Scottish oil and gas diversification opportunities: heat & cooling, water and energy storage and systems

This report presents the findings of an assessment that aimed to identify key sub sectors and areas of opportunity in alternative markets for the diversification of the Scottish oil and gas supply chain. It highlights and analyses the heat, water, and energy storage and systems subsectors, and assesses the viability of the diversification opportunities they present. The report also identifies and maps active companies in the oil and gas sector in Scotland who may be well suited to capitalise on opportunities.

The research involved: a literature review; a market assessment; filtering and prioritising of the identified opportunities (using a hot spot analysis and a red, amber, green (RAG) scoring system), against the key capabilities across the oil and gas Supply chain; and a deep dive assessment to further understand prioritised opportunities.

The top market opportunities identified in the report were: heat networks; geothermal heat; municipal water and wastewater treatment; industrial wastewater treatment; and smart water management. The study found that the heat networks market in the UK has a large growth potential and was expected to grow significantly in the short term. It noted that there were strong crossovers between the heat network supply chain and the following areas: specialist hydraulic analysis; sensors, controls and instrumentation; pipe and components manufacturer; specialist pipe services and design; and operation and maintenance. The study also found that there was a direct crossover of skills and technology from the oil and gas industry to the geothermal market. In particular, oil and gas expertise in the drilling and reservoirs modelling sectors was considered to have the potential to reduce the investment risk associated with drilling. It was also found that there is long term potential for oil and gas companies to enter the hydrogen market, with the largest known opportunity being the H21 Leeds project, where significant investment was planned in areas with direct crossover for the oil and gas industry. It was also reported that there may be opportunities to diversify into smart water management in the short term.

The report recommends that Scottish Enterprise should: target both an internal and external engagement strategy to accelerate the transition for SMEs in oil and gas into alternative markets; work closely with SMEs to understand their unique selling points, gaps in the supply chain and optimal market entry strategy, for example, by using a range of engagement tools from subsector workshops, one to one maturity assessments or online portals; and engage key external stakeholders to further understand specific needs and capability gaps in alternative markets and also to inform relevant parties of the offering in the Scottish oil and gas supply chain.