The North Sea at the Energy Crossroads

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The oil and gas sector in the British part of the North Sea is heading towards a more sensitive phase as production declines accelerate, while the renewable energy sector has not been able to compensate for the contraction in the traditional industry quickly enough. The repercussions of this shift extend to jobs, investments, supply chains, and public revenues, particularly in the northeast of Scotland, where a significant portion of economic activity is linked to the oil industry.

A study conducted last year and recently published in the journal 'World Oil' indicates that the continued decline in North Sea production could put around 115,000 direct and indirect jobs at risk, including those working on offshore platforms, supply chains, and land-based services related to the industry. These repercussions are particularly significant in Scotland, where the oil and gas sector plays an important role in the labor market, especially in the areas surrounding Aberdeen.

The fundamental problem, according to the study, is that the decline of the traditional energy sector is occurring at a faster pace than the building of new capacities in the modern energy sector. The sector has already lost about 25,000 jobs since the last British elections, with a large portion concentrated in the northeast of Scotland, where many workers rely on companies and services linked to the land-based oil supply chain.

These developments raise a question that goes beyond the future of oil and gas production itself: Can the 'energy transition' provide new investments and job opportunities at the speed at which the traditional industry is losing its jobs and economic activity?

The problem is not only related to the number of oil barrels produced by the North Sea, but also to the repercussions of the sector's contraction on employment, local investments, accumulated skills, and the industrial infrastructure that has developed around the oil industry over decades.

Some specialists who participated in the study believe that British fiscal policy could help change this picture, especially in light of the new financial system applied to oil production in the British part of the North Sea.

Estimates indicate that the new system could help stimulate private investments amounting to around £50 billion, which could also reflect on tax revenues, potentially increasing by more than £13 billion over the next decade.

The study calls for achieving a balance in the volume of investments directed towards offshore activities and those that support the economy, services, and supply chains on land. The study concludes that the future of North Sea production must now take into account the role of investment and employment over the coming decades, rather than focusing solely on current production rates.

The study also presented a set of recommendations to the Scottish government, which has key responsibilities in managing the offshore oil sector in Scotland, where the vast majority of British offshore oil fields are concentrated.

Among the recommendations is the call to adopt a clear and long-term energy strategy.

The experience of the North Sea indicates that the 'energy transition' is not only measured by the speed of growth of new energy sources, but also by the ability of local economies to manage the contraction of traditional sectors that have supported jobs, investments, and supply chains for decades.

Therefore, the challenge for Britain is not only how to reduce its dependence on oil and gas, but also how to manage the transition phase so that the decline in production does not turn into a gap in jobs, investments, and industrial capabilities before alternatives are able to fill it.

Quoted from 'Asharq Al-Awsat'