Oil and Gas and Energy Transition Strategic Leadership Group minutes: March 2022

Attendees and apologies

• Minister for Just Transition, Employment and Fair Work
• Melfort Campbell, IMES Group, Industry Co-chair
• Arne Gurtner, Equinor
• Andy Samuel, OGA
• Andrew McDonald, SE
• Audrey MacIver, HIE
• Colette Cohen, NZTC
• Craig Shanaghey, Wood
• David Rennie, SDI
• Dick Winchester, Pipistrelle
• Jake Molloy, RMT
• Jenny Stanning, OEUK (in place of Deirdre Michie)

• Jim Savege, Aberdeenshire Council
• John Boland, Unite
• John McDonald, OPITO
• Prof. John Underhill, University of Aberdeen
• Kathryn McKee, BP (in place of Doris Reiter)

• Maggie McGinlay. ETZ
• Neil Gordon, GUH
• Padraig McCloskey, Shell (in place of Simon Roddy)
• Paul De Leeuw, RGU
• Peter Black, Energysys
• Ronnie Quinn, NECCUS
• Roy MacGregor, GE Group
• Rozanne Foyer, STUC
• Sarah Moore, One Peterson
• Sian Lloyd-Rees, Aker Offshore Wind
• Terry Savage, GE Group

Guests

• Gordon Stirling, OCA

• Sir Ian Wood, ONE

Apologies

• Prof. Alex Kemp, University of Aberdeen

• Gordon McGuiness, SDS
• Graeme Sweeney
• Iain Donald, Enpro-subsea
• John Pearson, Petrofac
• Mark Abbey, ChCheli
• Phil Simons, Subsea 7
• Richard Knox, EC-OG
• Simon Slater, Ineos

Items and actions

Ministerial opening remarks

Mr Lochhead opened the first meeting of 2022 and welcomed members to the 11th meeting of the group.

Pertinent to meet this week give the horrific events in Ukraine. Scotland stand with Ukraine. War also serves to underline the importance of diversifying energy supply in a way to protect resilience of Scotland.

SG encouraging companies who have involvement in Russia to consider whether to continue this to take a lead from others and sever interests.

Successful COP in October, big success for Scotland

This week SG published National Strategy for Economic Transformation (NSET). Sets out how over the next decade can strengthen Scotland’s position in new market industries, generating well paid jobs from a Just Transition to Net Zero as well as dealing with structural inequalities in society which exist across economy.

Scotwind leasing round announced in January. Initial awards alone will deliver around £700m in revenues. Promises to be transformational in delivering wider supply chain benefits. FM in Aberdeen on Monday to open National Floating Wind Innovation Centre.

Draft Hydrogen Action Plan published in November 2021. SG will invest £100m through capital funding programme.

Remain committed to supporting development of CCUS. Disappointed Scottish Cluster not allocated Track-1. Continue to advocate for Cluster and offered £80m from Emerging Energies Technology Fund.

Just Transition Plan for energy sector will establish shared vision for Scotland’s energy system. Our 10yr, £500m NE and Moray fund that will accelerate the transition, creating new opportunities in region. More meetings in Aberdeen next week to discuss fund and some meetings already taken place. Detail shaped through working with regional partners.

Mr Lochhead handed over to Andy Samuel.

OGA and investor confidence – Andy Samuel

Andy presented a series of slides that were circulated in advance of the meeting.

Facing multiple priorities, climate emergency, biodiversity crisis. What is happening in Ukraine is appalling and leading to security of supply crisis. Also drifted last year into investor confidence crisis. Disappointing, here in 2014/15.

Last year very disappointing with negative reserve replacement, no major projects sanctioned.

3 of 4 lending banks are actively looking at moving out and moving into farm and other sectors more vocally supported.

Shell put in place new projects in last couple of years. New fields coming on.

Widely accepted that OGA analysis shows UK gas overall has lower footprint. Strong case for continued support for the industry through transition.

Can assure that OGA is well set up to hold industry to account on commitments through NSTD.

Seeing strong performance in emissions reduction.

Need to think systemically, starts with continued support and then unlocks potential.

Jobs aren’t there yet but future is being created and is very exciting. Thanks to SG for INTOG.

Risk that core business is ignored and needs more vocal support. Supply Chain is still precarious and needs projects sanctioned and soon. Need to keep skills. 

Mr Lochhead noted that the presentation highlights crucial role of oil and gas in energy mix and that transition is well under way. Crucial point as people are waiting for new jobs and projects to get underway.

Next steps of INTOG published a few weeks ago.

Members noted that oil and gas companies are becoming integrated energy companies and for every ‘buck’ made a significant proportion is invested into energy transition in UK. Industry have strong drive to diversify and are in line with emission reduction targets. They also have their own targets. Very concerned if don’t bring new projects in short term will have detrimental impact on supply chain and jobs. Vocal support is valued and appreciated.

Mr Lochhead invited Jenny from OEUK to update on NSTD.

North Sea Transition Deal – Jenny Stanning, OEUK

Jenny started by noting the appalling situation in Ukraine and thoughts with all.

Challenging times for industry, number offshore remains below pre-covid levels and activity in basin is suffering. £3bn of opportunities deferred or cancelled in 2020/21 and only 66 wells drilled in 2020. Contributes to perfect storm for supply chain.

Investor confidence dented, negative sentiment around Cambo and rumours of Windfall tax.

Around £21bn of opportunity in UKCS but £14.5bn still to be committed to. Need new development and projects.

Jenny presented pre-read that was circulated in advance of meeting.

Methane guidelines should be ready by Q3 this year.

OEUK have called for all cluster projects to be progressed, if net zero targets are to be met CCUS is a key part of this.

BEIS funding in deal for visibility of opportunity, capability and capacity mapping and stimulation of supply. Phase 1 will be CCUS, out by end of quarter, next phase floating wind.

NSTD is collaborative, collective effort. One Year On report will be shared later this month.

Mr Lochhead advised that a link to the SG response to the CCC will be shared with the group.

A member noted that we will need to produce our own oil and gas over the next 10-15yrs. If we focus on net zero, we can get to net zero whilst producing oil and gas. The member asked what the SG position on oil and gas is.

Mr Lochhead replied that oil and gas has an important role to play in the transition. Speed of transition is linked to oil and gas. SG are undertaking analysis of Scotland’s energy needs and refreshed Energy Strategy will be discussed later. Analysis will help inform decision making.

Members noted that there is an issue with timing in people and skills place. The type of jobs will shift. Need to get workforce transition right. EY are undertaking a piece of work on ‘skills passport’ that will be reported at end of March.

Clearance of minutes – Melfort Campbell

Minutes from meeting 19 August 2021 cleared.

Previous action points noted and cleared.

Melfort provided brief overview of last SEAB meeting:

FM spoke about COP26

Scotwind is an immense opportunity. £1bn investment in supply chain for every GW.

FM discussed cost of living and inflation. Around 50% increase in energy costs. 300,00 households dependent on oil and LPG and 2m dependent on gas. Need to support less well off on society. 1 in 3 households having difficulty with household bills.

Scotwind had 17 successful bids from 74 applications. 11 for floating wind. Strong role for supply chain.

SOWEC needs to link with NSTD

Need for collaboration with UKG

 Supply Chain Champion – Melfort Campbell and Sian Lloyd-Rees

Sian introduced herself as Supply Chain Champion for NSTD.

Focussed on 3 main areas of activity. Voluntary commitment to local content by OGA. Supply Chain Taskforce is looking at mechanism for that. Working with EY on visibility on future opportunities. 3rd is Roadmap which links today with future scenarios. Roadmap work suffering from lack of funding.

Roadmap will signpost opportunities and will help companies work out how to succeed and make early investment to be world class.

Members asked if work will identify gaps in supply chain and what is needed to attract inward investment.

Sian confirmed this is being looked at. Feedstock to that is work of CCSA, RUK and NZTC. Will require investment, policy and skills investment.

Supply Chain Champion role needs trust of the supply chain.

Energy Strategy and Just Transition Plan – Mr Lochhead, Madeleine Plater

Mr Lochhead introduced the agenda item. Refreshed Energy Strategy will coincide with Scotland’s first Just Transition Plan which will be Energy. Just Transition Minister it is my role to ensure transition is managed, planned and protect jobs and employment and tackle inequalities in society.

Madeleine Plater provided an overview of the Energy Strategy and Just Transition Plan (ESJTP). Whole system view with specific focus on meeting interim 2030 target. Will set out vision for what energy system to look like and set out what’s needed to deliver just transition.

Colin Seditas provided overview of just transition work. Overall aim to identify action need to make most social, economic opportunities and identify risk. Provide long term certainty and role they can play.

Must engage widely and have honest conversations across stakeholders and society.

Madeleine shared the scenarios which are being developed by Catapult. Purpose to provide 3 distinct energy scenarios for Scotland which meet 2030 and 2045 targets. Scenarios differ 1. Extreme technological change with minimal societal change, 2. Extreme societal change with minimal technological change and 3. Combination of both (do nothing) Will be tested through co-design process.

Melfort opened discussion to members.

Big concern on how changes will impact workforce and communities and how they will be supported through transition. Sustainable, secure well paid jobs are needed now.

Mr Lochhead responded that these concerns are at the heart of the just transition which will last for the next few decades at need to get it right. There are transferable skills but we need to make sure it happens.

Members further raised the need to move quickly, acceleration is essential Believe the best of both scenario is lacking ambition. Engagement is welcomed.

The Just Transition Commission was welcomed.

Oil and gas is still essential for the transition. Should talk about it as integrated energy basin to ensure oil and gas workers don’t feel they have to transition. Need to address planning and scheduling and grid capacity. Need to start seeing fields coming on to support supply chain in oil and gas.

Mr Lochhead responded that there is not an on and off switch, it is a planned and managed transition. Also an issue that companies have vacancies but can’t find staff, a number of different dynamics.

Members commented that there is a need to avoid duplication by linking together and public support for the industry is needed. Important to encourage, enhance and protect core oil and gas skills.

Issue with timetable, discussion need to how quickly renewable jobs can be brought forward. Will be a 5yr gap.

Mr Lochhead reiterated that just transition will be managed, no cliff edge. The just transition is about co-design. Employers needs to work with employees. There are massive opportunities for Scotland. Timetabling is crucially important and need to get right so we can plan properly.

Members further added that pace is needed for both social and employment aspects. People need to see the change happening and projects need to come forward.

Need to plan and build factories before the jobs will come. Manufacturing jobs are going to be critical.

Limited amount of real estate, offshore wind, oil and gas and CCUS can’t all co-exist. This needs to be thought about. Integration is important, need to plan strategically.

Mr Lochhead noted that we need to work with UKG and agree timelines for delivery. All in this together so need to use expertise and input into Energy Strategy. Need to avoid situation of energy security vs net zero, need to address both at once. Have abundance of energy resource in Scotland, expertise and experience of working in North Sea. Need to capture intelligence and ensure everyone is part of this process. In Scotland we have the Just Transition Commission and commitment to publish Just Transition Plans. We all have a responsibility to get messaging out there that this is planned and we are committed to people having good jobs and careers.

Closing remarks – Mr Lochhead

Mr Lochhead thanked the group for the useful discussion. Fascinating that on one hand we are discussing exciting potential for the just transition and on the other hand we are talking about implications for oil and gas sector and it is the same people that are making same points.

Oil and gas is important for the future but talking about a transition over coming decades and achieving net zero by 2045. Everything we do has to be taken in context of achieving 2045 target.

We have exciting momentum behind energy transition but need hard and fast projects off the ground and people need to see that happening. Need to all work in partnership to make that happen.

In the last few months we have seen 133,000 green jobs announced from different projects announced in media, although figure not verified.

The next meeting of the group will be in person on 23 June in Aberdeen.