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David Kidney (Minister from DECC) Speech - Subsea Delivery, Aberdeen
| Date: | 10 Feb 2010 | | Details: | Good afternoon. I would like to thank our hosts for inviting me here to talk to you about the important part, companies like yours, will play in the next chapter of the basin (UK continental shelf).
A lot happened in 2009. The meltdown of the world's financial services caused the greatest global recession in my lifetime. The consequences for the world's energy industries were severe.
We had the Copenhagen climate change conference and left without a legally binding agreement.
And at the end the year, we had the longest sustained period of cold weather for many years.
Surviving the recent financial climate brings new challenges and new opportunities.
The governments of 67 countries, accounting for more than 80 per cent of emissions, have signed up to cutting carbon. So the Copenhagen Accord is having some positive effects.
Of course being fortunate enough to have the North Sea and our operators responding well to that cold spell - we were able to keep Britain working.
This year we have a general election coming to a ballot box near you. Although I cannot predict its outcome - I can tell you that this industry will continue to be critical to the success of our country for many years to come.
The only future facing us all is a low carbon one, and we must prepare to make the transition to that future.
That transition presents valuable opportunities for us and not reaping the benefits from them, could be disastrous for us in the long term.
The history of our world is hydrocarbon. Our success in the industrial revolution depended on it. Our dependency remains and will help us through the transition. Let me give a specific example from the energy sector. As we rely more and more on variable supplies from Wind, say, a reliable flexible base load will be all the more necessary.
And coal, gas and oil are capable of fulfilling this role. But future fossil fuels must be clean, and this means making a success of Carbon Capture and Storage (CCS).
I expect much of the expertise necessary, will already exist in the oil and gas sector. This is invaluable to help us reduce CO2 emissions and step up to the challenge of becoming a low carbon economy.
What the science says
Climate change science came under attack in the run up to Copenhagen. Some recent news reports have been critical of individuals and institutions.
What I see is a focus on very specific issues, spun to suggest that the underlying science of climate change is in some way unsound.
For all the furore, the fact remains that the Climatic Research Unit (CRU) temperature records are corroborated by two independent analyses, confirming the increase in global temperature.
The IPCC remains the most authoritative and comprehensive assessment process for information about climate change science. Their summary texts have been agreed by every country in the world.
I think it would be wrong that when a mistake is made, it's somehow used to undermine the overwhelming picture that's there.
The Low Carbon Transition Plan
My departments Low Carbon Transition Plan sets out our ambitions clearly.
And the measures in the Plan add up - on emissions, on cost and on energy security. It guards our progress towards our domestic carbon budgets as well as our international commitments.
And through our carbon budgets, the trajectory to our 2020 and 2050 targets, gives clear direction to businesses's and individuals to play their part.
And by setting out our ambitions clearly - the Low Carbon Transition Plan provides energy investors and developers with unequivocal certainty about our energy needs.
Subsea Industry - why it's important
Allow me to pause for a moment and say how much I appreciate the courage, of those of you who risk yourselves everyday for the sake of our oil and gas production. For that, I would like to say 'thank you'.
I don't think anyone needs a reminder of that tragic day in the North Sea last April, but I would also like to pay my tribute to the 16 people who lost their lives. Our thoughts remain with their families.
We've now had forty years of real success from the Basin and we have a good forty to go if we get things right.
And I'd like to take some time to acknowledge what Subsea UK has achieved.
We have an ever growing skills set flourishing within Subsea technologies.
The UK subsea sector has developed the reputation as being the best on the global stage with UK subsea companies, now working in every hydrocarbon basin in the world. There are the right technologies in place to get the remaining 'hard to reach' oil and gas into production.
This expertise also helps the Basin remain competitive and continue to attract investment funding, which has become extremely competitive, with the North Sea having to compete against other global opportunities that operators have.
Over 40 per cent of the Basin's production is now Subsea and 70 per cent of new projects are Subsea. And up and coming technologies are more and more adept. 20 odd years ago, no one would have considered what you do now, as being possible.
These are no small steps in my book because the UK Subsea sector is now worth £5 billion per year.
What we're doing
Fossil fuels will remain an important element in the plan for providing energy supply security.
But we need to reap the benefits from existing fields and also keep up the pace of new development.
The Chancellor last week announced plans to extend tax relief, for the development of deep water gas fields, found in the area west of the Shetland Islands.
An area estimated to contain around 20 per cent of the UK's remaining oil and gas reserves.
And also, just a couple of weeks ago, my colleague Lord Hunt announced a new round of offshore licensing to give a further boost to the UK's offshore oil and gas industries.
This record breaking 26th Round includes areas of the Continental Shelf not as yet explored, and will boost activity in the basin.
And will help to secure also the future of the UK's oil and gas industry which still provides three quarters of our energy needs and some 350,000 jobs.
The evidence is clear that our oil and gas supply may not be able to meet our demands in the future in full. So in the long term we need to make the transition from a system where we rely heavily on fossil fuels, to a system that includes nuclear, renewable and clean coal power.
By 2050 our electricity supply will most probably be some combination of thermal power stations - increasingly fitted with Carbon Capture Storage, nuclear, and various forms of renewable energy.
Securing the necessary reductions through to 2050 - at an acceptable balance of cost, security and behavioural change must be considered by us all.
But I can assure you here today that I have no doubt that oil and gas will continue to have a major role in the British energy mix, for the foreseeable future.
In addition to bolstering our supply security, North Sea oil and gas is the bridge by which we can pass to a low carbon future.
Where do we go from here
UK Subsea companies now have 20 per cent market share of the global subsea market - real market leaders in this sector
50 per cent of this value is exports and they're likely to double in the next five years.
The Shetland islands have prospered greatly from the exploration of North Sea oil.
The Sullom Voe Terminal which opened in 1978 is Britain's biggest oil exporting port, handling around 25 million tonnes of oil a year, with 600 jobs depending on the terminal.
Of course Shetland is in the enviable position of being able to teach us a lesson in negotiating. When the terminal at Sullom Voe was first talked about the Shetland Islands Council stood their ground and negotiated the special oil fund.
This has provided millions of pounds in funds supporting the public trusts which provide social welfare, arts, sports and environmental improvements and economic development.
But we still must reduce our emissions by 34 per cent by 2020 and by 80 per cent by 2050.
So what do the next forty years hold in store for us?
Because we face unprecedented challenges to our environment and our economy, we must adjust, in order to prepare for that future.
The North Sea has and will continue to play a huge role in that transition. Since the early days of exploration, the North Sea has been a huge success story for the UK - providing a huge input to our economy and energy needs.
And for our security of supply, it's crucial to utilise the full potential of our indigenous resources. 40 billion barrels of oil equivalent (boe) have been produced in the UK with potential remaining reserves of 20 billion boe. Possibly more.
But there is a further role for the North Sea namely in Carbon Capture Storage (CCS).
Cooperation on Carbon Capture and Storage in the North Sea is urgently needed globally.
We have a unique asset in terms of depleted reservoirs and salt caverns in the North Sea. Which can be used to store away safely harmful CO2 emissions.
So even after the last drop of oil is recovered from beneath our waters, the North Sea has the potential to continue to be a very important asset to Britain or even Europe.
The International Energy Agency (IEA) forecasts that CCS will be responsible for around 20 per cent of CO2 reductions by 2030. This is perhaps the most decisive act in achieving our climate change targets.
The geological structures beneath the North Sea offer some of the best opportunities for storing large volumes of carbon dioxide in Europe, if not the world.
I think this is a further area of growth for the subsea industry. It has the unrivalled skills and experience to be instrumental in developing the technology to store carbon safely offshore.
Skills
I mentioned earlier a flourishing skills set. I cannot emphasis enough, the importance of having an ever present focus on our workforce and continually motivating, shaping and moulding their skills.
And the oil and gas sector was indeed fortunate and foresighted enough to develop its own industry funded Skills Academy - the first of its kind and the envy of most other industrial sectors.
I'm also pleased to learn that the Subsea sector also has world renowned skills and technology which are keenly sought around the globe.
But currently, despite that, we face a big skills gap. Without the right skills, keeping up with the transition that will inevitably happen towards a low carbon future, we will be left behind.
I know Subsea UK are already active in to helping to combat that risk of a skills gap.
For example:
The skills forum - a group of individuals brought together by Subsea UK to help develop a technician apprenticeship.
A Subsea skills website provides Careers information, recruitment links and online learning modules developed with RGU.
Aquatheatre - a scheme promoting the industry to school pupils at events and pupils invited to Subsea exhibitions and involved in an education day at Offshore Europe.
But we must continue to invest time and money in our workforce. However these schemes, although impressive and progressive, are not enough alone to carry us through to 2020 and beyond.
An example
I met with OPITO this morning and was extremely impressed with what they have achieved with their Oil and Gas Academy and even more impressed to hear their ambitions to extend their model into the wider energy arena.
The OPITO Academy has grown internationally to help connect with the Global supply chain and increase the safety and emergency response standards.
In 2007, 96,000 people were trained to the OPITO industry standards. As I mentioned earlier this is an industry owned and funded organisation who have directly invested £52 million over six years in its flagship Modern Apprentice scheme.
Their goal is actively building up the efforts and resources, needed to address employers' demand for skilled people.
That's the beauty of academies. You are in control. You take command of your own sector's needs and you reap the benefits.
Each year's intake is determined through a demand forecasting exercise to ensure employment for all those who finish their training. This is followed by two years practical training. With a 96 per cent completion rate after three and a half years.
Conclusion
The success of the Subsea sector is a proud fact. But we know what must be done to continue that success.
The vision of a low carbon future is a palpable possibility but we, the Department for Energy of Climate Change, cannot do all that needs to be done by ourselves. You are our partners and that future cannot happen without your help.
Thank you.
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