Good morning Ladies and Gentlemen.
It is a privilege to be here in Aberdeen today for the Offshore Europe conference.
Aberdeen is Scotland and Europe's oil capital. But it was not always so. While Britain displayed its industrial glories to an admiring world at the Great Exhibition of 1851, the commercial extraction of oil began that same year in central Scotland.
The leading figure in the industry was James 'Paraffin' Young and production centred in West Lothian - Scotland's Texas. It took the form of retorted oil from torbanite or oil shale. The oil-shale industry is long defunct but I know that Scotland's oil and gas industry in the North Sea will not be disappearing any time soon.
The North Sea will play a major part in Scotland and the UK's diverse energy future. And it is going to need skilled people to keep driving it forward.
Energy supply is one of the most pressing issues facing us in the 21st century. Set against the backdrop of our duty and commitment to tackle global climate change and the significance of maintaining energy security, it is crucial that we have an affordable, secure and sustainable energy mix for the coming decades.
These challenges present us with opportunities. There are many strands for Scotland to seize in the energy market. Investment in energy will do a great deal more than ensure that we can still put the lights on.
North Sea oil and gas is vital for the economy. The figures underline this. The production of oil and gas supports 450,000 UK jobs. Nearly two-fifths of total employment in Aberdeenshire is in the industry.
We all know that oil prices are volatile and that resultant revenues can fluctuate wildly, as has been well illustrated in recent months. While this is the case, in 2008 the industry contributed around £13 billion to the Treasury. And it gave the wider economy a £13 billion injection through its purchases of goods and services.
While we are making every effort to develop and expand other forms of low carbon fuels, the fact remains that three-quarters of our energy needs are currently met by oil and gas. As we embark upon the path to tomorrow's low carbon, green economy, set out in the UK Government's Low Carbon Transition Plan, it is imperative that oil and gas power us through the transition. Oil and gas will fuel 70% of our energy use in 2020 - and production from the North Sea will continue to play an important part.
For although North Sea oil is a declining commodity and the production peaks of the mid 1980s and late 1990s will never be repeated there are potentially another 20 billion barrels of oil out there. 40% of our oil and gas still remains to be extracted. Oil and gas have a major role to play during the years of transition and beyond.
Today I want to talk about the skills agenda and the need for us to address the skills shortages to further improve the industry's performance both domestically and in export markets. The sector needs to adapt and change and take on new opportunities. We are entering a new era of automation - leading to an increase in remote operated facilities.
It is about managing and supporting talent in a global industry. The types of jobs available internationally are going to change. The sector in Scotland needs to follow the lead of the best companies in taking skills and expertise both around the world and into renewable technology too. We must remember that not only are we drilling for oil in the North Sea, we are developing jobs across the world.
That's why it is vital that the North Sea retains and enhances its skills base. Built on the experience and expertise gained during four decades of exploration and extraction in uniquely challenging conditions. It has been a centre of excellence for nearly all of my life. My father worked on the rigs and I grew up with it as part of my family life. And we have a vibrant offshore industry which will provide great job opportunities over the coming decades.
But the face of the industry is greying. And the expansion of offshore employment by 30% since 2004 has led to shortage of key skills. It is a skills gap which needs to be bridged. Indeed it has been cited as a constraint which damaged the ability of the industry to fully exploit projects and investment opportunities arising from the buoyant oil price.
Half of the industry's professional staff are between 40 and 50 years old and only around 15% are junior recruits. We are reliant on a workforce recruited in the 1970s and 1980s. Up to half of the current workforce are projected to retire within the next decade.
The skills challenge will not disappear despite the recent slowdown and the industry must retain its commitment to invest in people and skills. The SCDI has warned that cost cutting would be extremely detrimental to its long term health. The industry must maintain its efforts to nurture fresh talent and maintain a pipeline of skills.
Women are also under-represented. While nearly two-thirds of the students in higher education are women, they comprise only 15% of those taking engineering or technology courses. Although the number of women employed by the industry has gradually grown in recent years, the majority of the 1,800 women travelling offshore are employed in the catering sector. And there are 28,000 offshore workers in the UK part of the North Sea.
That's why we are so lucky to have OPITO (Offshore Petroleum Industry Training Organisation) - the Oil and Gas Skills Academy launched here in Aberdeen in 2007 and with a heritage reaching back to 1979. The sector made a £6 million investment to establish OPITO. It was money well spent - a down payment on the industry's future.
OPITO is committed to a safe, skilled and effective workforce. It offers rewarding opportunities in the sector for those seeking to follow academic and vocational routes. Through OPITO we can see the industry's determination to act on apprenticeships, training and upskilling.
At the same time Cogent is the Sector Skills Council representing the oil and gas industry. Licensed by the Government to provide employers with the opportunity of coherent leadership and strategic action to meet their skills needs. And among its key national objectives is to reduce the skills gaps and shortages and to anticipate future needs.
That's why Cogent is working alongside OPITO and industry employers to ensure the delivery of skills of the right quality and to the right numbers, and to ensure that all training meets a common standard of excellence.
I appreciate that the oil and gas industry spends millions of pounds each year training and developing its workforce - over £60 million on apprenticeships alone since 2001. And the skills shortage means that fast track promotion is more common in certain occupations as companies seek to fill key posts. Not only are salaries well above the UK average, in recent years annual salary increases have easily outstripped inflation.
And oil and gas is an international industry reliant on multinational mobility. Skilled specialists are needed from all across the world for the industry to survive and thrive. That's why I have supported submissions put before the Migration Advisory Committee as they deliberate UK and Scottish shortage occupation lists every six months to ensure that they are flexible to labour market demand.
We are competing for scarce and highly mobile international talent. Aberdeen and the UK must stay ahead of the game. The city needs to be connected to global markets and the expansion of Heathrow, which serves as a gateway airport to the UK, is necessary for Aberdeen flights to keep their slots and North East businesses to make their connections.
At the same time, UK Trade and Investment has positioned the UK as the destination of choice for energy trade and investment and the creation of opportunities for talented people through their Energy Excellence International Marketing Strategy.
Offshore opens opportunities. Young people could work in it for their entire career. And the challenges and opportunities will change as exploration continues to mature and new subsea technology and techniques are required to extract oil and gas from the more marginal fields.
We are talking about high level skills such as High Pressure, High Temperature, Heavy Oil and Challenged Gas. Skills that enhance Aberdeen's reputation as a centre of excellence.
Skills that as the search for fresh reserves reaches into ever more inhospitable places, ensure that the proven expertise of Scottish companies should be in ever greater demand.
UK universities and training institutions are established in all of the world¿s leading oil centres. Helping international clients develop more efficient and safer workforces and to increase operational productivity. And UK Trade and Investment promotes the UK Education and Training Guide for the Oil and Gas Industry overseas.
And these skills will certainly be needed in home waters. Industry experts believe that the new £75 million tax allowance announced in this year's Budget will lead to the development of up to 50 new North Sea fields by 2035, producing an estimated 360 million barrels of oil.
The skills gained in the North Sea are transportable and transferable. Transportable to any part of the world where there is an offshore industry. Transferable as the skills required in oil and gas are welcomed in the growing renewables sector too. I don't believe that this should be viewed as competition - but rather as complementary - a chance to vary work patterns, address new challenges and an opportunity to share and exploit knowledge and expertise.
The UK oil and gas industry has a leading role to play in the 21st century knowledge economy.
And Government has a clear role to ensure that we have the best possible business environment and skilled workforce for the offshore industry. We laid out our strategy of industrial activism in the Building Britain's Future plan launched this summer. There will be no return to the old economics.
We cannot replicate the market but we can complement the market.
Government can help businesses grow and minimise or pull down the barriers that hinder the development of innovation and growth.
I want to see Britain firmly on the path to recovery and seizing the opportunities for future economic growth, with the skills and the infrastructure needed to meet the demands of the future.
The UK possesses the world's sixth largest economy for low carbon goods and services - worth £106 billion, employing 900,000 people and growing, even during the downturn. The transition to the low carbon economy is a key constituent in our economic recovery.
Scotland has experienced three energy revolutions during the past 250 years. At their core have been coal, oil and more recently renewables.
Oil and gas may have been superseded in the revolution stakes but it will be a long time before it is superseded as an energy provider. North Sea oil and gas still has a huge role to play as we try to balance the energy equation.
We must not neglect the present and instead highlight the potential opportunities the oil and gas sector offers to young Scots for well paid, highly skilled employment.
It is not just simply drilling for oil in the North Sea, it is developing jobs around the world for a new generation of Scots in tomorrow's energy sector.