The highs and lows of Scotland’s oil and gas industry are never far from the news. When the sector feels any kind of pain or suffers any loss, the nation’s economy takes a sharp breath in hoping the recovery won’t be far away.
In Aberdeen, the turbulent price of oil has had ramifications for the city and wider region and the ongoing swings in sentiment around the oil price continue to cause concern despite many businesses now seeing some light at the end of the tunnel. However, wider macro-economic uncertainties remain and the industry must stay focused on sustainable growth built on greater collaboration and a relentless push towards embracing innovation.
The oil and gas industry’s success or failure relies on the fine balance between supply and demand and the actions taken by the world’s largest producers to avoid excessively tipping the scales either way. Opec countries currently have a policy to reduce production until at least March 2018 but this has had limited impact on prices to date. The uncertainty over how quickly production from US shale will recover or how soon global demand will rise beyond current supply could be with us for some time and Scotland’s oil and gas sector must be on the front foot when it comes to delivering ways of working profitably in this environment.
The US shale sector has been aggressive in driving down cost through innovation and a similar approach will be needed to unlock future growth in the North Sea. Pursuing innovation and adopting new technology with the same vigour must be a priority for both operators and the supply chain, taking advantage of developments in areas such as digital data analysis, artificial intelligence and robotics to drive efficiency savings by enabling improvements such as self-diagnosis.
The ageing North Sea oilfields are proving to be increasingly challenging, but adapting to new, more innovative, exploration techniques could open up significant new revenue streams, prolonging the life cycle of our energy industry and providing greater reassurance to a nervous sector.
For several decades, Scotland has reaped the rewards from the North Sea. With the right investment and a focused approach to technology, it can continue to play a central role in the country’s economic success.
l Ian Knott is an advisory director at Grant Thornton in Aberdeen