Guide
Oil and gas

Oil and gas diversification opportunities

Scotland’s oil and gas companies have a wealth of expertise and a wide range of capabilities that can be applied to delivering solutions for new and emerging markets.

New markets, products and opportunities

Scottish oil and gas companies have a global reputation for excellence, built over more than 50 years of exploration and extraction in the harsh North Sea environment.

Throughout this period the Scottish oil and gas supply chain has continually evolved in line with changing industry requirements, delivering new solutions that have been employed at home and abroad.

While Scottish and international oil and gas markets will continue to supply new opportunities for many decades to come, there is also huge potential for Scottish companies to leverage their expertise to develop and deliver solutions for a range of other markets.

Through diversification, Scottish oil and gas companies can build new revenue streams, new capabilities and new solutions so they are better able to respond to whatever new challenges and opportunities the future may bring.

The broad range of capabilities within the Scottish oil and gas supply chain have considerable potential to be applied to solving the challenges of a range of other sectors, particularly those emerging sectors where process are still being optimised and supply chains are not yet well established.

Our guide to diversification includes an evaluation of 24 sectors that offer potential for new entrants from oil and gas. We also look at oil and gas capabilities that might be applied in other sectors and present an overview of different models of diversification.

Read our guide to diversification opportunities (PDF, 637kB)

We've also taken a closer look at the sectors that represent the greatest opportunities for oil and gas supply chain companies:

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Oil and gas decommissioning

Oil and gas decommissioning is a relatively new market with a new set of challenges and priorities.

There are strong synergies with oil and gas exploration, development and production but also key differences.

There is a need to significantly reduce costs which by adopting a different mindset and approach, while maintaining safe, efficient and effective working practices.

The decommissioning of UK fields presents the most accessible contract opportunities for Scottish companies, estimated to be worth £17.6 billion between 2016 and 2025.

Opportunities

The most readily accessible opportunities for Scottish companies are the UK Continental Shelf, where annual expenditure is expected to exceed £1.5 billion between 2016 and 2024.

The relatively accessible Norwegian decommissioning market is forecast to be worth £1 billion each year through to 2020.

The Gulf of Mexico is one of the world's most active decommissioning markets, with increased focus on deepwater activity expected by the end of the decade and into the 2020s. Malaysian and Indonesian decommissioning projects are expected to drive growth in the market.

Quick facts

  • The cost of decommissioning UK oil and gas assets is estimated at £50 billion over 40 years to 2025
  • Between 2016 and 2025, more than 100 platforms are forecast for removal or partial removal from the UK and Norwegian Continental Shelves

Read our factsheet on oil and gas decommissioning opportunities (PDF, 141kB)

By serving different markets, companies like yours can spread risk and mitigate some of the challenges faced by offshore oil and gas.

Offshore wind

Offshore wind is a growing market concentrated in the UK and Europe, where over 90% of the world’s offshore wind farms have been built to date.

There are high levels of synergy between the offshore wind and oil and gas supply chains, particularly in the areas of project management, array cables, substations, foundations, installation support, and operations & maintenance.

Three Scottish offshore wind farms with a combined value of £3 billion will begin construction in 2017, contributing to the £18 billion of UK offshore wind investment that is forecast between 2016 and 2020.

Opportunities

UK offshore wind projects present some of the most readily accessible opportunities for Scottish supply chain companies due to the industry's commitment to increasing the UK content of UK offshore wind farms.

A number of Scottish firms have used their experience of UK offshore wind projects to secure contracts elsewhere in Europe. The German market is the largest outside the UK, while the Netherlands, France, Denmark and Belgium also have sizable pipelines of projects.

China is the largest market outside Europe and the US and Japan have considerable growth potential.

Quick facts

  • The world’s first floating offshore wind farm, Hywind Scotland, begins construction in 2017
  • Europe is forecast to build around 25GW of offshore wind by the end of the decade, worth an estimated £60 billion in capital and operational expenditure over the next five years

Read our factsheet on opportunities in offshore wind (PDF, 121kB)

Carbon capture and storage

Carbon capture and storage (CCS) in a nascent technology with the potential to play major role in reducing greenhouse gas emissions.

There are currently sizable economic and legislative barriers to the large scale deployment of CCS in the UK and Europe, however, the technology is viewed by many independent forecasters as being essential to meeting the targets set in the Paris Climate Change Agreement.

The Scottish oil and gas supply chain has a broad range of capabilities that could be applied within the CCS market.

Opportunities

Scotland's oil and gas sector has created much of the infrastructure and supply chain necessary to support the emergence of CCS in the UK.

Industrial research and feasibility work is ongoing for a proposed CCS equipped power station at Grangemouth.

There are not understood to be any major technical barriers to the deployment of CCS in the UK but the absence of strong policy and legislative drivers, and market support mechanisms makes it difficult to forecast the size of the future market.

The US and Canada are currently the leading international markets for CCS. Norway, Brazil, Saudi Arabia, the UAE and Australia have projects in operation or under construction while China could emerge as an important market over the next few years.

Quick facts

  • Scotland's carbon dioxide storage resource is estimated to be greater than the Netherlands, Denmark and Germany combined
  • The International Energy Agency (IEA) describes CCS as being an essential technology for achieving the warming limit set by the Paris Agreement

Read our factsheet on opportunities in CCS (PDF, 181kB)

Carbon capture and storage opportunities for oil and gas

Hydrogen

Hydrogen production is an established market that largely serves demand from the ammonia manufacturing and chemical refining industries.

However hydrogen is also being developed for use as a transport fuel, heating fuels and energy storage medium.

These additional uses could generate significant opportunities for the Scottish oil and gas supply chain.

Opportunities

Although the UK market remains in the very early stages of development there are already opportunities arising from the UK hydrogen refuelling network rollout, as well as demonstration projects for green hydrogen production and storage.

Internationally, Japan and South Korea are pursuing ambitious plans for hydrogren, with the Japanese government setting out a long-term vision to create a "hydrogen society."

Germany is the leading European market with plans to install up to 400 hydrogen refuelling stations by 2023, up from around 60 in 2016.

Quick facts

  • Aberdeen is home to the UK's first commercial scale hydrogen production and bus refuelling station
  • Northern Gas Networks has developed a proposal to convert the Leeds gas network into a hydrogen network at a cost of £2 billion to 2030

Read our factsheet on opportunities in hydrogen (PDF, 143kB)

Nuclear decommissioning

Nuclear decommissioning is a growth industry that presents readily accessible opportunities oil and gas supply chain companies.

The UK spends between £2 billion and £3 billion each year on nuclear decommissioning activities. It is forecast that the total cost of fully decommissioning the UK's existing nuclear sites could reach £117 billion over a 100 year period.

Opportunities

UK nuclear decommissioning in the UK offers opportunities in a range of areas, including:

  • Civil engineering
  • Demolition
  • Fabrication
  • Waste management
  • Engineering design
  • Project management

In Scotland alone, the Dounreay site offers regular opportunities, with 124 contracts worth £139 million in 2015/16.

Internationally, Europe is predicted to account for 69% of the global decommissioning market to 2030. France and Germany are the biggest European markets next to the UK.

Quick facts

  • The Scottish nuclear decommissioning market is forecast to be worth £3.5 billion up to 2030
  • The value of European decommissioning projects is estimated to reach £197.5 billion by 2050

Read our factsheet on nuclear decommissioning opportunities (PDF, 104kB)



Nuclear decommissioning opportunities for oil and gas companies

Heating and cooling

Heating is a potential high growth industry that exhibits some crossover with the oil and gas supply chain in the areas of district heating and geothermal.

National and international climate change targets are driving the development of low carbon heating and cooling solutions in Scotland, the UK and elsewhere.

Opportunities

The most significant domestic opportunity for oil and gas companies is in the development of heat networks (district heating).

In 2015 there were approximately 10,000 homes connected to district heating in Scotland. Government targets are in place to increase this to 40,000 by 2020.

£320 million of capital funding has been made available to support heat networks in England and Wales between 2016 and 2021.

In European countries like Finland and Denmark where district heating is well established opportunities are limited for new market entrants. Emerging markets for district heating and geothermal heating are likely to present greater opportunities and include:

  • Germany
  • Greece
  • Hungary
  • Italy
  • Iceland
  • Netherlands
  • Sweden
  • Switzerland
  • Turkey
  • Indonesia
  • Mexico
  • USA

Quick facts

  • The cost of replacing Scotland's existing heating equipment over 40 years to 2050 has been estimated at £100 billion
  • The global heat technologies market is forecast to grow to £308 billion by 2050

Read our factsheet on heating and cooling opportunities (PDF, 74kB)

Water and wastewater

Global demand for water is predicted to grow 30% between 2014 and 2030, driven by population growth, urbanisation and climate change.

The Scottish oil and gas supply chain can play a role in supporting water technology innovation in the UK and has the potential to tap into infrastructure opportunities in the £500 billion global water and wastewater market.

Opportunities

Much of the UK's water and wastewater infrastructure was built in the Victorian era and the ongoing programme of repair, replacement and upgrades presents significant opportunities for UK supply chain companies.

An increased focus on innovation in water technology represents a key opportunity for oil and gas firms with Scotland well placed to capture a share of the UK water technologies market, which is forecast to be worth up to £8.8 billion by 2030.

Scotland's water and wastewater supply chain currently has limited international reach.

However, the Scottish Government's Hydro Nation Strategy and Water Innovation Service aim to develop Scotland's supply chain capabilities and maximise its international potential. 

Quick facts

  • Scotland's water and wastewater sector was estimated to be worth £1.8 billion in 2014
  • The UK water technology market was worth £1.5 billion in 2014 and is predicted to grow to £8.8 billion by 2030

Read our factsheet on water and wastewater opportunities (PDF, 159kB)



Water opportunities for oil and gas companies

Diversification should be seen as part of your long term corporate strategy, requiring careful consideration and planning.

Energy storage

New energy storage solutions are being developed and employed across the electricity, heat and transport sectors as part of the global transition to low carbon energy systems.

The energy storage market has the potential to generate a variety of opportunities for the oil and gas supply chain as it grows and evolves.

However, these opportunities could be challenging to identify in the early stages of the market.

Opportunities

Pumped hydro currently dominates the energy storage market sector. However, the battery storage market is predicted to grow significantly over the next ten years, particularly in behind the meter solutions

Japan is the largest international market alongside the US. Growth is also expected in Australia, China, India, Germany and Italy.

Quick facts

  • Scotland is home to the UK's first large scale battery, which was connected to the Orkney grid network in 2013
  • Global non-hydro storage capacity is forecast to reach 45GW by 2024, up from 1.9GW in 2015, representing investment of around £35 billion

Read our factsheet on opportunities in energy storage (PDF, 163kB)



Energy storage opportunities for oil and gas companies

Wave and tidal

Wave and tidal stream are emerging technologies that have significant deployment potential, subject to successful commercialisation.

Tidal stream is the more market ready technology, offering more immediate opportunities for Scotland's oil and gas supply chain companies.

Opportunities

Scotland's tidal energy projects present some of the most readily accessible opportunities for Scottish supply chain firms with the next phase of MeyGen and the Sound of Islay project both due to enter construction before the end of the decade.

There are over 40 wave and tidal sites at various stages of development across the UK as a whole.

Along with the UK, France and Canada are recognised as leading locations for the development of wave and tidal energy. The US, Japan, Singapore and Chile are also pursuing plans in the sector.

Quick links

  • Wave and tidal energy could contribute up to £4 billion in UK GDP by 2050, subject to successful commercialisation
  • The global wave and tidal industry is forecast to be worth up to £76 billion by 2050, subject to successful commercialisation

Read our factsheet on wave and tidal opportunities (PDF, 130kB)

Life and chemical sciences

Life and chemical sciences are large, established, highly competitive industries that present diversification opportunities in emerging areas.

Scotland's fast growing industrial biotechnology sector is the most likely point of entry for Scottish oil and gas companies, although there may also be opportunities in international markets.

Opportunities

Life and chemical sciences represent more challenging diversification opportunities than many other sectors.

Industrial biotechnology, a comparatively new industry, is not yet well established in Scotland, the UK or elsewhere and offers the clearest opportunities for oil and gas companies.

Scotland's National Plan for Industrial Biotechnology sets out ambitious plans to grow the number of industrial biotechnology companies from 50 in 2015 to 200 by 2025.

Fast growing international life and chemical sciences markets could offer more opportunities for oil and gas companies. Asia is the largest and fastest growing market for chemicals, driven by growing demand in China and India.

Quick facts

  • Turnover in Scotland's industrial biotechnology sector grew from £189 million in 2012 to £230 million in 2015 and is forecast to grow to £900 million by 2025
  • The UK life sciences sector regularly generates turnover in excess of £50 billion per annum and accounts for more business-based R&D than any other manufacturing sector

Read our factsheet on opportunities in life and chemical sciences (PDF, 97kB)



Life and chemical sciences opportunities for oil and gas companies

How we can help

We're here to help Scotland's oil and gas supply chain companies identify, understand and access diversification opportunities.

We've got a range of services designed to help your company grow at home and abroad.

Next steps

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