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by Margaret Taylor
25 May 2022
Positive outlook: Can Aberdeen rise again as the leader of the energy transition?

Positive outlook: Can Aberdeen rise again as the leader of the energy transition?

When Alex Salmond’s former chief of staff tells you down the phone that there’s a tangible sense of optimism in Aberdeen right now, the instinct is to ingest his words with more than just a sprinkling of salt. Geoff Aberdein did, after all, learn the art of spin from one of the all-time masters. Yet when I follow up that conversation with an early-April visit to Europe’s oil capital – my home city – to all intents and purposes it seems that Aberdein is right.

Certainly, the city has not fully recovered from the oil price slump of 2014-16 – an event that is estimated to have caused the loss of well over 100,000 jobs in the North Sea and supporting industries and had a devastating knock-on effect on the local economy. But, aside from a massive fall at the start of 2020, the rebound in the oil price has been such that the North Sea – a notoriously expensive basin to produce in – has been back in money-making mode for the best part of six years. And, while the Scottish Government’s push to wean the country off fossil fuels by 2045 casts a shadow over that, the fact that five decades’ worth of exploration and production skills are deemed to be highly transferrable means Aberdeen is ideally placed to become a clean energy leader too.

Put simply, even with an axe hanging over the core driver of its economy, boom-town Aberdeen is ready to make a comeback.

“There’s a great opportunity for us to replicate and build on the success of the oil and gas industry with a new generation,” says Stuart Payne, director of supply chain, decommissioning and HR at regulatory body the North Sea Transition Authority. “The skills we need are here – we need a lot more of them but we have the core skills we need – and we’ve got the kit – the infrastructure across the North Sea can be reused and repurposed. Floating offshore wind is a new technology that is going to require a revolutionary amount of subsea work because it needs to be tethered to the seabed, but what’s brilliant about our part of the world is that Westhill [a town to the west of the city that is home to numerous oil-service companies] is one of the leading subsea places in the world. We’ve got real skills in the core areas this is going to need.”

The North Sea Transition Authority was created in 2015 following a review by Sir Ian Wood, a veteran of the oil industry who transformed Aberdeen-headquartered engineering company the Wood Group into a global entity during his long tenure at its helm. Having stood down from that business in 2012, he has been focusing his own energy on securing the region’s future ever since, looking into how the local economy can both diversify away from oil and gas and harness the legacy it will leave behind.

“I spent my life in oil and gas and only about three or four years ago did I begin to get some inkling of how serious the climate emergency was,” Wood says, when we sit down in the West End offices of his latest venture – Energy Transition Zone (ETZ) – along with its chief executive Maggie McGinlay and adviser Aberdein. “The main reason is that the North East was far too taken up with oil and gas; it was far too focused on oil and gas. Climate change is a huge issue right now, but people weren’t talking about climate change five years ago.”

Sir Ian Wood

A stroll round the environs of ETZ’s Blenheim Place base shows why Aberdeen needs to take climate change so seriously. Known locally as the ‘posh’ part of town (Sir Ian, a billionaire, lives in the vicinity), the area was once home to a plethora of oil-service companies and the law and accountancy firms that served them. Many of the buildings – grand old granite houses set back from the road in their own grounds – now stand empty, their former tenants having fallen victim to the pre-Brexit, pre-Covid crash; signs placed by upmarket estate agency Savills abound. The burnt-out shell of Valentino’s restaurant, just a stone’s throw from ETZ’s new-build glass and steel HQ, serves as a metaphor for the destruction that has been wreaked in a town that allowed itself to become so utterly dependent on one very lucrative industrial sector.

Yet, like Payne, Wood is convinced that Aberdeen is set to rise again, not least because the energy transition the Scottish and UK governments are so focused on in their drive to hit net zero is predicated on an ongoing mix of old and new, dirty and clean, energy sources.

“There are a lot of things in common between oil and gas on the one side and on- and offshore wind, hydrogen and carbon storage on the other; the new energies will benefit from working with oil and gas,” Wood says. “We’re looking to establish a globally recognised integrated energy cluster, which will include oil and gas but focus on the delivery of net zero – net zero is the most important thing we should keep our eye on in this debate. The scale of the opportunity is huge. This region should be well placed to become a globally recognised hub supporting these new industries.”

On a snowy afternoon, the wind howling in off the North Sea, Jordan Harkins and Luigi Napolitano – Port of Aberdeen’s respective communications director and enterprise and innovation manager – take me on a tour of a site that is key to the development of this hub. Across the River Dee from the main city and historic quay, Aberdeen South Harbour is a £400m project due to open later this year that will not only greatly expand the capacity of the existing port but will allow for much larger vessels to dock too. It doesn’t look like much to the untrained eye, but Harkins and Napolitano wax so lyrical about what it offers that it is almost possible to see the huge cruise ships that are expected to soon be berthing alongside large-scale boats that will transport wind turbines out to sea and decommissioned oil rigs back in.

Bob Sanguinetti, Port of Aberdeen’s chief executive, who left his position as head of the UK Chamber of Shipping to succeed Michelle Handforth last year, shares their enthusiasm, detailing in a Teams call how he believes the expansion project is the game-changer that will put Aberdeen at the forefront of the energy transition.

“At the strategic level, it is the largest-scale development as part of the energy transition and it presents the biggest opportunity for sustainable economic growth in Scotland, not just Aberdeen, for a generation,” he says. “Aberdeen Harbour has been an integral part of the energy machinery in Aberdeen – it’s acted as a logistics hub, connecting the wet end with the dry end, and is a significant contributor to the local, regional and national economy. The introduction later this year of a £400m harbour extension is ideally placed, with perfect timing, to support the energy transition.”

Not only is the timing perfect, Sanguinetti says, but Aberdeen is “blessed with perfect geography” to take advantage of developments such as the ScotWind programme, which recently saw Crown Estate Scotland agree to lease vast swathes of seabed to offshore wind projects that will collectively be able to produce close to 25 gigawatts of power. Three quarters of the bids approved are for projects located within 100 miles of Aberdeen.

“Those 25 gigawatts of power represent £25bn of investment activity in the supply-chain network, of which ports, and Aberdeen in particular, will be a fundamental part,” Sanguinetti says and, though he concedes it is unlikely that the wind turbines will be fully – maybe not even partially – manufactured in Scotland, he notes that “all the parts need to be brought together somewhere”. “We are blessed with a brand-new port so are well placed to compete with other ports,” he continues. “In 15 to 20 years’ time we’ll increasingly be supporting the offshore wind sector rather than oil and gas, though there will still be a mix. We will be a more proactive cruise port and will also look at general cargo – too much of what is produced in Scotland is put on trucks and transported 500 miles through the UK. We could export more.”

As if that wasn’t perfect enough, Wood’s energy transition zone, which is spread across a large industrial site in the Altens and Tullos districts that lie behind the South Harbour, is ideally placed to make that a reality, according to ETZ’s McGinlay, who notes that the 40 per cent occupied 1970s buildings that sprawl across the site will be “re-energised and repurposed” as part of the plan.

“Part of the catalyst for ETZ was the new investment in Aberdeen South Harbour – it’s an amazing asset,” says McGinlay, who is also deputy chief executive of Opportunity North East, a private sector economic development organisation set up by Wood in 2015. “As well as having the harbour infrastructure, we said what additional onshore infrastructure do we need to deliver the supply-chain content. We’ve got big opportunities in wind, hydrogen and carbon capture […] and we’re providing the land and enabling infrastructure around new investment.”

At the same time, as the overall ambition is to achieve net zero and not, as it is sometimes misconstrued, zero zero. Deirdre Michie, chief executive of industry body Offshore Energies UK, agrees with Wood that there is a future – albeit a greatly scaled back future – for the existing oil and gas industry too. Currently around three-quarters of the UK’s energy needs are met by fossil fuels; as alternatives are scaled up that will be drastically reduced but Michie says it will never fall away completely. That, she says, will be good news for Aberdeen.

“Even by 2050, 25 per cent of our energy needs will be met by oil and gas,” she says. “It’s far better to do that here, with our own people and communities, so we are not relying on imports or importing a product that has a higher carbon footprint because you have to transport it. There’s an awful lot of exciting stuff happening with the Net Zero Technology Centre, Energy Transition Zone, the skills focus, ScotWind – an awful lot happening – and the vision is of a diverse energy mix that is being supported in the North East in the way oil and gas has been.”
All in all, it’s as if the optimism pointed to by Aberdein is almost too good to be true.

                                            ************************

Nobody is a greater cheerleader for the city of Aberdeen than Adrian Watson. Having previously led the local police force as chief superintendent of Police Scotland’s North East division, Watson has been chief executive of business improvement district (BID) Aberdeen Inspired since 2016. On the handful of occasions we have spoken since he took up that role he has been full of enthusiasm for the city and everything it has to offer. From night tsars and street-art festivals to resurgent city centre office working and world-class shopping experiences, Watson has always had plenty to rhapsodise about.

When I arrive for our meeting at a café in the city’s Marischal Square complex, Watson is chatting effusively with a couple of the other patrons, but it is a decidedly more muted BID manager I sit down with than the one I’ve encountered before. Covid has had a devastating impact on a city that was trying not just to find its feet in the years after the oil-price crash but to redefine its identity and reason for being too. Shops that drew people into the city from across the region have shut down and, with consumers still chastened by the oil downturn, the city centre seems deader than dead. There is a sense that Watson and his colleagues have been sent back to a shoogly drawing board to use thinner paper and blunter pencils to come up with a master sketch for the city’s next chapter. Who could blame him for feeing deflated?

“John Lewis closing is a challenge [the retailer pulled out of Aberdeen as part of a nationwide rationalisation last year]. Debenhams, that was a challenge for Aberdeen [the department store chain’s bricks and mortar business was liquidated last year],” Watson says. “We are still the largest retail offering north of the Central Belt but we need to build on that and bring people back in for the city to sustain itself.”

Part of the problem the centre of Aberdeen is now facing is that the city pretty much shot itself in the foot by following the retail-mall trend, with large-scale shopping centre Union Square sucking much of the life out of main shopping drag Union Street when it opened next to the harbour and train and bus stations more than a decade ago. Despite this, because the centre – which gives people arriving by public transport an under-cover point of entry to an array of shops, restaurants and cinemas – is fully occupied, Watson says it should serve as something of a blueprint for what the rest of the city could achieve too.

“Union Square has an offering that will appeal to all,” Watson says. “We’re delighted for Union Square but we want to bring people to the wider city centre. We need to build that sense of confidence and sense of community. The pandemic has accelerated the challenges on the high street, as it has in Glasgow and Edinburgh too, but it’s given people an opportunity to rethink. There will have to be some difficult decisions for the city to make to reimagine what we want our city centre to be. More of the same isn’t going to work. We need to look outwards to experiences and other activities.”

Much work is afoot trying to achieve that. Aberdeen Art Gallery recently reopened – two years behind schedule – after a £35m revamp that has transformed the space into an attraction that far exceeds Dundee’s V&A in the scale and scope of its collection; renovation work on Union Terrace Gardens is currently underway, with the £28m project – which is also delayed – set to connect Union Street to the gallery, its adjoining concert venue and nearby theatre, and bring a civic space that has been under-utilised for decades back into commission; and unsightly Union Street buildings whose emptiness and state of decay have been blighting what was once a thriving thoroughfare of shops are being torn down to make way for an enterprise centre that will incubate hospitality and cultural start-ups and complement the Opportunity North East tech hub that has been run in conjunction with Codebase since opening at Robert Gordon University (RGU) in 2019.

Revolutionising a city, even one that is down on its luck, is not an easy task, though. Watson notes the difficulties encountered in trying to make the Covid-enforced pedestrianisation of Union Street a permanent feature, something that is seen as vital to any city centre regeneration but which so incensed the locals that close to 2,000 people signed a petition opposing it. In the final weeks leading up to the recent local authority elections the city’s then Labour and Conservative-led administration voted to allow taxis and buses to enter the area once again.

“I see other cities with that pedestrianised area that are setting themselves up and are further down that road – they are still open to the car, because we still need that for now, but we know we all need to make that transition,” Watson says. “The city has to remain attractive and we have to listen to people’s concerns and fears – that’s always important. People are concerned about not being able to get off the bus on Union Street, but there will be an escalator from the bus station to Union Street and they can still get off the bus on Union Street, 300 metres away. We need to work together as a city to overcome these problems.” 

But that’s the thing about town and cities: they are built for and sustained by real people, and what those people want matters just as much as what corporations, civic organisations and political bodies think will be best for them. Much of the talk about Aberdeen’s future focuses on how the energy transition will ensure the area continues to prosper, but arguably too little attention has been given to the people – hundreds of thousands of people – that are expected to drive that. That is a vexed issue in and of itself, with the city’s non-oil-industry workers historically feeling marginalised by the focus the sector has taken. But unless the voices of the people living and working in the area and in the industry are taken into account the transition will not be a success and the entire local economy will continue to suffer.

Fergus Mutch, who led the SNP’s press function for five years until 2020, has returned to his native North East to run his own communications agency, which acts as an adviser to Aberdeen and Grampian Chamber of Commerce. When we meet in Aberdeen beachfront institution the Inversnecky Café the day is so wild, the waves crashing in are so high, that – save for a handful of hardy surfers – the esplanade is all but deserted. Still, Mutch is clear that from the chamber’s point of view it is people, more than anything, that must be at the heart of Aberdeen’s unfolding story. 

“RGU did an interesting piece of work last year [UK Offshore Energy Workforce Transferability Review] that showed that in the oil and gas industry 90 per cent of the skills are transferrable to renewables and low-carbon technologies,” he says. “If you’re creating the manufacturing base and the engineering capability then you’ve got the people to walk into the jobs and that’s a huge part of the transition. What mustn’t happen is what happened in central Scotland when they closed Ravenscraig. Aberdeen really has to avoid that.”

But just because skills are transferrable doesn’t mean they are going to be transferred. Last summer Aberdeenshire East MSP Gillian Martin, who in an interview with Holyrood details the impact industrial decline had on her own family and community, carried out a survey in an attempt to quantify what transition means to the people on the ground in Aberdeen. She had, she writes in the foreword to the resulting report, heard anecdotally about oil and gas workers having a “great appetite” to move into renewables “but rarely have I had conversations with constituents who have been successful in that transition”.

The response to the survey was overwhelming, not only because it was completed by 569 current and former oil industry workers, but because it gave voice to a group of people who are so often reduced to numbers and abstractions in the energy-transition debate. What they had to say will make uncomfortable reading for anyone who thinks the process is going to be made easy because Aberdeen has a ready-made pool of talent from which to pick.

As one man with 35 years of experience working offshore said: “[I have] tried numerous times to gain other employment onshore but am convinced that being an offshore worker has [gone] against me being successful.” Another, with 28 years of service, described a similar experience, noting he had been “turned away from onshore jobs” because employers “see offshore and [are] not interested in giving you a chance”. For one university graduate the reason for that seemed obvious when he was turned down for work in renewables: “I was perceived as coming from an outdated and aggressive industry when applying in [the] digital space.”

Nor is it obvious that any employer is willing to mould these people’s existing skills to take advantage of the knowledge they have already built up in one part of the energy sector to apply it in another. One respondent noted that “there seems to be no clear route from one to the other”, while another said that “only those that don’t have real work experience in oil and gas talk about transferring oil and gas workers into renewables”. “Who is going to transfer a driller, drilling engineer, plant operator, measure-while-drilling engineer, mud logger etc into renewables?” she asked. “Maybe those with administrative skills to do administrative tasks can transfer into renewables, but who [is] going to transfer those with technical skills and very specific skills to oil and gas?”

Martin stresses that it is a problem that reaches far beyond the confines of Aberdeen itself, with the whole North East region dependent on the oil and gas industry to some degree and the whole area left reeling from the impact the last downturn had. A visit to Peterhead, a large port town that sits along the road from Martin’s constituency, highlights that. It is Aberdeenshire’s largest settlement with a population of close to 20,000 people but its centre is dilapidated, its once-grand buildings crumbling, and its future fortunes are seemingly dependent not just on a fishing industry whose decline has been exacerbated by Brexit but by the promised changes in the energy sector too.

Leslie Forsyth, manager of local BID Rediscover Peterhead, remains upbeat as we go for an early afternoon stroll around the deserted streets but there is a sense that Peterhead, whose harbour has played a vital role in the oil and gas industry, will remain a town in limbo until the future of the energy sector is secured. “Peterhead is a proper, gritty, industrial port,” Forsyth says. “Our waterfront is real, it’s not derelict. It’s a proper busy harbour with boats coming and going. Investment in things like carbon capture and hydrogen will be significant for the economy.”

The investment will need to go much further than the industry itself if Peterhead’s fortunes are to be turned around, though. On the drive from Aberdeen to Peterhead it is striking that when the Aberdeen Western Peripheral Route (AWPR) – a road opened in 2018 to connect the towns to the south of the city with those lying to the north – terminates at Blackdog so too does the dualling of the road. Car drivers have to share a single carriageway with a convoy of agricultural and industrial vehicles from that point onwards and the going is painfully slow. The Scottish Government may be committed to taking cars off the road to help achieve net zero, but general connectivity in this part of the country remains notably poor – Peterhead has not been linked in to the rail network since the Beeching cuts of 1965 and buses to Aberdeen run at half-hour intervals while those to other large towns in the area pass through just once every hour. As the entry point to a part of the country that is expected to play an important role in the energy transition – the Acorn project is just along the road at St Fergus while Aberdeen and Peterhead are making a joint bid for green freeport status – it is hardly inspiring.

Contrast that with Inverurie, whose already impressive bus and train connectivity has been enhanced by the AWPR, and the differences between the two towns are stark. As we walk around the main centre, local BID manager Derek Ritchie concedes that Inverurie – a town popular with people commuting to Aberdeen – was hit by the oil downturn, with many of its residents losing their jobs and some longstanding businesses – locally famous Mitchell’s Dairy among them – closing down. But it has been a beneficiary of the pandemic too, with the move to hybrid working seeing much of the commuter cash that would have gone elsewhere five days a week remaining at home. Other decisions made at a local level, such as keeping the high school in the town centre when it was rebuilt, have also been beneficial, with Ritchie noting that when, in a previous life, he ran a convenience store in the nearby settlement of Ellon takings fell by £100,000 a year when the secondary school was moved to an edge-of-town site.

Yet much of what is driving Inverurie’s current success is precisely what is holding Aberdeen back. The workers that would have been in the city are spending at least part of their week at home, powering the town’s vibrant café scene and ensuring footfall – and cash – remains in the local environment. The family-owned shops that have lined its main thoroughfare for decades – Anderson’s for furniture, Booth’s for electricals, Bruce’s for shoes – have stepped up to fill the void left when John Lewis and Debenhams checked out, forming a department store of sorts on the high street along with neighbouring grocery stores, cafes, pubs and clothes shops. The AWPR, which once upon a time was expected to improve the functioning of the oil industry is carrying shoppers past Aberdeen and on to Inverurie, with the journey from the south no longer having to incorporate an off-putting traverse of the city itself.

“Inverurie has benefited from Aberdeen’s issues,” Ritchie says. “People say they don’t need to go there now, they’ve got everything they need here and a lot of businesses have said they’re doing so much better now John Lewis has closed. It’s amazing how these things pan out.”

Amazing, but also instructive.

                                                 ************************

No matter where it is, the one thing an area needs in order to thrive is jobs. After all, who cares what kind of shops and amenities are on offer if nobody has any money to spend in them? Understandably, everyone involved in the North Sea energy industry wants as many jobs to remain in the area as possible, but Professor John Underhill, director of the University of Aberdeen’s Centre for Energy Transition, says that for that to happen there needs to be a reality check on the part of politicians about what net zero is and how it is going to be achieved.

In the days after I’ve been in Aberdeen the UK Government releases its Energy Security Strategy, which – in the face of spiralling domestic energy bills and the threat Russia’s war in Ukraine poses to global gas supplies – makes the case for, as Prime Minister Boris Johnson says in his foreword, “a flow of energy that is affordable, clean and above all secure”. When we meet for coffee near his old University of Edinburgh stomping ground, Underhill suggests that Westminster is striking a more realistic tone than Holyrood in terms of the role oil and gas will continue to play as part of the energy mix, but says that while the transition will necessarily see a move to greater dependence on renewable sources as time goes on, the impression that mooted new technologies are a panacea to the climate emergency is problematic.

Though offshore wind and carbon capture and storage are being touted as the answer to all our net-zero prayers, much of the technology remains untested at scale. That means, says Underhill, that it is not yet known whether fixed offshore wind farms will cause difficulties if carbon has been captured and stored beneath them, while the idea that subsea cavities left by the oil industry can be used as vast carbon storage tanks may also be wide of the mark.

“The wells that have been drilled in the North Sea are effectively straws if they haven’t been plugged correctly,” Underhill says. “All those drilled in the past appear to have been done in compliance with the regulations but when they were plugged 30 or 40 years ago there wasn’t the thought that there could be an opportunity for carbon capture and storage. Were they done appropriately for the energy transition? A number of sites might be challenged from old legacy wells not having the appropriate cement. Carbon dioxide reacts with water to form a highly corrosive acid. That might mean a lot of the infrastructure in the North Sea can’t be reused.”

Hydrogen, meanwhile, is tricky for a number of reasons, including the fact the entire UK gas network would have to be replaced if 100 per cent hydrogen was used as that would cause existing pipes to crack. At the same time, if hydrogen could be produced at scale, storing it would be enormously difficult because, Underhill says, that requires “hermetically sealed blocks of rock salt”,  a substance that Scotland doesn’t have.

It is against this backdrop that the Scottish Government has made its apparent hostility to oil and gas known, with First Minister Nicola Sturgeon saying last November that the controversial Cambo oilfield – which those working in the sector say will be vital to a just transition – “should not get the green light”. Payne says that is regrettable because, while the entire country – including the oil and has sector – must go on its journey to net zero together, the messaging around what net zero is and how it can be achieved requires absolute honesty on the part of politicians, even those that want to be seen as being on the right side of climate history. If the messaging simply paints fossil fuels as bad per se, he says, the danger is that the climate emergency will be exacerbated – or our responsibility for it will be placed onto other countries’ shoulders – rather than resolved.

“How we talk about this, how politicians talk about this and how the industry is presented, is really important,” he says. “Three-quarters of our energy is from oil and gas right now. That demand is a reality and we hope it will decline over time, but while the demand is there the other message we need to get across to people is that we are a net importer – we’re not producing enough for our energy needs. If it’s needed and being used every day where do you want it to come from? The UK, where you can do lots of things like control emissions? The North Sea transition deal requires the North Sea to become a net zero basin. We don’t have that from places we import from. If you look at LNG [liquefied natural gas] versus North Sea oil and gas there’s about a 50 per cent difference in the carbon footprint.”

Given his career history, Mutch knows a thing or two about how political parties put their positions across. He says the first minister “knows full well” that oil and gas will have to remain part of the energy mix up to 2045 and beyond, but that by not explicitly correcting the impression she is anti-fossil fuels or that net zero is not the same thing as absolute zero she is putting Aberdeen’s future at risk.    

“Nobody’s route map to net zero suggests stopping oil and gas as part of that mix tomorrow,” he says. “Even in the Scottish Government’s ambitious targets for net zero by 2045 oil and gas must remain part of that mix, but they are not messaging that well and they are damaging investor confidence. I think any comments that no new oil and gas can come into production or be developed could set back our net-zero journey by five to 10 years if it has the unintended consequence of driving investment to the rest of the world.”

For Wood, that last point is key. Painting the oil industry as the villain of the piece is all well and good, but there needs to be a recognition that – however distasteful the concept may be – the corporations that helped create the mess are also key to cleaning it up. Without their investment the North East renewables sector will not be able to thrive, he says, and if that happens all hopes for the area’s economic sustainability will be dashed.

“Politicians have a really important role to play here,” Wood says. “They must carefully consider the impact of their comments, both on investment in the industry and on achieving net zero. Creating an adverse investment environment will finish up damaging the environment with carbon-heavy oil and gas imports. There’s been an understandable negativity about oil and gas – it’s a big dirty industry run by a bunch of capitalists that screw everyone they can – but I think we’re past that now. If we play this cleverly and try to get the timing right we’ll do well, but if we get it wrong we’ll destroy all the jobs.”  

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