Oil and Gas and Energy Transition Strategic Leadership Group minutes: August 2021

Attendees and apologies

Members

• Cabinet Secretary for Net Zero, Energy and Transport, Chair
• Minister for Just Transition, Employment and Fair Work
• Melfort Campbell, IMES Group, Industry Co-chair
• Alex Grant (in place of Arne Gurtner, Equinor)
• Prof. Alex Kemp, University of Aberdeen
• Andy Samuel, OGA
• Audrey MacIver, HIE
• Craig Shanaghey, Wood
• David Rennie, SDI
• Dick Winchester, Pipistrelle
• Emeka Emembolu, BP
• Gordon McGuiness, SDS
• Helena Charlton, BEIS
• Jake Molloy, RMT
• Jenny Stanning (in place of Deirdre Michie)

• Jim Savege, Aberdeenshire Council
• John Boland, Unite
• John Pearson, Petrofac
• Linda Hanna, SE

• Maggie McGinlay. ETZ
• Murdo MacIver, One Peterson
• Neil Gordon, Subsea UK
• Paul De Leeuw, RGU
• Peter Black, Energysys
• Phil Simons, Subsea 7
• Ronnie Quinn, NECCUS
• Roy MacGregor, GE Group
• Richard Knox, EC-OG
• Simon Roddy, Shell
• Stephen Sheal (in place of Colette Cohen), NZTC
• Terry Savage, GE Group

Guests

• Sir Ian Wood ONE
• Gordon Stirling, OCA

• Sian Lloyd Rees, Aker Solutions
• Mike Tholen, OGUK

Secretariat

• Linsey Wilson, Scottish Government

Observers

• Emma Stewart, Scottish Government

• Isabelle Gerber, OGA
• Jenny MacDonald, SDS
• Katie Phair, Scottish Government
• Kirstin Gove, Step Change in Safety

• Lewis Todd, Scottish Government
• Madeleine Plater, Scottish Government

• Sonja MacMillan, SE

• Stuart Payne, OGA

Apologies

• Andrew McDonald, SE

• George Boyne, University of Aberdeen
• Graeme Sweeney
• Mark Abbey, ChCheli
• Rozanne Foyer, STUC
• Simon Slater, Ineos
• John McDonald, Opito

No response

•  Iain Donald, Enpro-subsea

Items and actions

Ministerial opening remarks

The Cabinet Secretary for Net Zero, Energy and Transport thanked Mr Wheelhouse for his previous support to the group and welcomed members to the 10 meeting of the SLG and his first meeting in post.

The Cabinet Secretary is keen to ensure close collaboration and partnership working whilst appreciating that there may be differing views on certain issues. 

Mr Matheson stressed the importance of the oil and gas sector to the Scottish economy, with COP26 and stark warnings in the IPCC and IEA reports aware of significant work in the oil and sector to make sure it’s playing its part to meet climate change targets.

Since £62 million ETF was announced, met with ETZ in Aberdeen last week and announced £16.5 million for NZTC to exhibit range of transition projects. They also saw £26 million from ETF to GUH and Aberdeen Hydrogen Hub. Good to see progress at Aberdeen Harbour

Sectoral Marine Plan for Offshore Wind Energy published in October 2020. Marine Scotland undertaking a constraints assessment and designing a planning process to allow projects exclusivity over project location earlier in planning process. Information on planning specifications will be published shortly and they want views from members.

The commitment to refresh Energy Strategy was noted, and a draft for consultation will be published in spring next year. Focus will be on delivering a roadmap between now and 2030 and vision for whole energy system to 2045. Hope members will engage and help shape this

OGA and move to net zero – Andy Samuel

Andy Samuel provided context around NSTD and sector. Have been net importer for decades and will continue to be so out to 2050. Deal is around transition and providing security of supply with as low a carbon footprint as possible/

Recent focus has been on driving down emissions and helping industry transition. Deal sets powerful framework for industry over next period.

The biggest opportunity and scope on emissions reductions will come through electrification. Lots on Hydrogen that will feature in new strategy and has featured in UK Government strategy published this week. Significantly 50% local content.

Industry in spotlight and needs to demonstrate its licence to operate, best way through action and pleased to see clear commitment to stretching emission reduction targets. Working closely with industry and need to see targets met and will form part of UK Climate Compatibility Checkpoint.

Industry are in action and lot of change afoot as metrics show. OGA keep tally of interventions they have made. This year 970,000t has been abated. Confident industry up for challenge but there is a real urgency.

UKCS is jewel in the UKs crown and will provide 60% of UKs overall abatement. Growing need for strategic approach so calling for this. Need to work in new ways. Operators should embrace inclusion and diversity if to succeed through the transition.

North Sea Transition Deal – Mike Tholen, OGUK

NSTD is game changing. 60% of decarbonisation of the UK economy will start in the North Sea. Within the deal itself the skills and people are the single biggest asset, will continue to use oil and gas for decades to come but must begin to use it less and less. The deal focuses on cutting our emissions and how we use the oil and gas in a better way.

We have the capability and within the current plans of CCC we have exciting portfolio of opportunities that are part of production that has been recorded under OGA guidance.

There are huge opportunities to build on strengths that the Scottish economy currently has. CCUS knowledge the sector has builds on capabilities in Scottish technology based companies and academia.

Great work in use of Hydrogen right across Scotland, need NSTD to see hydrogen resources developed faster and Hydrogen Strategy published this week helps to support that. Just transition we are working towards is reinforced by NSTD.

Oil and gas is still part of the energy mix and we continue to work with the Scottish economy.

Climate conditionality open discussion

The Cabinet Secretary for Net Zero, Energy and Transport opened discussion. The pace of demand and expectation in the sector has increased significantly where public and political narrative around climate change has stepped up significantly and is a central focus of government policy.

The need for government to demonstrate they are taking forward the right measures to tackle climate change and balance this with working with the oil and gas industry to support the transition.

It's not just about licence to extract but also ensuring correct social licence in a way that carries political and public confidence.

There is an accepted need for compatibility checkpoint for new licences issued by UK Government. First Minister wrote to Prime Minister last week outlining two issues; four Nations Climate Summit and conditionality.

What will be extremely important for industry is that public hold confidence and the processes and decision making can carry public and political reassurance. Need to help decision making processes demonstrate compatibility with climate change objectives.

The oil and gas sector in Scotland has a crucial role to play in economic opportunities. The group will make sure to identify what key investments could be to achieve just transition we are looking for. There is still uncertainty and lots of decisions reserved to UK Government.

Conversation was opened to members. Members noted that oil and gas production must continue but with lower carbon emissions. Cutting back on oil and gas prematurely will result in greater imports, creating higher emissions and a loss of jobs. Must accelerate CCUS and offshore wind.

The supply chain products are available across the sector. Employees from the Oil and Gas sector can be pulled across into renewable energy technology. Need to be more transparent about the decisions we are making. NSTD is a global exemplar but we need to deliver on it.

The Cabinet Secretary emphasised that we need to see greater pace around CCUS, hydrogen and key decisions being made. Negative emission technologies is exactly what we want to see more of. There is a need to create space for technology and businesses to create at pace. There is also a need to deliver net zero, it is not total zero and people need to understand that. Danger if not demonstrating pace of transition that get overtaken by political and public expectation

Members noted that cost of new technologies are high and the public are not aware of that. Concern over impact on workforce and pace of change is creating uncertainty for offshore workforce, they need confidence.

The four nations and sectors need to align. Clarity is needed from government on strategy and policy. Not clear for industrial investors where to invest as there is not much out there e.g. CCUS, hydrogen. Not enough understanding on the steps to get to net zero. Cab Sec responded that if we had a clearer timeline on transition it would allow investors to see potential markets, we don’t know this yet but we need to give you the clarity.

Communication is the issue here, lots of opportunities to develop net zero technology and are being actively looked at. If we had the opportunity to provide Mr Matheson with the material to convey these messages to show sector progress and this needs to be communicated.

From an industry perspective we are moving at pace, need to work on how and when to use our products.

The Cabinet Secretary closed this discussion thanking everyone for their contributions. Moving into business end of climate change that will be more challenging politically. Mr Matheson takes away clear point that the sector wants to work in supporting the transition and we will continue to work and engage with sector - need an informed debate.

There is a need to engage with the sector - need an informed debate,

Vision for trade – Mr Matheson

Mr Matheson opened discussions on Vision for Trade outlining commitment made earlier this year. Primary purpose of policy is to ensure SG trade support and promotion is focused on helping support energy transition. Conscious there are concerns around this and potential impact on SMEs.

There was a request to make sure we sought to align with UK Government. Can confirm that we will be taking a similar approach to the UK on how we apply this policy. There is an issue with the timeline and you wanted me to work with the sector so I have options before me but keen to hear from the sector prior to making a decision alongside Ivan McKee.

David Barnes, Trade Policy added that Vision for Trade is much broader than just this topic. Question on what SG guidance should say so approach we are proposing is to signpost to UK Government guidance. Comments on cover note to be received by 3 September to Trade Policy email address.

Members clarified that UK represents just 1% of worlds production. NSTD is ground-breaking so need to get language right so we can assist other countries decarbonise with the incredible knowledge we have in UK.

The SME community feeling battered and bruised in energy oil and gas sector, post COVID-19, Brexit and low oil price so extending the grace period would be welcomed.

Events all around the world and organise events which were typically oil and gas but now all energy. Need to make sure we don’t cut off opportunity to engage and need to be exemplar.

It is not clear of the benefit to SG of policy change on SMEs. SME businesses are slowly beginning to move and gaps will just be filled by others.

Industry will depend on companies in Scotland to help decarbonise operations locally and worldwide. Any activities that make operations of those companies more difficult or add friction in the system are not ideal. Need to limit number of roadblocks.

Renewable capability around the world is reported by our oil and gas presence. If this is removed our ability to be a prominent player in renewables will be diminished. Withdrawn support before we have been able to transition so has put industry back.

Trade Policy cover note is very negative in its presentation. Oil and gas products will be needed for year to come. The impact on SMEs with the language current at the moment is making it difficult to operate in Scotland. Unable to recruit and is having detrimental impact on business.

The Cabinet Secretary noted that there is not much difference in what we are both trying to achieve and what you are looking for from this policy. Point around the language we use is important. Opportunity to provide further feedback so please take the opportunity to do that. Need to make sure we are a global leader, need to utilise skills we have and need to explain that properly.

David Rennie, SDI highlighted they work with over 300 companies overseas, since trade announcement we have undertaken a lot of work looking at people and events. That will continue, not saying because you are oil and gas company we can’t work with you we are saying for certain things you do we can’t help but are committed to signposting to other sources of help. Of 300 companies, only 50 companies we may not be able to work with.

Action: Cabinet Secretary will take points away to make sure we get language right and will follow up with officials. Mr Matheson to follow up with David Barnes.

Clearance of minutes – Melfort Campbell

Minutes from meeting 18 February 2021 cleared and previous action points noted and cleared.

Just Transition – Minister for Just Transition, Employment and Fair Work

Mr Lochhead, Minister for Just Transition, Employment and Fair Work. First Just Transition Minister. Make sure we work in partnership with people of Scotland and industries to get to net zero.

Net Zero and Just Transition have shot up the agenda in this parliament. Mr Lochhead highlighted that part of his role was to ensure good green jobs as part of the transition and no disproportionate burden on any family.

The Just Transition Commissions report was published, which has recommendations we are adopting and will appoint new Just Transition Commission to oversee delivery of recommendations. Action in next few weeks to publish Just Transition Plans for high emitting sectors in Scotland.

The key role in ensuring just transition across sectors like transport and skills. Also need to capture opportunities and ensure benefits for Scotland.

Just Transition means different things to different people in terms of types of jobs or where they live in Scotland. Well placed to have a Just Transition in Scotland and get these things right. If we get this right Scotland could lead the world in getting to net zero by 2045.

Members spoke of the ‘Goldilocks Zone’. If you decline oil and gas too fast opportunities will not be available in other sectors. If we don’t get it right we create a jobs issue, not a skills issue.

Concerns for the workforce because of increased pace of net zero and pressure being put on the sector. There is not going to be enough jobs to support offshore workers. Offshore workers are now concerned about their future. Concern that skills will be lost.

Mr Lochhead responded that need to manage the way forward. Need to ensure transition is accelerated and just. Needs to be four nations approach. Have Green Jobs Fund with first tranche of funding over the coming weeks.

Members commented subsea sector has made transition. Often forget whole cultural change and companies need to adapt. Needs to be emphasis on how companies position themselves in the market.

The topic of transition is most common thing raised from offshore staff in BP. Work underway to understand what transition looks like. Need to look at transition from current industry to new industries. Will be a period of overlap with skills. If we lose capability we will not be able to support new roles.

Mr Lochhead closed and emphasised need to plan and communicate to sector that support will be there and will be a managed and just transition. This is a big communication challenge.

AOB

Melfort Campbell attended SEAB SLG Co-chairs met twice. Notes will be circulated.

Maggie McGinlay has been appointed to the Scottish Governments new Economic Transformation Advisory Council. Keen to ensure energy message has landed well as part of economic transformation. The Council is looking at challenges and priorities for driving transformational change in the economy. Mailbox where thoughts can be submitted, link to be circulated or engage with Maggie directly. Next meeting end of August.

Closing remarks – Mr Matheson

Mr Matheson thanked the group for a really useful meeting. Provided reassurance of commitment to work with members and in partnership. Uncertain time for the industry but where government can support Mr Matheson will do everything he can to help.

Next meeting not timetabled but expected to be December.