Cameron has offered £250 million to Aberdeen under the City Region Deal . Scottish Secretary David Mundell said the announcement underlined the UK Government’s willingness to help the North Sea oil and gas industry through its crisis, a view I personally do not support. The funds are expected to address a number of regional proposals including an energy innovation centre, supporting the industry to exploit the remaining North Sea reserves, and the expansion of Aberdeen harbour to help the city compete for decommissioning work. There may be some investment towards regional diversification: the biopharmaceutical and agri-food industries and improved digital connectivity.
The Scottish Government will add roughly the same amount, £254 million, earmarked for infrastructure work. This I presume will be allocated to the harbour primarily.
Looking not only at the oil price, but agreed Climate Change pathways, how could these funds be used to support a real long-term future for Aberdeen?
Aberdeen's oil industry is based around old but still producing fields and installations. Few are viable with the current oil price, and even in an optimistic scenario ($60/bbl) most are no longer viable. But when economical oil is finished, that's not the end of the story. There are over 300 installations to decommission on the UK Continental Shelf, ~90% not Southern North Sea , half unmanned, at a cost which is estimated at over £2 billion per installation (DECC, 2015).
The true start of decommissioning, the "bow wave" as it is called in these circles, keeps pushing ahead of us. At $100 oil there were financial reasons for this relating to the "Time Value of Money" making both the operators and the government (whose taxpayers will foot 70% of the bill through tax relief) keen to postpone this expenditure.
Of course at $100/bbl it is easy to pretend we can afford these costs in the future, but when operators are making substantial losses the decision to delay becomes less obvious. They may be keen to wait until costs go down or they have a better cash flow, they may not. By contrast, the government will always try to postpone serious spending to a next government: spend 1/4 billion now and postpone 400 billion for someone else must be an easy choice for Cameron.
Propping up a declining industry until people and expertise leave is risky, as we'll need the expertise to clean it all up, for 30 to 40 years of decommissioning, because what options are left then? Buy in the expertise from the Middle East or Russia?
The solution to this whole issue is not complicated, and perhaps this City Deal can help, but there's something far more important: first the government (DECC, OGA) needs to force operators to seriously start decommissioning. That will support the current local workforce, grow essential skills, and reduce future exposure to environmental risk; no government investment is needed. If this process is started, we can use the government money to build a real future, covering two critical aspects: making the city low carbon and making the economy and workforce low-carbon.
Making the city low-carbon will mean improving infrastructure for public transport (including trains) and for private transport (including bicycles). Of course more is required, but infrastructure work is slow and therefore needs to be started as soon as possible.
Making the work-force low carbon means planning the transition of engineering and other expertise towards e.g. (and primarily) the renewable sectors. Of course, as mentioned, other industries (perhaps biopharmaceutical and agri-food industries ) also play a role but it is important to make use of skills and industrial infrastructure we have, and a lot of that is engineering.
If we spend the money without starting the abandonments, it will turn out to be Cameron's self-serving sweetener with little or no long term benefit. If Cameron kicks off the abandonments, we could set something great and worthwhile in motion, building a stable and sustainable future for Aberdeen and the shire.
Erik is a physicist, ocean sailor, petroleum engineer, climate change student, and public speaker and writer.