At the time of writing the oil price has slipped below $30 and I’ve already begun hearing of potential job losses, real job losses and project delays.
With memories of the last oil price crash still very fresh in our minds, thoughts will inevitably turn to whether Aberdeen – the supposed Energy Capital of Europe – is prepared for going through yet another downturn.
The answer can in large part be based on looking at what progress Aberdeen has made in diversifying its economy since the last crash in 2014 and particularly what it has done to prepare itself for the so-called energy transition.
Rystad believes the coronavirus epidemic could wipe out some 200 service companies across Norway and the UK. They calculate that’s 20% of the entire sector and many of those are in Aberdeen. Rystad also believes £4.1 billion worth of business has already been lost from the maintenance and operations market, which includes
drilling, well services and subsea work. That’s a big number.
Even if oil demand, led by a recovering China, starts to grow it will take time for levels to reach pre-virus levels, if they ever do.
Permanent change including a lot more people working from home and far less international travel could lead to any improvement in demand being quite limited for a long time.
Consequently, the need to fill all the gaps left by those 200 companies may never actually arise.
Being in “social distancing mode” gives me plenty of time to mull over the issues that surround Aberdeen’s future.
This period of cogitation has led me to believe strongly that Aberdeen hasn’t a hope of coming out the other end of a prolonged oil price crash with anything like the number of businesses and employees it had before.
Why not? Well think about it. We’ve been talking about energy transition and the need to diversify the Aberdeen economy for at least the last 10-15 years. In fact, the conversation was really launched 20 or so years ago by the initiation of the first All-Energy Scotland conference and founding of Aberdeen Renewable Energy Group by Energy Voice emeritus editor Jeremy Cresswell, with Gordon McIntosh, then of Aberdeen City Council.
There have been various projects, including the Oil and Gas Technology Centre and, more recently, Sir Ian Wood’s plan for the Energy Transition Zone (ETZ), but beyond that nothing tangible that makes me think “this is going to make up for the loss of oil and gas” has happened.
Comparing progress to our peers in Norway and Denmark and even other parts of Scotland is something I find immensely depressing.
For example, what have we got to match the Norwegian electrolyser manufacturer Nel and the Norwegian engineering company Kvaerner, who are going to jointly develop a 20MW hydrogen production module and will work on a “100MW-plus” design to allow for massive scaling up of hydrogen production later?
That and numerous other examples, not just hydrogen related, tell me we’re either not taking Aberdeen’s predicament seriously or those involved are
incapable of solving the issue.
I regularly take a pop at Opportunity North East (ONE) and Scottish Enterprise, of whom I truly despair for their lack of vision and seeming inability to act proactively.
ONE is talking about creating its ETZ somewhere in Aberdeen while other countries and even other areas in Scotland are already manufacturing the hardware needed to achieve net zero – Nova Innovation’s tidal turbines in Edinburgh being a prime example.
Scottish Enterprise and Highlands and Islands Enterprise recently issued a contract to Arup and a consultancy called E4Tech to “undertake an assessment of the potential to use hydrogen within the Scottish energy system”.
This is despite previous assertions that a hydrogen strategy paper would be issued early this year.
Surely a few hours spent on the internet looking at what other countries are doing would tell them all they need to know.
The energy group at Scottish Enterprise should not only be able to do this itself but should have done it years ago. They’re supposed to be an economic development agency after all.
It’s all too little and it could well be too late for Aberdeen. The energy transition presents huge opportunities. I know what those opportunities are and so do people like Jeremy Cresswell and plenty of others. We watch almost daily as these opportunities are picked up and exploited not just outside Aberdeen but, more often than not, outside Scotland and the UK as well.
If we really want Aberdeen to dodge a bullet and maintain a strong economy, then we need to grab this problem by the proverbial short and curlies and get things moving – fast.
Dick Winchester is a member of the Scottish Government’s energy advisory board