By Sam Phipps in Edinburgh

The scale of both challenges is great: on the one hand, to take some 285 hydrocarbon installations out of service; on the other, to ramp up Scotland’s offshore wind and tidal capacity in order to help towards a new target of 80% of electricity from renewables by 2020.

Among the more immediate problems faced by the two industries is a current and pending skills gap. A survey carried out by the Grampian chamber of commerce highlighted that the development of offshore wind could increase competition for staff at a time when the oil and gas industry faces a skills shortage of up to 10,000 to 15,000 a year for the next five years.

Elsewhere, the offshore wind industry could be at the mercy of oil and gas, given the latter’s priority when it comes to Crown Estate lease contracts, which state that developers building offshore wind farms off the coast could face cancellation of site leases if their projects are deemed to interfere with work related to oil and gas exploration.

Ian Bonnon, head of offshore wind at GL Garrad Hassan, a major consultancy to the offshore wind farm industry, described it as “neither harmonious nor confrontational” because to date the two sectors have not targeted the same offshore sites.

"I'm surprised if there are conflicts because certainly those sites that we have identified in shallow waters in the North Sea are not ones that have traditionally been of interest to oil and gas," Energy and Climate Change Secretary Chris Huhne said earlier this month in an interview with Reuters. A tug of war over site leases is unlikely, confirmed Mark Ruskell of Scottish Renewables.

Keeping abreast of demand

An acute shortage of vessels has prompted concerns over a pending bottleneck and corresponding spike in day rates for vessel hire. Richard Brooks, head of decommissioning at the Department of Energy and Climate Change (DECC) anticipates market volatility, noting, “vessels will be an issue” in the coming years, but not an insurmountable one.

“There will be times when both oil and gas and renewables are bidding for the same resource,” he said. “Oil and gas is probably stronger financially, so if it’s a bidding war they will probably win.”

However, a number of vessels are under construction, while new turbine designs would generally allow easier access to nacelles.

Mr Bonnon, GL Garrad Hassan, said the outlook in terms of vessels had eased in the last year. “If you’d asked about 12 months ago I would definitely have said we’re looking into a difficult future.  But there has been a rather sudden and immediate reaction from the industry. Not just established vessel owners building more vessels but also energy companies such as RWE taking the initiative and building their own vessels and DONG taking ownership in the vessel operator A2SEA.” It is therefore difficult to predict if the vessel numbers will match projected demand over the next few years because the situation is changing so fast, he added.

Cooperation is key

Both sectors are reliant on shared resources – adequate ports and infrastructure, for instance. Yet, rather than painting a picture of two rival industries fighting for limited resources, analysts stress that the mood is somewhat different.

Oil and gas service firms are becoming more aware of the opportunities on offer if they diversify into the offshore wind supply chain. Meanwhile, offshore wind stands to benefit extensively from the oil and gas sector’s extensive subsea and offshore experience.

 “In future it will very often be the same sub-contractors servicing offshore turbines as are now servicing offshore rigs, so the crucial thing is that both industries are working closely together,” said Ruskell.

 “Many of the challenges will be similar, so we need to get the infrastructure right, including how ports are configured to meet the demands of both industries,” explained Ruskell.

Two recent developments have come as welcome news for both the offshore wind and oil & gas decommissioning markets.

Earlier this month, Scotland’s first minister Alex Salmond announced a £70m investment to upgrade Scotland’s port facilities.

The National Renewables Infrastructure Fund, via Scottish Enterprise and Highlands & Islands Enterprise, is aimed at leveraging “significant” private investment in the next four years, with a potential 28,000 jobs to be created in the sector, according to Scottish Renewables.

“The £70m is a good foundation stone for bringing in private capital and, hopefully, in time, more public capital,” said Mark Ruskell of Scottish Renewables.

The planned improvement of ports would be a significant factor in drawing more private sector investment in renewables, Brooks agreed.

UK ports are mostly privately owned, unlike their equivalents in northern Europe, which tend to have public/private split ownership. This means the government money will potentially help lower prices for tenants, he added.

Separately, in December, Salmond will host a summit between leading oil and gas companies and the offshore renewables sector in Aberdeen. The meeting will be co-chaired by Sir Ian Wood of Wood Group and Ian Marchant, chief executive of Scottish and Southern Energy.

"There are clear opportunities for joint working and learning between the oil and gas and renewables sectors,” Salmond said. “An estimated 38% of the cost of an offshore wind project is spent on marine installation and associated sub-structure activity – where considerable strengths lie in the oil and gas supply chain.”

He cited the 120,000 people now employed in the Scottish oil and gas sector, and said a considerable number of firms already operated in both this and renewables, including Wood Group, BiFab, Technip and Bibby Offshore.

Salmond is also expected to repeat his call for the Prime Minister, David Cameron, to lift restrictions on the Scottish Government’s immediate access to the £191m of Fossil Fuel Levy funds generated north of the border. It wants to invest this into renewable energy.

While the oil and gas industry might not end up working in total harmony with offshore wind over the next decade, the sectors do have enough in common to forge a mutually beneficial relationship.

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