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The agreement will be Scotland’s second UK City Deal, following Glasgow’s arrangement agreed in 2014, and will again see equal funding committed by the UK and Scottish governments.
The City Deal will address a number of proposals from the region including a new energy innovation centre, supporting the industry to exploit remaining North Sea reserves, as well towards the expansion of Aberdeen harbour, enabling the city to compete for decommissioning work. The City Deal also sets out how the region will diversify the biopharmaceutical and agri-food industries, diversifying the area’s economy and creating new jobs and export opportunities, as well as commitments to improve digital connectivity across the area.
Scottish Secretary David Mundell will sign the deal on behalf of the UK government today. Then later, the Prime Minister David Cameron will visit Aberdeen to meet local employers and workers, as well as senior executives from the oil and gas industry, to hear about the challenges facing the area.
Whilst in Aberdeen, the Prime Minister is also due to announce further UK government measures to safeguard oil and gas sector jobs, on top of the financial boost the UK City Deal will bring.
Find out more about City Deals.
Secretary of State for Scotland, David Mundell, said:
Oil and gas is a crucial sector, not just for the north-east of Scotland but for the whole of the UK. I know it’s a very tough time for people who work in the industry and their families, and I am determined that the UK government will do what it can to support them.
We need action which will help in the short, medium and long terms – building a bridge to the future of the North Sea; helping the UK’s oil and gas industry to export its world-class expertise around the globe; and encouraging diversification of the economy to create new opportunities in other sectors too.
This UK City Deal will help deliver that and demonstrates our commitment to this very important part of Britain’s economy. We have seen in Glasgow the extra jobs and growth that this kind of deal can bring, and I want to see the same achieved in and around Aberdeen.
I also very much welcome that the Scottish government has decided to match our funding and work together with us on securing a better future for the north-east of Scotland.
Communities Secretary Greg Clark said:
Aberdeen has a long and proud industrial heritage – today’s City Deal will help ensure this continues.
This package of support will help prepare the oil and gas industries for the future, given their crucial importance both to north-east Scotland and the country as a whole.
But with plans including the expansion of the city’s harbour, greater digital connectivity and support for growing pharmaceutical and agri-food industries, it will also help other businesses locate to the area and offer job opportunities for years to come.
Today’s announcements add to the wider support the UK government is providing for the North Sea and those whose livelihoods rely upon it. In the last Budget, the Chancellor George Osborne announced a £1.3 billion package of reforms for the UK Continental Shelf, including tax cuts for the industry and a £20 million funding boost for seismic surveying to boost offshore exploration.
A new Ministerial Group on Oil and Gas, chaired by Energy and Climate Change Secretary Amber Rudd, has also been set up to reiterate the UK government’s commitment to supporting the oil and gas industry and those who work in it. The group will coordinate the UK’s response to the oil price and focus on vital issues such as exports, skills and investment.
Yesterday (Wednesday) the Group met for the first time, and agreed to produce a UK Oil and Gas workforce plan in the spring. This will focus on what steps the government will take to support those who may lose their jobs in the oil and gas sector, and set out how government and industry can help these skilled workers move into other sectors, including other energy related infrastructure projects.
Secretary of State for Energy and Climate Change, Amber Rudd, said:
The UK government stands 100% behind our oil and gas industry and the thousands of workers and families it supports. It’s a fantastic industry which benefits Scotland and the whole of the UK, but clearly the low oil price brings real challenges, and we’re determined to do everything we can to take advantage of the UK’s broad shoulders and help build a bridge to the future for UK oil and gas.
We’re stepping up our response, and yesterday I chaired a very productive meeting of the new Ministerial Group on Oil and Gas. As well as looking at how we help the industry get more business internationally and draw more investment into the UK, its very first priority will be to set out what steps the UK government will take to support those who may lose their jobs in the oil and gas sector. The plan will focus on how government and industry can help these skilled workers move into other sectors and find opportunities where their skills can be best put to use, including other energy related infrastructure projects.
As well as supporting the industry in its current form, the UK government is working hard to help develop new markets for the world-leading expertise which exists in north-east Scotland and elsewhere in the UK. As part of this, David Mundell will visit Mozambique next month to support the drive to strike a formal agreement between Aberdeen and the town of Pemba. The aim is for a deal which will see technology designed and manufactured in Aberdeen, and the skills of its workforce, play a key role in developing Pemba into an oil and gas hub.
The UK’s oil and gas industry is its largest industrial sector, contributing around £19 billion in gross value added in 2014. As of 2014, the industry was estimated to support around 375,000 jobs across the economy.
Oil and gas are expected to continue to provide around 70% of the UK’s total primary energy from now until 2035.
There are still the equivalent of between 11 and 21 billion barrels of oil to be exploited from the North Sea – half again of all those exploited to date. Meanwhile, between now and 2040, around £45 billion is forecast to be spent on decommissioning of its offshore infrastructure.
The UK Continental Shelf saw record investment of £14.8 billion in 2014, a proportion of which was directly incentivised by the government’s field allowances.
The Wood Review set out a tripartite role for government, industry and a strengthened regulator to get more life out of the North Sea by ensuring all 3 groups work together.
We appointed a Head of the Oil and Gas Authority (OGA), Andy Samuel, who began his role in January 2015. Through the Energy Bill currently going through Parliament, the OGA will have the necessary levers to help revitalise exploration by driving greater collaboration and productivity in the industry.
In the March 2015 Budget, the Chancellor introduced a £1.3 billion package of reforms for the UK Continental Shelf. This included reducing the rate of supplementary charge from 32% to 20%; reducing the rate of Petroleum Revenue Tax from 50% to 35%; introducing a new Investment Allowance to reward new investment; and providing £20 million of funding for seismic surveying to boost offshore exploration.