Energy industry at ‘crossroads’, says expert in call for ‘orderly transition’

The energy sector is at a “crossroads” on what its future will look like, the author of a new study on the industry has said.

Analysis by the University of Strathclyde found the UK’s energy sector is at a critical turning point, with a deteriorating investment environment putting jobs, tax revenues and regional economies at risk.

The research looked at the current environment, where workers are increasingly being deployed overseas to work on projects in more favourable regimes.

It said this could have implications for the economy for the next 25 years.

Working with scenario data from the Energy Transition Institute at Robert Gordon University, the research compared two possible paths for the UK’s oil and gas sector over the next decade.

The two paths could be a “managed decline” or an “accelerated decline”. Under both scenarios, the research found oil and gas activity and employment will fall sharply by 2035.

Report author Professor Mairi Spowage said: “The energy transition is often framed as a story of new opportunities – and those opportunities are real. But right now, the UK is not doing enough to keep investment, supply chains and high-value jobs here at home.

“The industry is at a crossroads: decisions taken in the next couple of years will shape what the economy of 2030 – and even 2050 – looks like for Scotland, the north-east and the UK as a whole.

“If governments want growth, they will need to focus not just on new industries, but on creating the conditions for a managed, orderly transition from our existing energy base.”

For the UK as a whole, the gap between the two scenarios is worth around £13 billion in gross value added (GVA) in 2035, the research found.

For Scotland the difference is around £4 billion, and for the north-east of Scotland the gap could amount to around £1 billion.

Since the 2015 oil price downturn, the north-east’s economy has contracted significantly, with output still around 10% below pre-pandemic levels in 2023.

Hayley Strachan, global employer services leader in Scotland at Deloitte, said: “Workforce deployment is central to Scotland’s ability to grasp energy transition opportunities, yet it’s a very complex area.

“Projects often require rapid staffing, demanding employers respond swiftly. This can necessitate cross-border movement, which brings its own challenges. Agility and creative problem-solving are therefore essential to matching the best workforce to a project.”

A Scottish Government spokesperson said: “Scotland continues to lead the way in the creation of green jobs, with data showing the number of green roles advertised has tripled since 2021.

“The Scottish Government is also clear in its support for a just transition for Scotland’s valued oil and gas sector, recognising the maturity of the North Sea basin and in line with climate change commitments and energy security.

“Through initiatives such as the Just Transition Fund and the Energy Transition Fund, we have already invested £120 million to support the North East’s transition to net zero, helping to create green jobs, support innovation and secure the highly skilled workforce of the future.

“It is essential the UK Government uses its vital reserved powers and listens to business concerns around the devastating impacts of the reserved Energy Profits Levy.

“The Levy was always supposed to be a temporary measure and it is vital it ends as soon as possible or is completely reformed, as it is affecting investment and jobs across Scotland’s energy sector.”