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Energy strategy a ‘betrayal’ of oil and gas industry

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The Chamber says oil and gas will remain part of the energy mix

The Scottish Government’s new energy strategy has been described as a “breathtaking betrayal” of the oil and gas industry and shows it has learned nothing from last year’s crisis.

Its new paper says that “in order to support the fastest possible and most effective just transition [to clean energies], there should be a presumption against new exploration for oil and gas.”

Oil and gas exploration is reserved to Westminster and the the policy comes at a time when the UK government is likely to approve about a hundred new licences for the North Sea and investors are showing renewed appetite for the region.

Russell Borthwick, chief executive of Aberdeen & Grampian Chamber of Commerce, said: “This move towards a presumption against exploration for North Sea oil and gas has been met with compete disbelief in the North-east of Scotland.

“While the Scottish Government’s position is largely symbolic, as these matters are reserved to the Westminster parliament, this is still a breathtaking betrayal of one of Scotland’s biggest industries.”

The strategy also reaffirms the Scottish Government’s opposition to nuclear, coal and fracking for gas in favour of “substantially increasing the current level of 13.4 Gigawatts (GW) of renewable electricity generation capacity” such as solar, hydro power and marine energy.

The government says the number of low carbon production jobs is estimated to rise from 19,000 in 2019 to 77,000 by 2050 as the result of a just energy transition, meaning there will be more jobs in energy production in 2050 than there are now. It forecasts that by that year oil and gas production will be just 3% of its 1999 peak.

It also commits to a £500 million Just Transition Fund that will support the northeast and Moray to become one of Scotland’s centres of excellence for the transition to a net zero economy.

Mr Borthwick said: “We welcome the strategy’s backing for the Acorn Project [the carbon capture project] and its ambition to increase investment in lower carbon technologies, including hydrogen.

“However, the energy transition is going to take 25 years or more and there is quite clearly a sustained period of time where oil and gas will remain a crucial part of our energy mix.

“So, we have two options; to produce more domestically, with full control over the regulatory environment in which it is extracted; or to import an increasing amount of our energy, with the heavier carbon toll that shipping it from other parts of the world carries. The latter makes little economic sense, and even less environmental sense.

“The position set-out today suggests a fundamental misunderstanding of the energy transition, and the requirement for oil and gas to fuel it. Drilling and production are still very much needed in the short, medium, and long term to bridge, and in many cases, fund, the transition.

“Furthermore, it suggests that ministers have learned nothing from the energy crisis of 2022 – a crisis which has been exacerbated by our reliance on energy imports due, in part, to a lack of new North Sea exploration and production over the last decade. 

“There is an acceptance in the public at large that leaving Scotland’s oil in the ground while importing increasing amounts of it from other parts of the world is environmentally illiterate. The Scottish Government needs to reflect upon this and reverse this damaging, job-destroying position before it is too late.”

Jenny Stanning, Offshore Energies UK’s external relations director, said it supports plans to develop a hydrogen economy.

“However, we are concerned at the statement’s suggestion of accelerating the decline in oil and gas production,” she said.

“Scotland gets 79% of its total energy from oil and gas according to its latest official figures. Across the UK about 24 million homes (85% of the total) rely on gas boilers for heat and we get 42% of our electricity from gas. We also have 32 million vehicles running on petrol and diesel. 

“These plain facts means we will need gas and oil for decades to come.  Additionally, in Scotland alone, the offshore industry supports 90,000 jobs. Across the UK it’s around 200,000.”

Scottish Labour Energy spokesperson Colin Smyth said: “In 2010 the SNP promised there would be 130,000 green jobs per year by 2020, claiming we would be the Saudi Arabia of renewables – but instead just a fifth of those jobs have been delivered and supply chain contract after contract continues to go overseas.”

Renewed investor interest in oil and gas

Barry McCaig, partner and head of corporate in Scotland at Pinsent Masons, said earlier this week that the IPO of Ithaca Energy at the end of last year indicated that institutional investors are coming back into oil and gas and that the capital markets are selectively open for quality businesses.

“The oil price may cool a little in 2023 but it will stay comparatively high compared to what we have experienced in the last five years, which will encourage deal activity,” he said.

“There also remains a good appetite to invest in oil and gas with a broader range of funds coming back into the fold because of three factors – the importance of establishing energy security; the industry appears to be addressing ESG concerns; and the potential returns were much more positive last year compared to many other sectors.”

Electric car slowdown

The plan to phase out new petrol and diesel cars and vans has been pushed back from 2030 to 2032 amid concerns that charging infrastructure is behind schedule.

There is also growing evidence that car manufacturers across Europe are slowing the production of electric vehicles because they are too expensive for the vast majority of motorists.

The Advanced Propulsion Centre, which disburses taxpayer money to push the automotive industry towards a zero-emission future, said British factories would produce 280,000 fully electric cars and vans in 2025, out of a total production of 1.1 million.

It previously forecast 360,000 battery-only vehicles to be produced out of a total one million.

If confirmed, the figures would point to fewer electric vehicles on the road than forecast.

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