The importance of the energy sector to Scotland’s prosperity and to the economy in the north-east of the country has been underlined by a major report.

The energy and natural resources industry has been revealed today as “by far the most profitable” in Scotland in 2023 by a new analysis of the country’s top performing privately owned firms.

Ten of the top 100 Scottish companies highlighted by the Scotland Limited Report 2024 compiled by accountancy giant Grant Thornton are involved in the sector, including the business which topped the ranking overall. Between them, the 10 firms reported combined earnings before interest, tax, depreciation, and amortisation (EBITDA) of £3.1 billion on an aggregative revenue of £6.5bn and employ 11,318 people, based on their most recently available accounts, as of March 31, 2024.

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“We have seen a number of standout performers in the energy sector this year,” said Grant Thornton in the Scotland Limited Report 2024. “Of course, each has its own unique story, but in the exploration and production space we have seen several independent operators acquiring assets from the super-majors at a time when they are moving away from North Sea operations and when there has been a substantial increase in oil prices.”

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The top contributor, and Scotland’s number one privately owned business, was Aberdeen-based NEO Energy, which the report said was now the sixth-largest oil and gas producer in the North Sea. Private equity backed NEO, which acquired ExxonMobil’s non-operated oil and gas assets in the North Sea for £1bn in 2021, reported EBITDA of £2.3bn in its most recent financial year for which accounts are available, up from £640m. Its rapid rise was underlined by a leap from 26th place to the top spot in the Grant Thornton chart.

And it has company from the energy sector in the top 10, with Aggreko, the temporary power generator, at 3, oil and gas services company KCA Deutag at 7, and North Sea energy producer Waldorf Production, a new entry in eighth position.

“The continuing trend for many of the global oil and gas companies to reduce their activities in the North Sea has presented good opportunities for leading independent players such as NEO Energy and Waldorf Production to grow their portfolios through acquisition,” the report states. “This has significantly changed the make-up of the key producers in the UK over very recent times, and the trend is likely to continue in the near term whilst these dynamics are at play.”

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However, the contribution made by the energy sector to the Scottish economy is not confined to North Sea oil and gas production, with the report underlining the importance of companies engaged in the transition to cleaner energy systems. CCL Components, the independent solar energy equipment supplier, was a new entry at number 50, and there were places in the top 100 for companies in the renewable energy supply chain.

“Energy transition continues to be a key driver and a number of companies (with a background in oil and gas) in the energy supply chain have been successfully expanding into the renewables sector,” the report said. “They’ve been developing their capabilities in alternative energies such as hydrogen, offshore and onshore wind, carbon capture and storage, and investing in their supply chains with a view to securing new jobs for decades to come.

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“This trend has been seen with Centurion Group (12), OEG Offshore (24), and North Star Shipping (100) who have grown by acquiring companies and assets in the renewables supply chain as well as by adapting their existing capabilities and tailoring products, assets, and services to suit the needs of the renewables market.

“These and other energy services businesses continue to generate significant profits from oil and gas where activity has been relatively strong in the recent past. This shows the need for a managed transition to renewables in the UK, enabling companies with relevant skills to capitalise on this and use the cash flows that they generate from continuing to service oil and gas, to help them expand into renewables.”

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The report affirms the concentration of the energy sector in the north-east of Scotland, with 17 of the overall top 100 firms located in the region.

The west of Scotland is home to 51 of the top 100 firms, followed by the east with 24 and the north-east in third place.

“Unsurprisingly, the north-east – where the offshore sector dominates – is the third biggest location for our leading private businesses,” the report notes. “The region is home to our number one company NEO Energy, and our fast-growing new entrant, Waldorf Production, both of which are acquisitive exploration and production businesses.”