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by Tom Freeman
10 May 2019
Paul Wheelhouse: there is a future for the oil and gas sector in Scotland, even in a climate emergency

Paul Wheelhouse - David Anderson/Holyrood

Paul Wheelhouse: there is a future for the oil and gas sector in Scotland, even in a climate emergency

First Minister Nicola Sturgeon used her speech to SNP conference to declare a “climate emergency”, paying tribute to strikes by school pupils and protests by Extinction Rebellion activists in the weeks before.

However, the central argument of these protests was the warning from the UN’s Intergovernmental Panel on Climate Change (IPCC) that climate change will be irreversible in just 11 years. 

The Scottish Government has accepted all recommendations from the UK’s Committee on Climate Change (CCC) to achieve net zero emmissions by 2045. But despite huge progress in switching electricity generation to renewables, it is not yet clear how Scotland can speed up the transition in other areas such as heating and transport.

Holyrood sat down with the man responsible for keeping Scotland’s lights on, energy minister Paul Wheelhouse, and asked him if we are decarbonising fast enough.

“I’d start with the point that Scotland, in global terms, is decarbonising faster than anyone else,” he says.

The Scottish Government is “absolutely determined” to do what it can, according to Wheelhouse, pointing to the fact emissions have halved in Scotland since 1990. The IPCC is due to give updated guidance in how to take that further, he adds.

In 2018, almost three-quarters of Scotland’s electricity use was met from renewable sources, but the way Scotland keeps warm is through the use of fossil fuels, with most buildings still heated by gas. 

Wheelhouse says his energy strategy, published in 2017, is “consistent with us achieving our existing very ambitious climate change targets”, but he is committed to “keenly” exploring the recommendations of the CCC.

Holyrood speaks to Wheelhouse shortly after a visit to a new district heating network in Glenrothes, which uses waste heat from a biomass plant in Markinch to heat local business premises. It is hoped it will be extended to nearby homes.

“These are the examples of the kind of thing we want to see more of, and we’d like to put in place the regulatory and licensing regime to enable more district heating schemes in Scotland,” he says.

“It is an area in the UK which is largely unregulated at the moment, and we need to work with the UK Government on consumer protection areas.”

Oil and gas remains a sticking point between protestors and government. How much new exploration for oil and gas does Wheelhouse think is compatible with the IPCC’s timescale of 11 years to turn it around?

“Anyone looking at this, including the IPCC, knows that the world, and indeed that includes developed nations in Europe, will require hydrocarbons during the low-carbon transition, possibly not for burning beyond the transition but we will need oil and gas products for other purposes so there is a future for the oil and gas sector,” he says.

Oil and gas production is actually rising in Scotland, while it recovers from a dramatic contraction in 2015 and 2016. 

Switching off the supply at a time when the UK is “three-quarters reliant” on hydrocarbons for heat, transport and other prime energy needs would inflict “severe damage to communities”, says Wheelhouse.

“We have a responsibility to ensure that we have a continued supply of hydrocarbons during that transition. We’re lucky. Compared to other countries, we can do that domestically to high environmental standards, and where we can minimise greenhouse gas emissions from production.”

Holyrood suggests no one is actually talking about stopping production overnight. The question is should exploration for new oil fields be halted or wound down?

Wheelhouse says modelling shows new sources are needed just to continue to meet demand, which is why the energy strategy focuses more on diversification and the supply chain.

“It’s not a massive expansion of oil and gas as it is sometimes being portrayed as,” he says.

“I understand why, for political reasons, they might be making that point but it’s about trying to manage the supply as we transition to a low-carbon economy.”

There is also a “duty of care” to the oil and gas workforce, he adds.

“It’s not about, as some would like to see, the oil and gas sector being wiped out. I take a totally different view from that. I believe we’ve got a wealth of knowledge and expertise, talents and innovation we can see increasingly deployed in the low carbon energy sector, becoming energy companies rather than oil and gas companies.”

However, oil and gas, with most of the energy infrastructure, remains reserved to the UK Government. Wheelhouse says policy decisions since 2015 have been “very unhelpful” to Scotland’s ambitions to decarbonise.

This includes the dropping of commitments to marine energy and carbon capture, and the removal of the feed-in tariff for smaller renewable projects.

“When we turn to community-led local projects, the removal of the feed-in tariff is a huge disappointment to us and a great concern. A cliff-edge has been created for technologies such as small-scale hydro, community onshore wind projects, solar projects as well that are affected by that enormously.”

Energy market rules have also been changed, pitting renewable energy options against each other in a way Wheelhouse describes as an “unfair playing field”.

Unsurprisingly, he believes Scotland could do more if it was independent.

“These are all areas where with the powers of a normal sovereign state, working in partnership with our partners in Europe on areas such as the emissions trading system and decarbonising the energy system, we could do far more as an independent country.”

But the case for independence can surely no longer be built around North Sea oil?

“I agree with you there. What I’ve tried to do with my engagements with industry is say, ‘Look, we value the sector for its employment, its contribution to the socioeconomic fabric of Scotland and its contribution to energy production and we don’t see it as a cash cow’. 

“It’s generating a huge amount of wealth for the economy through taxes such as VAT and income tax rates, but what we want to do is transition that sector and create a bright future for the people working in it.” 

Even if Nicola Sturgeon gets her wish to have a second referendum by 2021, the earliest Scotland could be independent would only leave five or six years before climate change becomes irreversible. Presumably ministers recognise that to wait for independence would be leaving it too late.

“Certainly, we recognise the scale of the challenge the world faces,” says Wheelhouse.

Carbon capture, utilisation and storage (CCUS) technology could provide the answer, he adds. 

“It will be up to developed countries, wealthy countries like the UK, like Scotland, like Norway and others to try and break the deadlock on developing that technology to be commercially viable for countries that cannot afford to do that R&D.”

Wheelhouse attended a conference on CCUS in Edinburgh in November, chaired by UK energy minister Claire Perry. 

He says Turkish economist Dr Fatih Birol of the International Energy Agency told delegates there was “no scenario” where the global temperature rise could be kept below four degrees without the use of carbon capture.

“Technically, feasibly, we need to do that with the expertise and skills of the oil and gas sector,” suggests Wheelhouse.

He adds: “Too many countries have not moved early enough. They need a new technology to be a game-changer, and CCUS might be that technology. 

“We need to work together internationally to collaborate on that. I know that’s not comfortable to hear for people I greatly respect in the climate movement, but to get that rapid change, we need to have the ability to put the oil and gas sector into negative emissions, and CCUS can do that.”

There is little evidence of a transition in jobs from fossil fuels to renewables, however. A report by the STUC showed that only 21,400 direct and 25,000 indirect jobs exist in a sector the Scottish Government hopes to have 130,000 jobs in by next year. 

Wheelhouse declines to say whether the target will be met, instead blaming the UK policies he has already mentioned. 

“Technologies like remote island wind, floating offshore wind and marine energy are expected to compete with technologies that had been helped to get to that point. That is not fair, in my opinion. I support all of those technologies and I believe the UK Government should as well.”

The supply chain is also fractured, with BiFab reporting it had been effectively shut out of an offshore wind contract despite making a very low loss-making bid. 

Wheelhouse says the contract for difference procurement process should recognise “the contribution it can make to science, to innovation, supply chain development and local jobs, because UK taxpayers, UK consumers are paying for the electricity that’s being generated. Working in partnership with industry rather than going too far down the competition route would lead to greater support for the supply chain.

“Having said that, we are extremely disappointed with the outcome of some of the procurement decisions that have been taken. I don’t want to name individual companies, it would not be fair for me to do so, but we are disappointed, and we do have concerns about whether there was truly a level playing field for UK contractors, with a particular focus on BiFab.” 

A report into the feasibility of a public energy company in Scotland is due on Wheelhouse’s desk.

“If we have, in some point in the future, the ability for a public energy company to commission projects, to be involved in generating electricity if that is possible, then clearly there would be an attraction to do what Equinor do for Norway, Vattenfall in Sweden, to do what other public energy companies do around the world, to be able to develop projects ourselves and to be able to have control over who in the supply chain gets that work.”  

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