The UK's oil and gas industry has welcomed a government pledge of cash to support the supply chain amid the nation's push to expand its low-carbon economy.

At a time of job cuts in the oil and gas industry due to current market conditions, with supermajors BP, Shell and ExxonMobil slashing thousands of roles in recent weeks, industry voices called the financial backing “a positive shot to the arm for its struggling supply chain”.


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Build Back Greener

The positive feedback came as UK Prime Minister Boris Johnson said £160 million ($204 million) will be made available to upgrade ports and infrastructure across communities in the likes of Teesside and Humber in northern England, Scotland and Wales to hugely increase UK’s offshore wind capacity.

This new investment will see around 2000 construction jobs rapidly created and will enable the sector to support up to 60,000 jobs directly and indirectly by 2030 in ports, factories and the supply chain manufacturing offshore wind turbines.

“Through this, UK businesses including smaller suppliers will be well-placed to win orders and further investment from energy companies around the world and increase their competitive standing on the global stage, as well as supporting low-carbon supply chains,” Johnson said.

Johnson also boosted the government’s previous target for offshore wind from 30 gigawatts to 40GW, and created a new target for floating offshore wind to deliver 1GW of energy by 2030.

“Building on the strengths of our North Sea, this brand new technology allows wind farms to be built further out to sea in deeper waters, boosting capacity even further where winds are strongest and ensuring the UK remains at the forefront of the next generation of clean energy,” Johnson said.

Welcome support for ‘struggling’ sector

Industry body Oil & Gas UK (OGUK) said developing skills and supply chain capabilities will be “critical” if the UK is to reach its climate ambitions.

In early 2020, around 75% of OGUK member companies reported at least some of their revenue is generated from non-oil and gas related work, with 30% noting that more than 25% is comes from diversified activity.

While OGUK welcomed the move as a positive shot to the arm for its struggling supply chain, it also reinforced the importance of a North Sea Transition Deal to deliver the low-carbon solutions needed to drive “a true green industrial revolution”.

Electricity demand currently accounts for 17% of total energy demand, meaning the decarbonisation of transport, industrial needs and heating remains critical if the UK is to meet its climate change targets, according to the body.

OGUK chief executive Deirdre Michie said: “If we are to have the best chance at success, the green energy revolution must go hand in hand with a skills and supply chain evolution.

“Through a North Sea Transition Deal we can help do some of the heavy lifting for the huge parts of our economy which won’t be able to meet climate targets through electricity alone.

“It’s why today we encourage the Prime Minister to maintain this momentum and unlock wider low carbon opportunities including carbon capture usage and storage, and hydrogen."

Oil & Gas Authority (OGA) chief executive Andy Samuel added: “Our recent report showed that offshore energy and integration projects such as wind, platform electrification, CCS and hydrogen can contribute up to 60% of the emission reductions required for the whole of the UK to reach net zero. This announcement is a clear step towards achieving that,” Samuel said.

Meanwhile, BP chief executive Bernard Looney said: “I agree with Boris Johnson — Teesside and the Humber are ideally-placed for the vital expansion of the UK’s offshore wind industry — and central to the country’s aspirations to lead in both carbon capture and storage and hydrogen."

BP said in June it would axe 10,000 jobs to help cope with the impact of the pandemic, while Shell last week said it would cut up to 9000 positions by the end of 2022. Earlier this week, US supermajor ExxonMobil said it would but 1600 across its European operations.

Renewables support

In addition, this week the UK government also set a target to support up to double the capacity of renewable energy in the next Contracts for Difference (CfD) auction — a support mechanism for companies looking to build renewable energy projects — which will open in late 2021.

The UK has 10GW of offshore wind capacity in operation off its coasts.

The government’s plan for renewable energy forms part of wider efforts to ensure the UK meets its legally binding target to reach net zero emissions by 2050 and build back greener from Covid-19.

These latest commitments are the first stage of a plan for a green industrial revolution, which will be set out fully later this year.

This is expected to include ambitious targets and major investment into industries, innovation and infrastructure that will accelerate the UK’s path to net zero by 2050.