Newly released data indicates that UK oil and gas transformation will see a boost after Covid-19 as firms eye a move towards a low carbon future.
The 33rd Oil and Gas Survey, conducted by Aberdeen & Grampian Chamber of Commerce’s Research Chamber alongside the Fraser of Allander Institute and KPMG UK, paints a picture of “fragile optimism and strong leadership” among businesses operating in the sector.
Significantly, 75% of contractors anticipate moving into renewables work over the coming three-to-five-year period, the highest level recorded since 2015.
Data shows a drive towards carbon neutrality targets, with leaders suggesting that oil and gas will account for less than three-quarters of their business activity by 2025 – down from the current average of 86%.
One quarter of firms (27%) said they have set their own carbon-neutral target, with data revealing that 3% have already achieved it.
Additionally, around 38% said that, despite committing to being carbon neutral, have not set a deadline for achieving it. For those that have, ambitions range from 2030 to 2050 in terms of completion.
Shane Taylor, policy manager at Aberdeen & Grampian Chamber of Commerce, said: “The survey results showcase a sector that is gearing up to deliver the energy transition in practice but one that is doing so from a relatively fragile position, both in terms of confidence and activity, as it looks to rebuild from the enormous challenges faced in 2020 and the market disruption driven by the pandemic.
“Given that the majority of our fieldwork predated the announcement of the long-awaited North Sea Transition Deal in late March, we expect the outlook to strengthen as government and industry look to invest in the sector’s pivotal role in achieving our net-zero ambitions.
“Not only is it clear that firms in the sector are taking steps to cement their commitments, it also seems likely that fast-movers in this area will be able to gain a real competitive advantage as net-zero ambitions become a more tangible part of the procurement process.
“These substantive changes to the way firms operate may well be just as transformative as their wider diversification efforts to local economies. In particular, the significant shifts in office usage and ways of working make it clear that the Chamber’s wider asks for a business rates review, reflecting the impact of the pandemic, need to be taken forward by the government to reduce upfront costs and ensure that it’s attractive for firms to take up office space and invest in town and city centres.”
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The survey also asks about the key factors influencing UKCS activity and the actions firms are taking to retain a competitive advantage. Three quarters of respondents said that the level of demand for oil and gas is the most pressing concern for contractors.
Plans to hire new talent in the coming year have also increased, with the research showing that the industry remains “resilient and proactive” in embracing change.
Martin Findlay, the senior partner at KPMG in Aberdeen, said: “As we emerge from the pandemic, we’re facing a new set of climate-related challenges, driven by policymakers and an increasingly impatient public. With that in mind, it’s incredibly reassuring that our survey found contractor confidence in the UKCS has significantly improved from -76% six months ago to +6% today.
“The common misconception is that oil and gas is the cause of much of the climate crisis we face when it’s actually often the driving force behind a potential renewables revolution. 75% of contractors interviewed for the survey told us they’re likely to become more involved in UKCS renewables work over the coming three to five-year period. That’s the highest level recorded since the question was introduced in 2015.”
Findlay continued: “The industry is on the cusp of transformation and much of our findings reflect the collective sense of anticipation. It certainly feels that in Aberdeen we are heading towards the ‘new normal’ after a long period of reliance on carbon-based energy sources.”