employment to a skilled workforce that drives strong economic growth. However, the transition is estimated to cost £1.4 trillion, the majority of which will come from private investment and competition for capital is fierce. To avoid the flight of capital, our people, and our supply chains to other countries that are transitioning their economies, companies must see the UK as an attractive country in which to invest.
The heritage UK oil and gas sector has been committed to delivering a net-zero basin by 2050 since 2019 when we voluntarily committed to and published our emission reduction targets. Many of the skills, assets, and infrastructure currently present in the sector have been instrumental in delivering our emission reductions to date and developing first of a kind technology which will support the scale up of low carbon opportunities such as deeper offshore wind, CCUS and hydrogen. Maximising this heritage will be fundamental to delivering a homegrown energy transition.
Our sector has the potential to spend almost £200 billion over this decade in homegrown energy production and decarbonisation, with the expanding industry continuing to support hundreds of thousands of jobs across the UK. The majority of this could be spent in offshore wind, CCS, and hydrogen. However, we must create an attractive investment environment and a strong industrial economy to safeguard the future management of our energy generation and net zero transition.
As such, the UK Government must leverage local expertise and foster collaboration between the UK government and devolved administrations. There must be a coordinated frameworks that give certainty to investors for regional and sectoral collaboration to avoid losing the skills, capital and infrastructure we need to maximise the UK content in the transition.
2. What UK Government interventions will be necessary to maximise the ability of oil and gas workers to find jobs in clean energy?
90% of the UK’s oil and gas workforce have highly transferable skills and are well positioned to work in the adjacent energy sectors based on a recent study from RGU. Maximising these skill sets will underpin a successful homegrown energy transition and ensure we can deliver as much of these activities from the UK will be key for economic growth.
The similarities in skills, infrastructure and operating environments means many companies are progressing oil and gas and renewable opportunities in tandem, and we expect this trend to continue. The CCC forecast that the UK will still require a significant proportion of oil and gas to meet energy demands in the UK in 2050 and beyond. Therefore, we will need to retain the supply chain, skills and infrastructure in order to produce this from the UK and minimise carbon intensive imports whilst also supporting the scale up of the low carbon opportunities we need to reach net-zero.
Given this integrated approach, it is very likely that many of the “oil and gas workers” will support both oil and gas and renewables in tandem using skills honed in the oil and gas sector to as we drive forward a new energy mix in the UK. The ability for the workforce to work seamlessly across sectors is fundamental and the UK Government must prioritise policy that promotes a joined-up approach across sectors.
The Energy Skills Passport enables workers and employers to easily identify which qualifications and training standards, such as health and safety, are needed for specific roles in offshore wind. As part of the Energy Skills Passport, an interactive tool will provide clarity on which qualifications are mutually recognised across the sector to avoid any duplication of training courses, as well as mapping out potential career pathways. It will be managed jointly by OEUK and RenewableUK and will be available to a limited number of testers later this year before it is rolled out in full. The initial version focuses on the transition to offshore wind and future versions will include other parts of the energy sector.
There is also a need for flexible skills funding - it is key that allocation of funding for training programs is put into ones that are adaptable to local employment market needs. Local universities and businesses could be encouraged to develop graduate retention programs that provide career pathways within regional growth sectors, such as internships, research placements, and innovation programs to retain young talent in high-demand areas.
Finally, the creation of partnerships between local education institutions, businesses, and local governments to address skill gaps in key growth sectors will maximise the existing skills base to support across the energy landscape. For instance, partnerships could focus on producing more engineers for manufacturing hubs, tech talent for digital clusters, or skilled technicians needed for the energy sector of the future.
Are Scotland’s energy industry and associated supply chains well-placed to transition to clean energy generation, or is more support needed?
Supply chain companies are the backbone of Scotland and the wider UK’s offshore energy industry and have powered the country for the last 50 years. To harness the full potential of these world-class UK companies for the next 50 years, there is no simple choice between oil and gas or renewables. The reality is that we will need both to support these companies, power the country and grow the economy. The government has committed to working in partnership with industry; it is vital this sector is represented in the groups determining industrial policy and that the Government appreciates the impact that their proposed tax changes will have on the supply chain, which is responsible for most of the 200,000 jobs supported by this sector.
OEUK’s 2024 Supply Chain report highlighted that the expected energy investment profile shift, from oil and gas to renewables, over the next decade is dependent on our ability to convert potential projects into committed ones. There is an urgent need to acknowledge the reality of the timescales required not only to deliver the UK’s decarbonisation ambitions but also in a way that protects existing jobs and creates new ones. The new energy activity will only maintain the current workforce if we manage the transition in a way that preserves skills and transitions jobs in line with project commitment timelines.
Research centres with strong links between academia and industry are an excellent way to ensure that the technology research fits a market need by engaging directly with industry. A good example of these collaborative partnerships between universities and industry is the National Manufacturing Institute of Scotland at Strathclyde University.
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?
The UK's ability to meet its offshore wind, hydrogen, and CCS targets by maximising UK resources depends heavily on certainty in commitments to date and developing "enabling infrastructure" such as ports, transmission systems, interconnectors, storage facilities, rail networks, electricity grid, and other facilitating infrastructure. A strategic and integrated approach is needed to meet Scotland and the UK’s infrastructure requirements.
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, and broader funding, must prioritise unlocking necessary opportunities that otherwise would not happen to maximise value for the UK taxpayer. This could include localised energy solutions and fundamental infrastructure projects alongside supporting necessary anticipatory investment.
Innovative commercial solutions between public and private finance are essential, with a focus on appropriately sharing risk and reward and crowding in further private investment to accelerate projects.
6. How should GB Energy work with the Scottish Government and other Scottish bodies to identify appropriate funding and other mechanisms?
GBE will be most impactful where it can complement existing frameworks within Scotland to unlock further capital. The level of activity in the foundation and growth driving sectors is going to increase and collaboration should be prioritised to ensure GBE is an enabler rather than a bottleneck.
GBE must work collaboratively with exiting bodies such as Scottish National Investment Bank to deploy further capital and leverage co-funding opportunities. Similarly, interacting with CARES program to prioritise localised and community owned energy would be another area that GBE should explore and identify means to overcome some of the challenges with community owned energy we see.
Whilst the transition will require a significant investment in infrastructure, there could also be a role for GBE to incentivise investment in people to ensure we have the human capital needed to maximise domestic content. This should include exploring opportunities to support existing skills frameworks in Scotland.
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?
The sector is focused on delivering a fair, inclusive and sustainable transition to a low-carbon future. The future of the UK's energy industry depends on retaining, growing and evolving the skills of our world-class offshore workforce. Policymakers must ensure any policy interventions make the most of their talents and safeguards jobs and communities across the UK.
Continued partnership with governments, regulators, and our people ensure that we can continue to support the UK's diverse energy needs, the communities we work in, and the wider society. Moreover, energy communities across Scotland should be considered in instances of local generation and infrastructure – ensuring transparency in cost across regions and sharing of reward.
8. Can the UK learn lessons from international examples about how to effectively manage Scotland’s energy sector transition?
There are a range of options being adopted in other countries to support individual economies transition to a lower carbon future including tax incentives, state ownership and supply lead measures. While there are valuable lessons to be learnt from industry partners abroad, Scotland and the wider UK's unique geographical and market context must be taken into consideration when designing policy. Policy that maximises the natural opportunities we have and delivering a managed transition should remain the priority.
January 2025