Energy Strategy: Is the presumption against oil exploration the right approach?

"I don’t think it’s particularly good politics,” says Fergus Mutch, former SNP head of communications, of the Scottish Government’s proposed presumption against oil and gas exploration. “Secondly, I don’t think it’s particularly good economics. And thirdly, I’m not sure it gets us to net zero any faster.”

Published last month, the long-awaited energy strategy sets out the plan for transitioning the energy sector towards net zero by 2045. Now out for consultation, its top line is a presumption against issuing licences to explore new oil and gas fields – as recommended by independent advisory group the Climate Change Committee. While it is not within the Scottish Government’s gift to stop these licences being issued (it’s a reserved matter), such a stance would be significant symbolically.

Now a managing partner of lobbying firm True North, Mutch gives the strategy short shrift. On the whole he says it fails to recognise the role of energy companies in the transition journey – namely that profits from oil and gas can be reinvested to support green tech.

Indeed, he accuses the government of “energy policy by virtue signal”, arguing that if it did have the powers over licensing, it would be making very different choices. “There’s serious economic challenges in Scotland anyway, post pandemic, about how we pay for public services. To remove energy revenues from that mix, I mean, it would be madness,” he says.

We could, we should, and we must become world leaders in carbon capture utilisation, transport and storage

The Scottish Government, though, is keen to highlight it isn’t wholly against new exploration. Net Zero Secretary Michael Matheson told Holyrood: “In the consultation, we’re asking if we’re going to have a compatibility checkpoint for both new exploration and also for fields going into production, what should that contain? And we’ve also posed a question, should there be a presumption against new exploration licences?

“That doesn’t mean, as some have tried to present, it’s a ban. What that means is that the responsibility is on anyone who’s seeking to go for an exploration licence to demonstrate the need for that and that there is a requirement for it. That’s a change in threshold.”

But a clear split has emerged within the SNP, particularly between the leadership and those who represent constituencies in the North East.

Former energy minister Fergus Ewing, MSP for Inverness and Nairn, is among those dissenting from the party line. While at pains to distance himself from the right-wing, anti-green caricature that he seems to have acquired – he points out that as minister he consented to more windfarms than anyone else in Europe and even saw off a legal challenge from Donald Trump over one of them – he insists his approach is a “moderate” one.

Despite the tenor of his interventions in the chamber and the press, Ewing is optimistic his government is in listening mode. “In the current SNP circles, my view isn’t supported by leadership, but I do hope that they will listen to a wide variety of opinions expressed and if they do, then we can have our cake and eat it. We can have continued success in oil and gas, and we can use their skills and their money to invest in renewables.”

Even Aberdeen South MP Stephen Flynn – before he became the party’s group leader at Westminster – seemed to share some of these concerns. In a speech in the Commons in February 2020, he warned that “simply turning off the tap will not work”.

And in a tweet from August 2021, he said: “The independent [Climate Change Committee] are clear that forecast North Sea production will not meet our demands – even on the balanced net zero pathway. We cannot escape their findings and we cannot find ourselves in a situation where we are ever more reliant on imports.”

The future of the oil and gas industry is naturally seen through the lens of Scottish independence for many in the party. Some of the climate policies being pursued by the Scottish Government appeal to younger voters, who make up a good bulk of the current support for Yes.

But Ewing worries that moving too quickly would weaken the economy and therefore harm the case for an independent Scotland. He says: “We must win the economic argument. I cannot see how abandoning arguably our most successful industry over the past 50 years can help us win that argument. And I think there are a lot of people that agree with that approach in and outwith the SNP.”

Mutch, when asked if the SNP had lost its way on energy policy, without skipping a beat replies “yes”. “If I was putting together the prospectus for independence, sure, I would want to be talking about Scotland’s leading transformational role in providing Europe’s green energy, because Scotland is in a great place to do that. In the meanwhile, I wouldn’t want to be shaking the confidence of one of our core sectors.”

The responsibility is on anyone who’s seeking to go for an exploration licence to demonstrate the need for that

Likewise, other SNP figures are concerned about the damage the approach is already doing to the party’s prospects in the North East, especially if it is perceived to be abandoning workers.

Matheson, though, argues that as a “mature basin”, a move away from oil and gas is necessary even without the weight of the climate imperative. The good news, he says, is that Scotland is “blessed” with the natural resources to manage that transition in a way that won’t have devastating impacts on the economy and employment.

“As we’ve set out in the strategy, if we take this forward in the right way, by ramping up our renewables, we can be in a position where actually we are net-positive in the employment we have in the energy sector in Scotland in the future. We’re expecting to see more people employed in the energy sector in the decades ahead. And that’s why the just transition plan is such an important element of making sure we do that in a managed, fair and just way,” he explains.

Indeed, the strategy’s full title is the Energy Strategy and Just Transition Plan – reflecting the priority that must be placed on ensuring no one loses out as Scotland moves to net zero. But despite Matheson’s reassurances that the renewables industry stands ready to absorb current and former fossil fuel workers, there is huge concern that the North Sea is being asked to wind down too quickly for the newer sectors to keep up.

Mutch explains that “the money in the industry is still on the oil and gas side”, which frequently means workers are being asked to take a pay cut for jobs in green and clean energy. This creates, he says, a “flight risk” in that these skilled workers will easily be able to find jobs elsewhere in the world for better pay and job security.

Ewing agrees. He argues that the biggest impact Scotland can have in the global battle against climate change is not reducing its own domestic emissions but leading the way on new technology. To do that, it must retain key skills and make use of its resources – for example by using depleted oil and gas fields to store not only Scotland’s carbon, but much of Europe’s too. “We could, we should, and we must become world leaders in carbon capture utilisation, transport and storage,” he says. “One particular fear is that if we prematurely cease new exploration for oil and gas, then the industry – which is declining in its output anyway – that decline will be accelerated. The upshot will be the people, the very people whose skills we need to deliver climate change, will be gone.”

Professor Karen Turner, director of the Centre for Energy Policy at Strathclyde University, is broadly in agreement. She highlights existing issues with access to skilled workers and warns this may be exacerbated as different projects across the UK compete for the same people. She points to the UK Government’s plans to build four carbon capture, utilisation and storage clusters by 2030 as one example. “If they start to do the projects at the same time as other net zero projects are happening and other infrastructure projects are happening, you’re going to start getting wage competition for the right workers, and so that pushes up the project costs. You might just not be able to deliver the project because you don’t have the workers to deliver it.”

I cannot see how abandoning arguably our most successful industry over the past 50 years can help us win that [independence] argument

This lack of detailed planning is a problem with Scotland’s energy strategy more broadly, too, she says. While it includes a lot of information about overarching aims and ambitions, “it’s short on how we’re going to get there”. “The big gaps are in terms of how the processes are actually going to be applied. Exactly how is project planning going to be done? What’s the coordination in particular across Scottish Government and industry, and between the Scottish Government and the UK Government? And also, how are they going to assess impacts?”

She adds: “It’s easy to say at a government strategy level that we’re going to transition the oil and gas industry, but exactly how are you going to do that? How are you going to transition the skills? What do the supply chains look like? Do we know down to things like the steel that you’re going to need to put up a turbine, the copper that you’re going to need for wiring?”

Turner believes Scotland should be learning from its experience in wind energy, where many of the supply chains lie outwith the country because it pursued wind potential without proper planning in place. “A lot of the value leaked back out of the economy because they had to import an awful lot of stuff. We didn’t get the supply chains in place, we’re still having problems over who builds these big turbines,” she says.

She also warns about potentially creating “stranded assets”, whereby oil and gas pipelines that could in theory be utilised for new technology like CCS are not maintained, deteriorate, and therefore become unusable.

Perhaps controversially, Turner suggests it might be prudent to reconsider the importance of Scotland’s 2030 interim net zero targets and whether it would be better to “push that back a little bit in order to get things into place to do it properly”.

She argues “bigger picture thinking” is required, particularly around Scotland’s wider carbon footprint. Net zero targets currently focus on reducing domestic emissions, which means Scotland could reach its targets “if we stopped doing any dirty stuff and just imported it all”. But importing oil and gas would increase our carbon footprint via transport. Turner says: “It’s a meaningless emissions target if we reach net zero and we’re pushing up emissions [globally]. It’s like one of those kid’s toys that you push down a block and another one pops up.”