Annual energy statement: 2020

12. Oil and Gas

The oil and gas sector was worth an estimated £11.6 billion in Gross Value Added (GVA) to Scotland’s economy in 2018

This represented 6.6% of total Scottish GDP (including a geographical share of UK Extra Regional activity)

It supported approximately 101,400 jobs in Scotland in 2018.

Oil and gas makes up 93.9% of Scotland’s indigenous production and imports

Of this total, 82.3% of Scotland’s oil and gas is exported – worth £25.0 billion in turnover in 2018

Consumption

Oil and gas makes up:

78.8% of all Scottish energy consumption

91.3% of heat demand

The 2017 Scottish Energy Strategy recognised that Scotland’s oil and gas sector is a key component of our energy system and our economy. The sector can also play a key role in supporting the transition to a net zero economy.

It is also recognised by leading external organisations, including the Intergovernmental Panel on Climate Change’s Special Report^[6], that both oil and natural gas will continue to play a significant role in the global energy mix to 2050.

Our 2019 Programme for Government^[7], clearly outlined that our continued support for oil and gas exploration and production in the North Sea is based on a sustainable, secure and inclusive energy transition.

Reducing emissions from the extraction of offshore oil and gas will make a significant contribution to tackling global climate change, particularly if technologies applied in the North Sea can be exported to and deployed in other countries. In June 2020, the sector announced ambitious targets committing to halving operational Green House Gas emissions over the next decade – reductions of 50% by 2030 and 90% by 2040. This is not only an important commitment from one of Scotland’s key sectors, but a significant step to support Scotland’s just transition to net zero.

The oil and gas industry continues to remain a critical component of the Scottish economy, it has a crucial role to play in the energy transition required to move to an economy and society that generates net zero greenhouse gas emissions. The Scottish Government recognises and supports industry’s calls for a North Sea Transition Deal which will support both the industry in its recovery and ensure a just and sustainable energy transition, at pace, for the sector.

The Scottish Government has refreshed the Oil and Gas Industry Leadership Group (ILG) to the newly formed Oil and Gas and Energy Transition Strategic Leadership Group (SLG). This reflects the critical role which the oil and gas industry has to play in driving forward and delivering Scotland’s transition to a net zero economy. It also reflects the increasing focus of the previous Oil and Gas ILG on the new industrial and supply chain opportunities which the transition represents for the sector – through leadership and skills development, technological innovation, the development of hydrogen and the establishment of CCUS in Scotland.

In June 2020, informed by the work of the SLG, the Scottish Government announced the creation of a £62 million Energy Transition Fund (ETF) designed to help accelerate a recovery from the COVID-19 pandemic in a key structural sector and region, and help assist with Scotland’s long term aims to decarbonise the economy. The ETF will boost the energy sector supply chain, with a number of projects having a particular focus on the North East, to migrate into emerging renewable energy opportunities, help businesses and workers in the region build resilience to economic fluctuations, and help to diversify the energy sector and wider economy whilst maximising inclusive growth impacts. Projects are expected to attract significant private sector investment across the programme.

The Scottish Government continues to support principles and ambitions behind the industry’s Roadmap to 2035^[8], with its focus on: developing Carbon Capture Utilisation and Storage (CCUS) and low carbon technologies at scale; underpinning an increasingly diversified energy system; continuing to help the UK meet its energy needs; driving technology and innovation; developing people and skills; and growing the economy and exports.

CCUS will be a vital component of Scotland’s energy transition. It is clear that CCUS is required to enable us to decarbonise at the rate we need to reach net zero, CCUS is essential.

The sector’s Roadmap 2035 is viewed by the sector as being instrumental to support a green recovery, and the Scottish Government will look to work in partnership with the industry to ensure that the identified actions and targets within the Roadmap are delivered at pace.