Aberdeen: teetering between its high-carbon past and a green future

Aberdeen is one of the few cities in the world where your taxi driver is almost guaranteed to know the global market price for oil.

It is the second week of March in the capital of the North Sea oil and gas industry and Aberdonians have witnessed one of the sharpest oil price slumps in a generation. The Granite City is still one week away from a market collapse even deeper than the 2016 price crash.

“This is a real worry so soon after the last downturn,” one taxi driver says. “It doesn’t take long for people to lose their jobs if the oil price is under $35 [£28] a barrel. Within three or four months of low oil prices contract workers can be out of work. It’s always quicker than you’d think.”

A week later oil is trading at about $25 a barrel, wiping billions from the market value of UK oil companies, and an industry report warns that the North Sea oil and gas industry is in a “paper-thin” position. Oil companies are expected to axe their spending plans to weather the latest market rout, which threatens to halve the revenue from the barrels of oil they produce this year.

“During the last oil price crash Aberdeen was not ready at all,” says one North Sea veteran. “The city itself completely changed within the space of a few months. Around 150,000 people in the UK lost their jobs, and Aberdeen bore the brunt.”

He asks not to be named because after more than 20 years working in the North Sea oil and gas industry he is struggling to find work. In recent days a verbal job offer from one North Sea firm was rescinded and an interview with another cancelled. Employers have brought in hiring freezes across the city and recruiters have scrapped their meeting schedules for the next few weeks.

This disquiet is still fresh in the city’s collective memory. The last oil market downturn was deeper and longer than any oil market rout in history, lasting from late 2014 to its nadir at $28 a barrel in the first weeks of 2016. It was punctuated by about 150 North Sea job losses a day and a string of bankruptcies. At its depths property prices in Aberdeen plummeted and mortgage arrears spiralled to double the national level.

“The last downturn was a tough one for the city,” says Derek Leith, a senior partner at EY’s Aberdeen office. “But what it meant was that Aberdeen began to think very seriously about the fact that eventually the era of oil and gas will come to an end and the city needs to be famous for doing something else.”

“There’s been a lot of effort to change the trajectory to make Aberdeen a centre for energy, rather than of oil and gas. The idea is to use the city’s existing skills and pivot towards renewables and other clean energy sources,” he says.

Brent crude graph

As the UK moves towards a net-zero carbon future many have questioned whether there can still be a place for the UK’s ageing oil industry. Now, a green future might be Aberdeen’s best bet for a long-term future.

“If you were to ask a dyed in the wool Aberdonian who has worked in the oil industry for the last 20, 30 years whether they are interested in climate action they would probably only go along with it as long as it didn’t impact their livelihoods,” the North Sea veteran says. “These same people are realising that renewables might just save them.”

Sir Ian Wood is one such convert. During the North Sea’s boom years in the 1970s and 80s the billionaire oil tycoon used the UK’s lead in offshore oil and gas to transform his modest family firm, Wood Group, into one of the world’s largest oil engineering companies. Today, he believes the city that ignited the world’s dependence on fossil fuels believes it may hold the answer to tackling its consequences.

Wood set up Opportunity North East (ONE) as oil prices tumbled in 2015. His three-fold plan to rebalance the region’s economy recasts the offshore heritage and engineering legacy of the north-east of Scotland as a vital advantage in building a greener economy.

First, accelerate the offshore wind boom, including a new generation of floating wind farms. Next, use this abundant clean energy to run electrolyser machines which siphon off the carbon from hydrocarbon gas to produce clean-burning hydrogen for transport fuels and industry. Finally, store the leftover carbon “waste” from this process beneath the seabed to prevent it contributing to rising global temperatures.

“This all sounds very glib,” Wood says. “It will take, in my opinion, 10 to 15 years to get this right. Once we have it, we will be able to sequester quite a lot of carbon emissions.”

Getting it right would also secure a route to market for North Sea gas and a place for Aberdeen at the centre of the UK’s hydrogen economy. The city has already taken steps to lay claim to a green future, including the establishment of the Net Zero Solution Centre, a hub of green tech innovation within the Oil and Gas Technology Centre (OGTC), which could one day export low-carbon energy solutions globally.

Colette Cohen, the chief executive of the OGTC, says leading oil companies are beginning to take meaningful steps towards complying with the UK’s legally binding climate targets, but the oil price collapse has raised doubts.

“When we were first set up three years ago the industry was still struggling against the last oil market downturn,” she says. “When we were talking about what their carbon footprint would look like in the next decade, companies were saying: ‘I may not exist then, it’s really financially challenging right now.’”

In the last year, there has been a palpable shift within the industry, she says, but the latest market crash “has to be a concern” for future green investments. “Everything around net zero costs money. If oil companies are backed into survival mode their ability to spend any spare cash on future-proofing their operations becomes more difficult.”

Leith believes the latest crash may be enough to convince companies that investing in clean energy alternatives and “survival mode” are not mutually exclusive.

“There are always some who would prefer to batten down the hatches and hope for an upturn in oil prices so that they can go back to what they regard as normal. If anyone is still under that misconception then the last few weeks should have put that to bed,” he says.


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