A battle over a hectare of green space in Aberdeen’s city centre has pitted a young former art student who works in a snowboarding shop against one of Scotland’s wealthiest men.

The area in question is Union Terrace Gardens, a couple of acres of turf surrounded by the city’s famously grey architecture. It is under-used and under-appreciated, but two visions are now competing to develop the area. Both claim they will transform it and attract jobs, tourists and investment. And both use apocalyptic language to describe what will happen to the city should their attempt fail.

Katie Guthrie, 24, says she “didn’t want to be a political vigilante” but that events in Aberdeen this summer forced her into it. “It’s just the way I’ve been brought up, to question things – which could be a real pain in the ass for my mum,” she says. “I wouldn’t allow myself to be intimidated by people just because they have money.”

Ms Guthrie’s vigilantism began after she attended a public meeting held by Sir Ian Wood, the millionaire chair of the oil services giant Wood Group, and the development forum Aberdeen City and Shire Economic Future (Acsef). They put forward their case: to raise the sunken gardens to street level, ­creating spaces for development, and to connect Belmont Street to Union Terrace and the train station. The content of the new area is yet undecided, but car parking, performance spaces and an arts centre have all been mooted. The scheme would cost £140 million, £50m of which would come from Sir Ian himself.

The meeting stuck in Ms Guthrie’s craw, not just because of the proposed decking over of the ­existing gardens but because of the threat she believes the scheme poses to Peacock Visual Arts (PVA), the city’s only contemporary arts centre.

It is currently housed in a leaky old church building it has used for 30 years. But the council had approved PVA’s plans to build a new, much larger centre in the steep banks of Union Terrace Gardens, and had given the go-ahead in November 2007, a year before Sir Ian announced his intentions.

The arts centre quickly raised £9.5m, 70% of the total development costs, from Scottish Enterprise, the European Union, Aberdeen City Council and the Scottish Arts Council, and received full planning permission. Ground was due to be broken next month.

Now, though, its plans are in limbo. Its current lease is up in two years’ time. Without a new home, PVA could collapse. It is a situation Ms Guthrie believes is “unjust”.

“When they announced the Peacock plans, myself and other artists were so excited,” she says. She graduated from Gray’s School of Art in the city three years ago. “Aberdeen is lagging behind Dundee, Edinburgh, even Inverness and much smaller cities. Culturally it is so far behind. It’s so frustrating being an artist graduating from art school and seeing your peers move to Glasgow and Edinburgh. There are no jobs in the creative industries here. So we got excited about this, and then Ian Wood turns up and puts a spanner in the works.”

Since June, Ms Guthrie has orchestrated a campaign to save the gardens from behind the till of Boarderline, a skateboard and snowboard shop. She started a petition that last week attracted its 3000th signature.

Located in two buildings, separated by a murky close, the existing arts centre is hard to find even if you knew what you’re looking for. A sign near the Mercat Cross points you in a completely different direction.

Once inside, the need for a new building becomes clear. There is no heating in the large print-making rooms. All the artists work with hats and gloves on. Yet there is also the tangible buzz that accompanies the process of creation.

In the workshop, Lindsay Croall is making lithographs, an 18th-century process for producing prints using a massive slab of stone. Across the close, in the main exhibition space, there are video works by the Lebanese artist Ayah Bdeir. The blare encourages some afternoon drinkers from the nearby Castle Bar to take a look.

Elly Rothnie is the campaign manager for PVA’s new building. Over the course of this year she has had to let one member of staff go as funding dried up. Unless the tide turns in their favour in coming weeks, things could get even more desperate. “The danger is, without being melodramatic, we lose our project, on which a million pounds of public money has already been spent,” she says.

While the centre itself has been studiously diplomatic, Ms Guthrie has given a voice to the rumbling discontent about its plight. She describes Sir Ian’s £50m as “a carrot to wave in front of the council to get his own way”, the idea of paving over the gardens as “arrogant”, the public consultation as a potential “whitewash”, and the entire scheme as “standing against anyone with any artistic integrity or morals”.

As well as the petition, Ms Guthrie has organised an art sale with local artists to raise money to buy more fliers. Band and club nights have also swelled the campaign’s coffers, with local musicians and DJs lending their support for free. The award-winning artist Toby Paterson is a patron of the campaign, while the broadcaster Jonathan Meades used his BBC4 documentary Off Kilter to describe Sir Ian’s vision as “vainglorious” and “irreparably damaging to the cityscape”.

Wood Group’s headquarters lie south of the River Don, in the midst of an inauspicious industrial estate. The first thing Sir Ian stresses to me is that this is not his scheme. The plan to raise Union Terrace Gardens, and with it Aberdeen’s aspirations, has been mooted in the city since the 1980s. His money, he says, is merely the catalyst.

“I don’t want to be looked back on as one of the industrialists who enjoyed the oil era for themselves and left a horrible legacy for the people,” he says.

Sir Ian voices a deep interest in the creative arts – although he is unwilling to divulge what kind he enjoys – and expresses the wish to include Peacock in the £140m scheme. “It was never the intention to threaten Peacock’s existence. We never wanted that to happen,” he says.

Like Ms Guthrie, he clearly remembers the meeting in June. He recalls people speaking “strongly and emotionally about art being the number one thing”, something he respected but disagreed with.

“There is quite rightly a strong feeling about the arts in Aberdeen,” he says. “It is not for everyone

but some people do feel intensely about it. I understand the emotional concern.

“What I find hard is that, frankly, this is about jobs and economic prosperity, for the wider interests of people in Aberdeen who don’t care about the arts. Eighty per cent of the people who spend time in the square will have no interest in the arts. You have to develop things for the good of everyone.”

Sir Ian is joined in the office by Dave Blackwood from Acsef, who is also the former head of BP in Aberdeen. Both men see a new city centre as key to securing a future as North Sea oil dries up. Currently, they say, Union Street and its surrounding area are “nothing to be proud of”.

“We need to plan for a future where the city becomes an international energy capital,” says Mr Blackwood. “The alternative is pretty terrible. If we sit and watch the oil decline and we don’t export this expertise and build on it, Aberdeen is not a place I want to be living in. It’s about securing that economic future. Either we grow into being an energy capital or we go back to being a fishing village without the fishing.”

Mr Blackwood claims the arts centre has been uncooperative. “Peacock have portrayed themselves as the monopolistic owners of culture in Aberdeen, and this therefore portrays the scheme as anti-cultural,” he says. He claims he spent weeks negotiating with PVA to integrate its plans with his own but that the centre was not willing to compromise.

“The integration of a contemporary arts centre has always been there, from day one,” he says. “We don’t debate that the cultural component has to be large. There is an emotional attachment [by the arts centre] to a particular design but that shouldn’t hold the transformation of the entire city centre to ransom.”

Acsef points to what it sees as concessions to Peacock. Both Scottish Enterprise and Aberdeen City Council have agreed to be more flexible with their project ­funding, giving the arts centre breathing space. The £4.3m of Arts Council funding remains problematic, as it is still project-specific and needs to be assigned by next month.

“This should not be an either/or choice between Peacock or a city-centre square,” says Sir Ian. “Aberdeen needs them both. It badly needs a major city-centre change.

“Aberdeen has changed so much: it is cosmopolitan, rife with technology, and has a vibrant business community. This would be Aberdeen saying, ‘We have changed.’”

The arts centre denies it has been uncooperative but says the funding arrangements for its new building leave little room for manoeuvre. However, glimmers of hope for some kind of agreement are starting to appear. The Scottish Arts Council confirmed that “highly constructive” talks had taken place last week with each of the partners, and Culture Minister Michael Russell, who visited Peacock in August, has urged a compromise.

“There is a fantastic redevelopment opportunity here, but the priority must be for Peacock and Sir Ian’s team to work together to find a solution,” he said. “There is no doubt that Peacock Visual Arts’ work in Aberdeen over the last 35 years has contributed greatly to the cultural life and wellbeing of the people of the city. A way forward must be found that allows this high-quality work to continue, through positive engagement from all parties.”

For most of 2009, the two schemes have been at loggerheads. Each has the potential to cancel the other out, as one council source said, and the city would be left with nothing. So the next few weeks will be key to whether the most common f-word in Aberdeen will remain frustration, change to fruition … or darken into something altogether more desperate.