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Scottish oil and gas industry to focus on supply chain as part of refreshed strategy

Scotland should aim to become a worldwide 'centre of excellence' for oil and gas related services including subsea technology, digital services and decommissioning, according to a new strategy for the sector.

The refreshed document, which updates the original strategy published in 2012, places an increased emphasis on the need for companies in the supply chain to "drive efficiency, innovation and internationalisation". It was developed by an Industry Leadership Group co-chaired by Fergus Ewing, the energy minister, and industry expert Melfort Campbell in response to the current low oil price environment.

Ewing said that although the oil and gas industry was currently facing "severe challenges", the sector could have a "strong future" by taking advantage of new discoveries and its "world-class supply chain".

"The first minister visited Aberdeen last week to announce funding of £254 million – part of a £400m package of support for the North East – to boost research and development, kick-start innovation projects and help industry workers develop new skills," he said.

"This strategy, which we committed to refresh in our most recent Programme for Government, builds on these themes, supporting the industry to maintain its global position and to drive forward the changes required to increase growth in international and supply chain sales and production efficiency. I also look forward to seeing the Oil and Gas Technology Centre develop and grow into a world class R&D hub," he said.

A new Oil and Gas Technology Centre is to be developed in Aberdeen as part of a £500m investment package for the city, announced by the UK and Scottish governments at the end of January. The centre will be a place for universities and industry to collaborate on R&D opportunities aimed at both extending the life of the North Sea basin as well as increasing the international reach of the UK supply chain, according to plans published by Aberdeen City Council.

The desire to acquire new technology and expand internationally is expected to drive a "surge" of mergers and acquisitions involving oilfield services companies over the next 12 months, according to research commissioned by Pinsent Masons, the law firm behind Out-Law.com. This report, which drew on the views of 200 senior executives across the industry, also found high levels of confidence in the ability of the UK Continental Shelf to recover to 'peak' levels of profitability, with more than a quarter of respondents expecting this to happen within the next five years.

The ILG's original strategy document was based on collaboration between the public and private sectors and "an overall focus on the importance of maximising recovery"; something which has since been developed by the UK government through the 2014 Wood Review. The updated strategy reports "considerable progress" against its original priority areas, and sets out how to develop this further through enhanced support for the supply chain, international support for new exporting, development of the Oil and Gas Technology Centre and improving cost effectiveness.

"While of course we fully recognise the seriousness of the current situation and all respond accordingly, it is equally important to remain focused on assisting further development of the supply chain, enhancing our global reputation in key strengths to even higher levels and seeking to embed the sector in Scotland for the long-term through innovation and technology development," the ILG said in the strategy document. "We need to ensure that the current competitive advantages we have remain and new ones are developed."

The ILG meets three times a year, and intends to publish a progress report at each meeting.

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