Ian Knott: Oil and gas still vital to Scotland's economy

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, the nation's economy takes a sharp breath in hoping that the recovery won't be far away.

Ian Knott says innovation will be needed to drive growth in the North Sea. Picture: Danny Lawson/PA Wire

In Aberdeen, the turbulent price of oil has had ramifications for the city and wider region, and the resulting swings in industry sentiment continue to cause concern despite many businesses now seeing light at the end of the tunnel.

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However, 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 currently has a policy of cutting 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.

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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.

The ageing North Sea oilfields are proving to be challenging, but adapting to more innovative, exploration and production techniques could open up significant new revenue streams, prolonging the life cycle of our energy industry.

Scotland has reaped the rewards from the North Sea. With the right investment and a focused approach, the sector can continue to play a central role in the country’s economic success.

• Ian Knott is advisory director, specialising in energy, at Grant Thornton in Aberdeen

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