Panoramic view of Aberdeen from the Torry Battery (Source: Patrick Johnston) (Click image to pan)
Aberdeen (‘the mouth of the Dee’ in Scots Gaelic) is the third most populous city in Scotland, and lies in the north-east of the country. It is an old city – a settlement is thought to have been on the same spot for over 8,000 years, the Romans were there, the Normans founded the port and it has had a university since 1495. Robert the Bruce laid siege to Aberdeen castle in 1308 during the Wars of Scottish Independence, eventually destroying it and massacring the English garrison inside. When the railway line was finished in 1850, Aberdeen became more successful as it meant fish trains could go between Aberdeen and London and it became Scotland’s largest fishing port.
Aberdeen owes its distinctive appearance to the local grey granite that many of the buildings are made from, giving it the nickname ‘Granite City’ or the ‘Grey City’. It grew up around the typical local industries of fishing, shipbuilding, papermaking and textiles, although by the end of the 19th century the granite itself was a major business; Aberdeen was the world centre for the granite trade, employing thousands of men cutting, polishing and sculpting the stone, which was sent around the world. Aberdeen’s famous ‘Granite Mile’, Union Street, remains the heart of the city.
However, it was the discovery of oil in the North Sea which defines the city these days. Although it had been speculated about for many years, only in the 1960s, when the sheikhs and leaders in the Arabian Peninsula started to realise the value of their supplies and the political implication of this, did it become economical for the major oil firms to start to tackle the relatively challenging deep waters and inhospitable conditions of the North Sea. The first discovery was the Forties field, 180 km north-east of Aberdeen, in November 1970 (GEO ExPro Vol. 7, No. 3). The city, being the nearest port, and with an extensive dock area, was the natural base for the developing industry, and since then oil – and oil money – has been flowing and is expected to carry on flowing for quite a few years yet.
The oil industry is thought to have created over half a million jobs in the Aberdeen region over the past 40 years, and it still employs 47,000 people. The surge in jobs bolstered the local economy throughout the 1970s and 80s, funding the development of the city with new schools and housing and it is estimated that over £175 billion has been paid in taxes directly due to the oil industry. The industry is thought to have invested over £200 billion into the region itself so it is no surprise, then, that Aberdeen is one of the wealthiest places in the UK, and is the only UK city to have actually grown its economy during the present recession.
However, it is not all good news. The rise in house prices that accompanied the boom now means that the younger generation struggle to afford properties and typical industries in the city have been squeezed. For example, electricians can earn three times as much by working on the rigs than they would back in Aberdeen and the average salary for oil workers is £64,000 per year – more than double the UK average. In addition, the city’s infrastructure, which was rapidly thrown together at the beginning of the boom, is now starting to decay and although expensive cars roam the streets, the city has a run-down appearance that is not reflective of its wealth.
Ten years ago, extraction of oil in the North Sea cost approximately $5 per barrel, which was comparable to West Africa or the Caspian Sea, and investment from the big firms declined as they shifted their energy and money elsewhere towards discovering larger finds to boost their reserves. This year, however, has seen an increase in investment from £11.4 billion in 2012 to £13 billion and deepwater drilling has become more attractive. By 2017, it is estimated that 2 MMbopd a day will be extracted, which is up from the current 1.5 MMbopd today.
Another reason for the increase in investment is down to tax breaks. UK Chancellor George Osborne made a £2 billion tax raid back in 2011, which meant that the North Sea’s marginal tax rates were raised to up to 81%. This was eased this year by a series of tax allowances designed to promote exploration in more challenging fields, making it more attractive for the firms to return, and helping boost Aberdeen.
Energy Capital of Europe
As reserves in the North Sea decline Aberdeen has attempted to rebrand itself as ‘Energy Capital of Europe’ – moving away from the reliance on oil and focusing on energy services and renewable energies. The expertise in the industry is now becoming a valuable commodity. Firms based in Aberdeen who cut their teeth in the boom years and generated huge amounts of specific expertise are now selling that expertise overseas as they bring their knowledge to new spheres. As offshore fields are being explored in deeper and deeper water, Aberdeen has become a world centre for innovation and the execution of the technology that makes the modern offshore energy industry possible. It is thought that British companies have a 45% market share of the global subsea business, worth just under £9 billion – and many of these businesses are based in Aberdeen.
The city has mapped out a 20-year plan to reinvent itself without the reliance on oil. By investing in projects to liven up the city’s appearance and improving support for the arts, they hope to make the city more desirable. Technology will play a key part with many tech firms deciding to base themselves there as well. Recently described as ‘the City the Credit Crunch forgot’, Aberdeen now thrives with over 800 shops, five major shopping centres and restaurants from all over the world, plus a wide range of entertainment and events, museums, art galleries and fashionable café bars, as well as a long beach only a mile or so from the city centre.