Written evidence from Oil & Gas UK (SMA0026)

Oil & Gas UK

Oil & Gas UK is the main industry association representing 480 producers of oil and gas on the UK continental shelf (UKCS) and service companies supplying both the domestic offshore industry and export markets.

The UK offshore oil and gas industry remains the country’s largest industrial investor, with the potential to deliver huge economic benefit for the UK over the coming decades.

We are responding to the Transport Select Committee’s call for written evidence to support its inquiry into smaller airports.  We have responded only to the areas that are relevant to our members.

Summary

1. The strategic importance of smaller airports and the extent to which smaller airports meet the needs of regional economies and provide efficient and effective services for the local communities in which they sit, and their impact on regional economic development and regeneration:

Oil & Gas UK considers maintaining good links to and from regional airports both in terms of route development and maintenance, but also access to airports, as crucially important for the oil and gas industry and in turn the broader UK economy.

In April 2014, Oil & Gas UK published reports commissioned from EY that mapped the capability and economic contribution of the UK oil and gas supply chain[i].

EY concludes that the supply chain was worth £35 billion in revenue terms in 2012 and directly employed 200,000 people across the UK. Companies active in the UK offshore oil and gas sector have bases and offices located right across the UK, but there are a number of hubs where oil and gas industry related activity is currently anchored, namely in the Scottish Highlands and Islands, Aberdeen/Aberdeenshire, Newcastle/Teesside, Norwich, the West Country and London.  These hubs are served by the following regional or “small” airports (i.e. fewer than 5 million passengers per annum): Inverness, Sumburgh, Kirkwall, Aberdeen, Newcastle, Teesside, Humberside, Norwich and London City.

The EY reports identify inadequate UK infrastructure as a macro threat and barrier to growth.  Many of the companies that participated in the reports highlighted the benefits associated with a “cluster effect” such as the concentration of companies in the above-mentioned hubs, eg Aberdeen/Aberdeenshire.  They highlighted growing concerns about inadequate civil infrastructure, including airport services, which they believe has assisted the trend for some companies to move parts of or set up new component parts of their businesses elsewhere within the UK.  A continued dispersing trend would reduce the benefits associated with a “cluster effect” and reduce the overall upstream oil and gas supply chain anchoring effect. It is vitally important for the long term future of the industry that it can retain a firm anchor in these geographical areas, otherwise skilled workers and investment will be attracted elsewhere.

The EY reports also highlight almost £15 billion of UK supply chain sales in the export of goods and services. Regional airports serving our industry’s key hubs provide essential inter-hub transport links for this highly mobile sector, but also, crucially, gateways to international oil and gas destinations where the UK has significant and growing reach.  Oil & Gas UK, therefore, concludes that smaller airports are not just of strategic importance to our industry but to the wider UK economy as they contribute to regional economic development.

2. Issues around competitiveness, rationalisation and commercial viability affecting smaller airports, including the importance of smaller airports in serving niche leisure and business markets and flight training and education ('general aviation') and providing dedicated capacity for cargo services, and the role that partners and airlines play in the delivery of such services:

In July 2014, Oil & Gas UK noted disappointment that British Airways announced that it was cancelling the Aberdeen to London City route as of October 2014.  British Airways said that the route was not commercially viable, therefore Oil & Gas UK was pleased to welcome news from Flybe later that month that they would operate a twice daily service between these two hubs from October, using a different commercial model.

As explained above, Aberdeen is a major hub for the oil and gas industry and links to the City of London are critical, as many of our members have global headquarters in the capital, and it is home to many of the professional services that serve the industry.

The oil and gas industry is a global industry and 42% of the £35 billion revenue for our supply chain comes from exports[ii].  If we are to anchor the supply chain in the UK for the long term, there need to be good connections between these UK regional airports and hub airports within the UK (e.g. Manchester and London Heathrow) and further afield (e.g. Frankfurt and Schiphol) to enable contractors to travel to export areas and movement of personnel

3. The role of local authorities and Local Enterprise Partnerships (LEPs) in ensuring smaller airports improve connectivity:

In addition to good connectivity between airports, it is important to have quick and easy access to airports. 

Case study: Aberdeen

In Aberdeen there is no direct train station for the airport, rather a station at the wrong end of the airport necessitating a transfer shuttle bus on overcrowded roads through the heavily populated industrial estates that surround the airport.  For car passengers, access to the City of Aberdeen or the surrounding industrial estates in the suburbs from the airport is comparatively very slow for the distance travelled and size of the city. 

Responsibility for trunk roads and railway stations rests with the Scottish Government, but Oil & Gas UK hopes that the Aberdeen Western Peripheral Route (bypass) will ease congestion.  Responsibility for local road network improvements rests with two local councils – Aberdeen City and Aberdeenshire – and Oil & Gas UK calls on both local authorities to work together to maintain good infrastructure in and around the city, between key transport hubs like the airport, train and bus stations and port.

We support calls from local regional organisations such as Aberdeen and Grampian Chamber of Commerce, ACSEF and NESTRANs in their call for better local infrastructure.

Case study: Norwich

The primary airport for the energy sector in the East of England region is Norwich International which has a large number of offshore gas helicopter operators including Bond, Bristow, Dan Copters and NHV.  Thousands of passenger movements are processed offshore each year.  We understand that in addition to these offshore operators, other helicopter operators offer aerial survey operations for National Grid and UK Power networks, among others.

Fixed wing operations from KLM and Eastern Airways operate regular flights to key energy industry locations including Aberdeen with international connections via Amsterdam Schiphol providing access to other key energy areas in Scandinavia, Germany and the USA. Other internal services to Manchester and Edinburgh are also used heavily by the energy sector.

With comparatively poor road and rail connections when compared to other parts of the country (the A11 is finally in the process of being fully dualled and the A47 is a major bottleneck for links to the midland and North) air travel from Norwich Airport is a cost effective and timesaving alternative which is very popular in the region.

We support calls from the East of England Energy Group (EEEGR) to improve the current road access to the airport by approving the proposed Northern relief road and dualling the A47.

October 2014