October 21, 2009 / 12:49 AM / 8 years ago

Scottish city prepares for when oil runs out

ABERDEEN (Reuters) - Offshore supply vessels resembling large, floating flat-backed trucks fill Victoria Dock, unable to find charters in a sign of the downturn in Britain’s oil industry.

With UK North Sea oil and gas production 44 percent below its peak, self-styled oil capital of Europe Aberdeen fears the slowdown is not simply cyclical: it is targeting diversification into areas including green energy.

Throughout a hydrocarbon heyday that has run to almost five decades, the city has to some extent been preparing for the end.

The oil industry that at one stage sparked talk of Scotland as “the Kuwait of the West” has already outlived most predictions.

“I‘m steering my kids away from anything to do with oil,” said John Irvine, a lorry driver who used to work on the rigs. “It’s not going to last forever.”

BMWs and Mercedes are plentiful in the traffic jams that clog the roads at rush hour and Jaguar, Aston Martin and Porsche sportscars with personalized license plates are evident in the city of around 200,000 inhabitants.

The North Sea industry, with output of 2.5 million barrels of oil equivalent per day currently, pays more to UK government coffers than any other industry, is one of the highest spenders on goods and services and an important employer.

Around 40 percent of Aberdeen area’s 10.5 billion pounds economy is reliant on the industry, according to the Aberdeen and Grampian Chamber of Commerce.

Oil has pushed unemployment in the Granite City, as Aberdeen is known for the hard, volcanic rock from which most of its buildings are constructed, to less than half the UK average.

But with Brent crude at around $80 a barrel, nearly half where it was a year ago, the port authority says the harbor is quieter now.

Dock workers say some ship owners are so pessimistic of getting a charter soon, they won’t even pay to dock at the harbor. A dozen vessels are moored a few miles off Aberdeen’s sandy coast. Normally one might see one or two, oil men said.

Aberdeen has seen hundreds of layoffs and engineering graduates from local universities have, for the first time in years, struggled to find jobs as big oil companies such as BP and Royal Dutch Shell cut spending.

The result already is vacant shops on Union Street, the city’s main thoroughfare, while bars, restaurants and taxi drivers say business is slacker than a year ago.

RENEWABLE HOPES

Tourism, life sciences, and the export of oil services around the world are among Aberdeen’s targeted substitutes for North sea oil and gas -- but for many the biggest prize would be to use its offshore oil expertise to build a renewable energy industry as big as oil.

The city aims to use its experience to become a leader in offshore wind, tidal power and carbon dioxide capture and storage (CCS0 -- industries it hopes will receive a boost from global climate change talks in Copenhagen in December.

“We have to harness that expertise and turn Aberdeen into the energy capital of Europe and not just the oil capital of Europe,” said Mike Rumbles, West Aberdeenshire Member of the Scottish Parliament, echoing a broad city marketing shift.

Alex Salmond, head of the devolved Scottish government, told a conference in Aberdeen last month the market for wind power could be worth 130 billion pounds, while Scotland could be the “Saudi Arabia of tidal power.”

“We’re seeing the emergence of an offshore energy market that is comparable in scale to the market we’ve seen in offshore oil and gas in the last 40 years,” he said.

Tidal power remains at the testing stage, and the economic viability of new offshore wind projects has been questioned even by current investors such as utility E.ON.

CCS technology could also see the development of an industry filling depleted North Sea fields with carbon dioxide, although oil men doubt any Copenhagen treaty would provide sufficient incentives to make this activity profitable.

Another area of focus, tourism, has previously been hindered by the presence of oil.

“The hoteliers got lazy,” said taxi driver Jim Moir. “They were full Monday to Friday with oil workers so they never bothered attracting tourists.”

Eager to put Aberdeen on the international tourist map, local business has strongly backed a plan by U.S. real estate tycoon Donald Trump for a luxury housing and golf project 12 km (8 miles) north of the city, even though it means building on a nature reserve.

Trump is currently locked in dispute with land owners who refuse to sell to him and hopes local authorities will, if necessary, invoke compulsory purchase powers to facilitate the development.

The city also hopes to reorientate its vibrant oil services industry toward emerging offshore oil centers such as Brazil.

“Just because the production in the North Sea starts to decline doesn’t mean that Aberdeen as a global center also declines,” said Robert Collier, Chamber of Commerce Chief Executive. “That expertise can still stay here and be exported around the world.”

Local companies plying their wares to international buyers at the Offshore Europe exhibition and conference last month said the shift in focus was already underway.

“Ninety percent of our production is exported,” said Equalizer International Managing Director Ian McCormick, standing beside a yellow mock-up pipeline, to which were attached samples of his company’s stainless steel clamps.

Decommissioning itself will be another opportunity.

When the oil finally does run out, the hundreds of offshore platforms and thousands of pipelines will need to be disassembled and returned to shore for disposal, a market worth at least 23 billion pounds, estimates industry lobby Oil and Gas UK.

“It could be the beginning of a whole new industry,” said Lewis MacDonald, MSP for Aberdeen Central.

Editing by Sara Ledwith

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