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

Attendees and apologies

• Minister for Just Transition, Employment and Fair Work
• Prof. Alex Kemp, Aberdeen University
• Arne Gurtner, Equinor
• Christine Currie (in place of John McDonald)
• Colette Cohen, NZTC
• David Rennie, SE
• Gavin MacKay (in place of Audrey MacIver)
• Gordon Stirling, Marchfield
• Sir Ian Wood, ONE
• Jenny MacDonald (in place of Gordon McGuinness)
• Jenny Stanning (in place of Deirdre Michie)
• Jim Savege, Aberdeenshire Council
• Karri Tough (in place of Doris Reiter)
• Maggie McGinlay, ETZ
• Melfort Campbell, IMES
• Neil Gordon, GUH
• Paul de Leeuw, RGU
• Peter Black, Energysys
• Richard Know, Verlume
• Ronnie Quinn, NECCUS
• Simon Roddy, Shell
• Stuart Payne (in place of Andy Samuel)
• Terry Savage, GE Group

Apologies

• Craig Shanaghey, Wood
• David Curran, BEIS
• Dick Winchester, Pipistrelle
• Graeme Sweeney
• Jake Molloy, RMT
• Jim Savege, Aberdeenshire Council

• John Boland, Unite
• John Pearson, Petrofac
• Sarah Moore, One Peterson

• Sian Lloyd-Rees, Aker Offshore
• Simon Slater, Ineos

Items and actions

Melfort Campbell opened the meeting.

Ministerial opening remarks

Minister for Just Transition, Employment and Fair Work welcomed the group to the 12th meeting. Highlighted a number of expressions of interest have been submitted for North East and Moray Just Transition Fund.

Minister visited Shetland recently where energy transition is transformational. Highlighted visit to decomm site where jackets were built in Scotland and is being decommissioned in Scotland.

National Ukraine Day, marking 6 months since start of war. Energy transition is happening with backdrop of war, energy and cost of living crisis. Just Transition can’t happen fast enough.

 NSTA update – Stuart Payne

Looking to maximise existing projects. There are 30 which they are looking at how to bring to fruition.

Change in exploration compared to a year ago. Hope that is in 4-5 weeks outcome of Climate Compatibility Checkpoint will be announced in readiness for 33rd licensing round. Support from Government important.

On CCUS Gas storage, launched nationwide licensing round which is first for CCUS. Working with industry and 13 potential areas agree. Rounds are now open and should be 1 success for each company with awards in early 2023.

Projected numbers of storage sites needs to increase.

Supply Chain and Export Taskforce set up. 50% UK content commitment – using Supply Chain Action Plans to report and monitor. Can identify investment gap in real time for first time.

SNIB and others explore early liquidity for supply chain to build capability in time for need. Requirement to think about to get in front of need.

Minister noted that Scotland must be the lead when it comes to CCUS.

North Sea Transition Deal, supply chain and industry update – Jenny Stanning

OEUK economic report will publish on 7th September.

Volatility is high and more uncertainty around oil.

Markets are starting to react to rumours of a recession.

New investment commitments are needed, although do have Penguin and Seagull.

Offshore personnel back to pre-pandemic levels which is big milestone. Making sure prepared for winter and working with NSTA and sharing learning with Norway.

Have to attract new investment in basin, however instability of fiscal regime may impact this.

EPL will affect different operators differently. Have written to conservative leadership candidates to ask that EPL is short-term and same ask to SG.

Sector paid £13.8bn in taxes and believe that the UK Government should spend more of this contribution should be spent supporting consumers.

On Supply Chain – SME members met on 23 August and feeling of uncertainty. Concerns included being ‘tarnished’ as part of oil and gas sector

March 2022 BEIS published NSTD One Year On report

New guidelines have been published to help reduce methane emissions.

People and Skills – OPITO People and Skills Strategy now launched with Steering Group looking at skills passport element. Need to secure funding for CDT by September.

Capability and capacity mapping is underway for oil and gas and report will follow for hydrogen and offshore wind.

CCUS Forum has been launched and they will push UK Government on Scottish Cluster.

The Deal Delivery Group were meeting today and focus on hydrogen.

Mr Lochhead mentioned that oil and gas will continue to be part of energy mix. On Windfall tax position remains that should not just be oil and gas companies.

Members noted that on CCUS Acorn the Track 2 process seems to be slipping so will encourage to promote where possible.

Clearance of March minutes and SEAB update – Melfort Campbell

Minutes were cleared by group except from small typo.

Skills work is crucial and actions should be identified. Can support be offered to existing groups?

Need to consider what an integrated energy basin looks like and how to get there.

There is a Supply Chain Roadmap and a need to support OEUK with resourcing.

Need to build factories before the demand is needed and could be work for the SLG in pulling that together.

SEAB Co-chairs get together 2/3 times per year and trying to pull together piecemeal agenda.

Cost of living was focus of last meeting. Need to look at causes and what can be done e.g. can electricity be delinked from gas? Can profits from electricity generation help those in need.

Are all groups coming together to ensure we achieve net zero. Governments nor industry can do it alone.

Mr Matheson met Kwasi Kwarteng and Sir Jim MacDonald to discuss UK Energy Strategy and how to stimulate capacity of grid, the role of hydrogen.

Action: Melfort to share SEAB minutes once cleared for circulation to the group.

Update on Energy Strategy and Just Transition Plan – presentation

Energy Scenarios

Slides look at energy system by 2030 and take into account security of supply

Will be an increasingly complex system and need to consider impact on other vectors.

The system focuses on emissions and most cost effective way but has not considered things like supply chain capacity. The system assumes that things happen in time effective way which may not always be the case.

Action: Clarity to be sought on whether slides can be circulated to the group.

All three scenarios show reduction in oil and gas but role for gas remains

Model recognises CCUS and hydrogen but notes this is not practical until 2030.

No new unabated electricity generation.

Just Transition Plan

Focus is on delivery that achieves targets in a fair and just way.

Co-design of the plan is an important principle that was raised by Just Transition Commission.

Series of engagement sprints undertaken which aim to bring together different perspectives. Place based workshops have also taken place to ensure inclusive approach as well as a survey with energy workers and online dialogue for public to provide views.

In the process of analysing outputs from engagement activities

Open discussion

Minister comment: focus of scenarios is emissions

Minister comment: milestones between now and 2030 are not annual but there will be specific actions. 2030 – 2045 will be less granular but roadmap will have key milestones

Minister comment: International trade will be covered in economy section

Question over whether document will be instructive or directive. Acceptance not everything will be practical or within Scottish remit but will include actions on how to make things happen.

Will there be more vocal advocacy of oil and gas sector? Minister response: refresh will reinforce message and analysis work is underway looking at demand.

Educational piece – transition process is complex and takes a long time so need to bring society with us. Good to highlight demand side. Minister comment: EIA have models looking at predictions. Need to think about what actions are needed now.

On tube map, volatility will increase, how do we grasp that challenge

Minister comment: Work is underway to ensure own security of supply and import if required which is separate to scenarios. Plan will include chapter on resilience and security.

Messaging is big challenge and term “green jobs” not helpful as creates a them and us situation

What benefits do we get working with UK rather than just Scotland. UK appear to be ahead, should try and work together

Will the Strategy be an aspiration or a requirement. Changes needed to support e.g. planning framework

Hugely complex, needs to be made accessible for the public. Need to be clear what just and fair means as it means different things to different groups. Take time to get Strategy right rather than publish too early

No risk assessment

There is a focus on net zero but there will still be a need for oil and gas

Will there be support for oil and gas projects if the strategy shows a need going forward?

UK Government have set out what they would do in energy strategy. We have Scotwind and INTOG. Will there be actions Scottish Government can take forward?

Minister comment: assumption is that delivery can happen and will be addressed in NPF4

What assumptions have been used in modelling?

Minister comment: there is detailed report setting out assumptions that will be published in the coming weeks

Investors need certainty to consider jobs and skills. Rosebank will be £8.1bn investment creating 1600 jobs, 1200 will be local. Need more projects lined up to enable supply chain to plan for future.

Debate in public is not based on fact. Once we have facts there can be no complaints about profits as profits are necessary for investment. Scottish Government needs to be advocate for the sector.

Need to look at positive legislation e.g. Norway have restrictions in ports. In areas where legislation is in place it helps industry make business case

Minister comment: this Strategy will be written in 2022, the last Strategy in 2016, think what has changed. The Strategy needs to be right and is being written with backdrop of energy, climate and cost of living crisis. Huge jobs and economic opportunities and opportunity to takes decisions at Scottish level. Energy policy is reserved so need UK Government to work with us.

How is engagement with investment community being undertaken? Companies need to know what opportunities there are

Research is currently ongoing which will include risk assessment. Will be reviewing recommendations and options of whether legislation needs updating to support. Will be continued engagement

Energy Task Force is focused on unlocking near term investment

There are 2 prizes; jobs and export opportunities. 20 countries are all having the same conversation. Lots of opportunities to be missed if decisions are not made now.

Need to stop trying to get everything right and accelerate no regret decisions. Need to enable industry to invest now.

Is there enhanced role for SNIB if constraints loosened?

Minister comemnt: need to identify incentives to enable projects. Who pays?

Real challenge is identifying opportunities. Where are we now? Where are the gaps? Need to do early stage risky things e.g. like Scotwind we need a plan soon. Need to get signals out to investment community.

Manufacturing as an example needs to be supported to allow early investment. Need to know where we are in the ‘race’

Lots of conversations about manufacturing, need to be braver and back investors

Need to invest in test and demonstration sites. Need to go after short term opportunities and prepare for longer term. Test and demonstrators need to be open to everyone. What installing now needs to be more modular and use existing ports and infrastructure. Can do it, just not doing it.

Has analysis of supply chain been undertaken to identify where opportunities might be?

Barriers have been identified so do interim report and task people with finding solutions for example in 30 days

How quickly do we realise actions? Need an action plan. Everyone is looking at same things but not collectively. We know what we need to do and immediate priorities are INTOG and Scotwind

Minister comment: risk missing opportunities if focus is on offshore wind

Need confirmation on what is capex and what is opex

Huge variation in local content. Need to be mindful of messaging, if not captured correctly won’t get jobs right.

Ministerial closing remarks

Appreciate shared concerns raised. There is lots of momentum and need to focus on opportunities and makes things happen. Want Scotland to be a first mover and global leader

Will be undertaking a review of the group, looking at the role and membership. Have to ensure group is made up of people who can make decisions and make them happen.

Opportunity to have a further meeting should an issue arise.