£250m City Deal will benefit North Sea oil

THE UK government is to sign a City Deal with Aberdeen which will see £250m (US$357m) invested in the north-eastern Scottish city, including significant investment in the troubled North Sea oil and gas industry.              

The funding will come equally from the UK and Scottish governments. City Deals are signed between the government and a city and allow the city to spend funding where it sees fit in areas that will bring the most benefits, help businesses grow best and create economic growth in the region. There are many such deals in the UK, including in Birmingham, Leeds, Liverpool, Newcastle, Hull, Bristol and Stoke-on-Trent, but the Aberdeen deal will be only the second in Scotland, after Glasgow.

The money will support a new energy innovation centre to help the industry research ways to exploit remaining oil and gas reserves, and an expansion of Aberdeen harbour, which will allow the city to compete for decommissioning work. The City Deal includes plans to diversify Aberdeen’s biopharmaceutical and agri-food industries, and to improve digital connectivity in the area.

“We need action which will help in the short, medium and long terms – building a bridge to the future of the North Sea; helping the UK’s oil and gas industry to export its world-class expertise around the globe; and encouraging diversification of the economy to create new opportunities in other sectors too,” said sectretary of state for Scotland David Mundell, who will sign the deal on behalf of the UK government.

Prime Minister David Cameron will visit Aberdeen later today. As part of the visit, he is expected to announce further measures to protect jobs in the oil and gas sector.

Industry body Oil & Gas UK has welcomed the announcement. CEO Deirdre Michie said that the deal is a recognition of the seriousness of the situation, and that the funding “is a much-needed positive step”.

“While the oil and gas sector is under severe pressure globally, due to the current oil glut and price collapse, it is being felt particularly forcefully on the UK Continental Shelf (UKCS), which is a mature basin with its own particular difficulties and cost challenges,” she said.

“Aberdeen and the north-east of Scotland have to compete with international energy hubs such as Houston and Dubai. Investing in infrastructure and innovation here, particularly through the new energy innovation centre, is a hugely positive move which will further cement Aberdeen’s position as Europe’s oil capital, at the heart of the UK ‘offer’ to the global oil and gas supply chain.”

Meanwhile, the previously-rumoured ministerial group on oil and gas held its first meeting on 27 January. The group is chaired by energy and climate change secretary Amber Rudd and will coordinate the government’s response to the oil price. At its first meeting, the group decided to produce a workforce plan to set out how skilled workers who lose their jobs in the oil and gas sector could be supported by the government and the industry, and how they could move into other sectors.

Commenting on the group, Michie said: “Senior level, co-ordinated engagement from government to support the industry and those who work in it is very encouraging. The group’s focus on exports, skills and investment is highly relevant in today’s climate and Oil & Gas UK stands ready to engage with it on its workforce plan in the spring.”

Scotland’s First Minister Nicola Sturgeon will visit Aberdeen on 1 February to meet with members of the oil and gas industry. While no details have been announced as yet, she will announce additional Scottish government action to support innovation, exploration, skills and access to finance for the North Sea industry.