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28.01.16

Boost for struggling oil sector with £504m joint Aberdeen city deal

Aberdeen is set to receive £250m in a new city deal with the UK government in an effort to retain its status as the country’s oil and gas hub amid a growing jobs crisis in the industry.

Prime minister David Cameron and Scottish secretary David Mundell MP will unveil the package today, marking Scotland’s second ever city deal after a similar agreement for Glasgow in 2014. Today’s deal is a joint investment between the UK and Scottish governments, with the latter promising to inject a further £254m in the region.

The deal is designed to address a series of issues in the region’s largest industry, helping exploit the remaining 11 to 21 billion barrels of oil still in the North Sea reserves and expand the Aberdeen harbour. Between now and 2040, around £45bn is expected to be spent on decommissioning of its offshore infrastructure.

Mundell will sign the deal on behalf of Whitehall today, with Cameron dropping by later on to meet local employers and hear about the challenges facing the oil and gas industry.

Aberdeen’s deal closely follows a special session held in the Scottish Cabinet earlier this week, during which first minister Nicola Sturgeon claimed “there is no doubt” the industry is currently facing an “extremely challenging outlook”.

At the meeting, Sturgeon announced that the Energy Jobs Taskforce would not finish activities this month as originally intended, instead continuing to support companies in the oil and gas sector.

She also confirmed that finance secretary John Swinney MSP would seek an urgent meeting with the chancellor to press him on lowering the tax burden on the industry at the March Budget, given that tax policy is the “main lever for incentivising investment”.

The first minister had also personally written to Cameron last week urging him to finalise Aberdeen’s city deal so that Scotland could help the region’s city council and Aberdeenshire Council to invest in vital infrastructure.

Mundell is expected to say today: “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.”

A ministerial group on oil and gas, chaired by energy secretary Amber Rudd, was also set up to further strengthen the industry and those who work on it, with the group coordinating the UK’s response to the oil price and focusing on issues such as exports, skills and investment.

Meeting for the first time yesterday, the group agreed to produce a UK Oil and Gas workforce plan in the spring, outlining what steps Whitehall will take to support those at risk of losing their jobs in the oil and gas sector.

It will also serve as a bridge to other sectors, setting out how the government and the industry can help workers move into other energy-related infrastructure projects.

Communities secretary Greg Clark MP added that the deal also comes with boosts for the city’s agri-food and pharmaceutical industries, as well as views for greater connectivity and general job opportunities.

(Top image credit: Colin Hunter)

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