Aberdeen Gambling on Oil and Gas

  • Mar 14, 2019
  • Oil & Gas People

The 10-year Aberdeen City Region Deal was announced in November 2016, worth £250 million of direct Scottish and UKgovernment funding, and a total of £826 million once private sector investment is included.

But what’s unique about the Aberdeen deal is the presence of a fourth partner alongside the three levels of government in the form of Opportunity North East (ONE), an industry-led and privately funded economic development body.

At the head of ONE’s economic leadership board sits Sir Ian Wood – the oil magnate. What’s been the flagship investment of the Aberdeen deal so far? £180 million toward innovation in the oil and gas sector in the form of the OGTC. Or, as a recent House of Commons Library briefing paper recently explained, “support for the oil and gas industry to exploit remaining North Sea reserves.”

Aberdeen has a history of putting industry-led bodies at the heart of its public planning, as ONE replaced another body in 2015, the Aberdeen City and Shire Economic Future (ACSEF). ACSEF was a partnership of private and public sector representatives which stated that part of its strategic aim was to “anchor” the oil and gas sector to the north east.

Coincidentally or not, this is the same language used by transport body Nestrans when it supported the AWPR, which it said will offer easier transport of goods for energy firms and will help “anchor” them to the north-east.

Not only do these top-table seats help corporations decide where public money goes, but they also give access to facilitating the deals themselves. Investigations by the Guardian and The Ferret have shown how Scottish financiers sought to make major gains through their involvement in these lucrative public contracts.

Oil and gas hasn’t been the only benefactor of the Aberdeen City Region Deal’s millions – there are also high speed broadband projects and innovation funding for other industrial sectors, including the life sciences. So, unsurprisingly, business leaders have heaped praise on the deal’s direction.

But with its flagship aim of benefitting Aberdeenshire as a proxy to giving direct support to the oil and gas industry, Ford said it was controversial in its beginnings.

“Aberdeenshire Council expressed strong views that the City Region Deal should be about the future - diversifying away from oil and towards renewables,” he said.

Significant investments

Ford and other members had argued that propping up a North Sea oil with ailing profits was not only bad for the climate, but short-sighted with regard to Aberdeenshire’s long term future.

“There were earlier iterations of possible inclusions of significant investments in public transport, significant investments in affordable housing, and – though in the end there was money to pay for transport studies, which is a plus – essentially the deal became very much oriented away from reducing emissions or diversifying the economy, and toward prolonging the status quo in terms of energy, oil and gas specifically,” he said.

Ultimately the council’s views seemingly fell below the priority of those business leaders choosing where the public money should go. But was this a case of a wealthy region like Aberdeenshire’s economic demands taking precedence over the pressing needs of national climate policy?

“From my perspective as a member of Aberdeenshire Council, you can turn that upside down,” Ford said. “The council wanted a much more enlightened deal than the government wanted. So it was national policy imposing old thinking on a region that knew it needed to break out of that.”

Renaissance

Thanks to this continued influx of both public and private investment to support the North Sea oil and gas sector, the industry is now doing well after the oil price downturn of 2014.

The Chinese state-owned oil giant CNOOC (China National Offshore Oil Corporation), Total and Euroil recently announced the discovery of a new gas field of nearly 250 million barrels of oil equivalent, one of the largest in decades.

If the enormous size is confirmed, it would match a 2008 discovery by Maersk Oil which is expected to start producing gas this year and could provide up to five percent of the UK’s energy – together both these fields may produce nearly 10 percent.

Maersk said that its operations had been helped considerably by tax breaks which the former chancellor, George Osborne, declared as “a clear signal that the North Sea is open for business”.

But the Maersk project has been criticised not only from a climate perspective by environmental groups, but by centrists and conservatives for the recipient of its profits.

Despite the government reiterating the importance of the North Sea for the UK’s prosperity, only half of the £3 billion development investment will be spent here after large parts of the infrastructure were ordered from Singapore and other countries.

Economic nationalists see such arrangements as bizarre at best, naive at worst.

Terrible news

Friends of the Earth Scotland said that the discovery is “terrible news” for the climate. “It’s high time our governments stopped supporting fossil fuel development, and get serious about planning a just transition away from this industry,” it said in a statement.

But at the same time as the Scottish parliament assesses the government’s new Climate Change Bill, the handouts keep coming. Earlier this month a parliamentary report from Westminster recommended that the government offer a new sector deal to the oil and gas industry, including a fresh £176 million for technology innovation.

This is important, the report said, to simultaneously “maximise the recovery of the 10–20 billion barrels of oil and gas” and help “the industry reduce its carbon footprint”.

What’s clear is that arguments for rescuing the North Sea fail by their own logic: what’s seen as protection of the UK’s prosperity via fossil fuel tax revenues has actually resulted in zealous tax breaks, largely benefiting big business in Aberdeen and the other nation’s economies. It’s a fallacy.

But those representatives that stand to gain from the financial success of that fallacy were those meeting together in Aberdeen in February 2017, and are still making decisions alongside politicians now.

In such a situation, that the UK is struggling to meet its climate targets doesn’t really matter.