Aberdeen is one of the few cities in the world where your taxi driver is almost certain he knows 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 the Aberdonians have witnessed one of the sharpest slumps in oil prices of a generation. Granite City is still a week away from an even deeper market crash than the 2016 price crash.
“This is a real concern so early after the last recession,” says a taxi driver. “It doesn’t take long for people to lose their jobs if the oil price falls below $ 35 [£28] a barrel. Within three or four months of low oil prices, contract workers may be out of work. It is always faster than you think. “
A week later, oil is trading at around $ 25 a barrel, wiping out 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 position. “thinned”. Oil companies are expected to give up their spending plans to overcome the latest market route, which threatens to halve revenue from the oil barrels they produce this year.
“During the latest oil price crash, Aberdeen was not ready at all,” says a North Sea veteran. “The city itself has completely changed in a matter of months. About 150,000 people in the UK have lost their jobs and Aberdeen has put up with the weight. “
He asks not to be named because after more than 20 years of work in the North Sea oil and gas sector he is having difficulty finding work. In recent days, a verbal job offer from one North Sea company has been canceled and an interview with another has been canceled. Employers have introduced hiring blocks across the city and recruiters have eliminated the meeting schedule for the coming weeks.
This concern is still fresh in the collective memory of the city. The latest oil market recession has been deeper and longer than any oil market route in history, which lasted from late 2014 to its nadir at $ 28 a barrel in the first few weeks of 2016. It was punctuated by around 150 losses of jobs in the North Sea per day and a string of bankruptcies. At its depth property prices in Aberdeen have plummeted and mortgage arrears have spiraled up to double the national level.
“The latest crisis has been a severe one for the city,” says Derek Leith, senior partner of the EY office in Aberdeen. “But that meant Aberdeen started to think very seriously about the fact that the oil and gas era will eventually end and the city must be famous for doing something else.
“There have been many efforts to change the trajectory to make Aberdeen a center for energy, rather than oil and gas. The idea is to use the city’s existing skills and move towards renewable energy and other sources. of clean energy, “he says.
As the UK moves towards a net-zero carbon future, many have wondered if there can still be room for the aging of the UK’s oil industry. Now, a green future could be Aberdeen’s best bet for a long term future.
“If I were to ask a wool-dyed Alberdon who has worked in the oil industry for the past 20 to 30 years if they are interested in climate action, they would probably only do so until he” influences their livelihood, “says the veteran. of the North Sea. “These same people are realizing that renewable energies could simply save them.”
Sir Ian Wood is one of these converts. During the North Sea boom years in the 1970s and 1980s, the billionaire oil tycoon used the UK’s leadership in oil and offshore gas to transform his modest family business, the Wood Group, into one of the largest oil engineering companies of the world. Today he believes that the city that triggered the world’s dependence on fossil fuels believes it can contain the answer to deal with the consequences.
Wood created North East Opportunity as oil prices plummeted in 2015. His threefold plan to rebalance the region’s economy re-proposes the offshore heritage and engineering legacy of north east Scotland as a vital advantage in building a greener economy.
First, accelerate the offshore wind boom, including a new generation of floating wind farms. Then, use this abundant clean energy to operate the electrolyzer machines that absorb carbon from the hydrocarbon gas to produce clean burning hydrogen for transportation and industrial fuels. Finally, it stores the residual carbon “waste” from this process under the seabed to prevent it from contributing to rising global temperatures.
“This all sounds very casual,” says Wood. “In my opinion, it will take 10 to 15 years to achieve this. Once we have it, we will be able to sequester many carbon emissions. “
Doing the right thing would also ensure a route to the North Sea gas market and a place for Aberdeen at the heart of the UK’s hydrogen economy. The city has already taken steps to claim an ecological future, including the establishment of the Net Zero Solution Center, a green technological innovation center within the Oil and Gas Technology Center (OGTC), which could one day export low energy carbon emissions solutions globally.
Colette Cohen, chief executive officer of the OGTC, says the major oil companies are starting to take significant steps towards meeting the UK’s legally binding climate targets, but the collapse in oil prices has raised doubts.
“When we first started three years ago, the industry was still struggling with the latest oil market recession,” he says. “When we were talking about what their carbon footprint would look like in the next decade, companies said,” I might not exist then, it’s really a financial challenge right now. “
Over the past year, there has been a tangible change within the sector, he says, but the latest market crash “must be a concern” for future green investments. “Everything around net zero costs money. If oil companies return to survival mode, their ability to spend cash money to make their future-proof operations becomes more difficult. “
Leith believes that the latest incident may be enough to convince companies that investments in clean energy alternatives and “survival mode” are not mutually exclusive.
“There are always some who prefer to break down the hatches and hope for a recovery in oil prices so that they can return to what they consider normal. If anyone is still under this misunderstanding, the past few weeks should have put him to bed, “he says.