North Sea Oil and Gas

Wednesday 9th February 2022 Commons Chamber

13:21

[Caroline Lucas (Brighton, Pavilion) (Green)]

(Urgent Question): To ask the Secretary of State for Department for Business, Energy and Industrial Strategy if he will make a statement on reports that six North sea oil and gas fields are due to be given the green light this year.

[The Minister for Energy, Clean Growth and Climate Change (Greg Hands)]

There will continue to be ongoing demand for oil and gas over the coming years. It is a clear choice between a transition that secures our energy, protects jobs and leads to innovation in new technologies like carbon capture and hydrogen, and an extinction for our energy sector, as I think the hon. Lady proposes. Flicking a switch and turning off our domestic source of gas overnight would put energy security, British jobs and industries at risk, and we would be even more dependent on foreign imports. The way we produce oil and gas is cleaner than in many jurisdictions, so it would be illogical to import them at further expense to Britain and our planet.

The fields referred to in these reports are already licensed, some dating back to as early as 1970, and are now going through the usual regulatory processes. All proposals are subject to a rigorous scrutiny process prior to consent, as opposed to licensing, by our expert regulators, including an environmental impact assessment and a public consultation. No decisions have been taken by the regulators, so it would be inappropriate to comment further on that process. However, to be clear, continued support for Britain’s oil and gas sector is not just compatible with our net zero goals; it is essential if we are to meet the ambitious targets we set for ourselves while protecting jobs and livelihoods.

As announced last year, and forming part of the North sea transition deal, we will introduce a climate compatibility checkpoint for any new licences to ensure that any future licensing rounds remain consistent with our goals. Meanwhile, we continue to make progress on developing new nuclear, which I think the hon. Lady also opposes, and renewables that will power our future. Today, we have announced that we are ramping up our options for our flagship renewable scheme, contracts for difference, establishing new industries, boosting investment and creating jobs in our former industrial heartlands.

[Caroline Lucas]

That was a frankly extraordinary statement by the Minister. The idea that the solution to an energy crisis caused by high gas prices is to increase our reliance on gas seems pretty risible. The UK still holds the COP presidency and is, of course, bound by the Glasgow climate pact, so why is he ignoring the international agreement that

“limiting global warming to 1.5 °C requires rapid, deep and sustained reductions in global greenhouse gas emissions”

and giving the green light to the extraction of more oil and gas?

Will the Minister confirm whether he and his Government are actually still committed to net zero by 2050 and the interim targets? Frankly, judging by their actions, that seems to be in question.

Why is the Minister not listening to experts such as the International Energy Agency, which could not have been more explicit? Perhaps he has not read its “Net Zero by 2050” report, but if he had, he would know that 2021 is the cut-off point for the development of any new oil and gas fields if we want to hit internationally agreed climate goals. Does the Minister acknowledge that the proposals go against the spirit, if not the letter, of that warning?

Is the Minister aware that renewables are already cost competitive, with wind and solar beating new gas generation hands down? Let us not have any more of this guff about more transition fuels being needed.

Will the Minister explain to the House and to our constituents why the Government are not investing in real energy security for people? Why not roll out an ambitious street-by-street energy efficiency and insulation programme, instead of pretending that we need more oil and gas to keep our homes warm and to bring people’s bills down?

Why are Government decisions about new licences being taken behind closed doors? MPs only hear about them through media reports.

When does the Minister plan to update the Oil and Gas Authority’s usual processes and the environmental impact assessment framework to minimise the economic recovery of North sea reserves? When will he get rid of the outdated MER duty that calls on the Government to maximise economic recovery? He needs to be guided by the climate science and, quite frankly, he is not.

Finally, will the Minister agree that any Government recommendation to the OGA that undermines the House of Commons’ formal declaration of a climate emergency, as well as our international climate obligations, should at the very least be subject to a parliamentary vote?

[Greg Hands]

Let me first say that it is a pleasure to take a question from the hon. Lady. I have been in this role for four months, and I think I am right in saying that this is the first time that she has actually asked me a question about energy and climate change, so I am delighted to see her here today.

We are not increasing our dependence on gas. We are clear that we are increasing the production of renewables, which is actually part of the solution for the medium to long term—and even the short term. We are not resting on our laurels about having the world’s largest offshore wind sector; we are quadrupling that capacity over the decade. What we are not increasing is our dependence on imported foreign gas. The point of this is that our domestic production emits far less carbon and is obviously better for our energy security.

The hon. Lady says we are ignoring COP, but it is quite the opposite. The COP President continues to be hard at work for the rest of the year. Of course, we remain adherent to our net zero strategy, which I launched at this Dispatch Box back in October.

Renewables are cost-effective—the hon. Lady is quite right. They have become a lot more cost-effective thanks to the actions taken by this Government on contracts for difference and our hard work over 12 years to increase the percentage of our electricity generation coming from renewables from 7% to 43%.

The hon. Lady talks about decisions behind closed doors, but these are not decisions. These licences have already been licensed, and further regulatory processes will continue throughout the year.

The hon. Lady asked whether we are guided by the climate science. Of course we are. We are leading in climate science.

Finally, it is now 33 years since the Green party’s best ever electoral performance in the UK. I think it scored 12% in the 1989 election, but it has not come close since. Why is that? At that time, it was saying that it was impossible to take action on emissions while still growing the economy. This country and the Conservative party has proven the Green party comprehensively wrong. We have grown the economy by 78% while cutting emissions by 44%, delivering for the people of this country both on the economy and on the environment.

[Bob Blackman (Harrow East) (Con)]

My right hon. Friend mentions nuclear power. Does he welcome the successful nuclear fusion experiment that has taken place today? Does he agree that it is far better for us to produce our own gas and oil than to depend on expensive foreign imports?

[Greg Hands]

I entirely agree. A very important announcement on fusion is being made today by the Under-Secretary of State, my hon. Friend the Member for Mid Norfolk (George Freeman). My hon. Friend the Member for Harrow East (Bob Blackman) is quite right about the progress we are making in this place, which is opposed by the hon. Member for Brighton, Pavilion (Caroline Lucas), her party and various other Opposition parties. We are moving forward on nuclear. Money is going into the Rolls-Royce small modular reactors programme; Hinkley Point C is being built; we are moving towards a final investment case for a further nuclear power plant in this Parliament; and we have a future nuclear enabling fund. We are moving forward on nuclear, which is an essential part of this country’s future energy needs and energy security.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The truth is that the Government are thrashing around after what we now know has been a decade of failure on energy, particularly on the transition to a low-carbon energy economy. They have no answer to the energy crisis that millions of families in our country face.

This is not a long-term answer either. The energy price crisis is a fossil fuel crisis, so the long-term answer must be to go further and faster on zero-carbon energy, energy efficiency and clean energy storage. On energy security, the Opposition believe that the long-term answer lies in zero-carbon energy. We need a phased and just transition in the North sea, but that cannot be an excuse for business as usual and pretending that the climate crisis does not exist.

There is one crucial climate test that should be applied to the current proposals and other proposals: whether they are compatible with keeping global warming to 1.5°. In the energy White Paper, the Government said that they would

“develop the existing checkpoints in our processes before proceeding with future licensing rounds.”

Is the Minister saying that the proposals he describes are exempt from that statement in the energy White Paper? Can he explain how what he has said today is consistent with its approach? Can he tell the House whether he believes that any future licensing decisions must be compatible with keeping global warming to 1.5°? Can he tell us how that assessment will be made?

[Greg Hands]

I thank the hon. Gentleman for his questions. Of course, he could have made his own UQ application today on this very topic, but let me answer him.

Yes, we are absolutely committed to a zero-carbon energy system. We are committed to a decarbonised power sector by the year 2035, so long as it is consistent with security of supply, as well as being consistent with the net zero strategy to get the UK to net zero by 2050. I have not heard recently whether the Labour party is still committed to getting to net zero by 2030, which I think was in its manifesto at the last election. Perhaps it would be helpful if one day the hon. Gentleman updated us on that really very ambitious target.

On compatibility with action on global emissions, the answer is “Absolutely.” That is why a key part of the North sea transition deal was the climate compatibility checkpoint that we announced just a year ago. The consultation, which closes on 28 February, refers to future licences; the current licences would still need consent from the regulators. Nothing has changed in the Government’s position or in the process. We look forward to responding to the climate compatibility checkpoint consultation in due course.

[Robert Jenrick (Newark) (Con)]

Our commitment to net zero is not in any sense incompatible with making use of our domestic reserves. Otherwise, we will simply be reliant on imported gas from Putin and the Gulf, creating insecurity and greater emissions in the process. If we want our oil and gas companies to invest, we need to provide them with certainty. Will my right hon. Friend reaffirm the principles that I committed to as Exchequer Secretary, as other Treasury Ministers did: fiscal stability and maximising economic recovery in the North sea basin? It is through that combination that we can encourage our world-leading oil and gas companies to invest for the future.

[Greg Hands]

My right hon. Friend was a brilliant Exchequer Secretary.

As a former Treasury Minister, I can say how well he was regarded in Government and in this House for the important work that he did at HM Treasury. He is right: this is not in itself a debate between gas and renewables. The current debate is whether we get the gas that we currently need from the UK continental shelf or import it from abroad. Foreign imports come at a higher price in regard to emissions and our energy insecurity.

It is worth reminding ourselves that 50% of UK gas comes from the UK continental shelf; that is a good position to be in. An additional 30% comes from Norway, which I regard as a very good, stable and secure source. On the investment picture, he is also right—and the Chancellor was absolutely clear on this in his statement on Thursday—on the importance of more investment coming into the North sea, not just for the short term but for the transition going forward.

[Stephen Flynn (Aberdeen South) (SNP)]

I welcome this urgent question because it gives us all an opportunity in this Chamber to reflect upon the fact that when the UK Government need to meet their energy demands and their financial demands, the first thing they seek to do is to turn the tap on in Scotland and exploit our natural resources. Whilst they are willing to do that, they are simultaneously unwilling to deliver carbon capture and underground storage in the north-east of Scotland, unwilling to match the Scottish Government’s £500 million just transition find, and of course unwilling to finally end the renewables robbery that is the TNUoS—transmission network use of system—account charging scandal. May I ask the Secretary of State a very simple question: when is he going to show similar haste on those important issues?

[Greg Hands]

I listen to the hon. Gentleman week in, week out, claiming that the UK Government, when it comes to energy, are doing down Scotland. The exact opposite is the truth. We are very supportive of Scottish nuclear, which he is opposed to. The Hunterston nuclear plant closed just a few weeks ago, which had provided, at low cost, zero-carbon energy to all of Scotland’s homes on an equivalent basis for 31 years. We heard not a peep out of him. We hear the Scottish First Minister recommending that particular fields not be given approval. How does that land among the 200,000 people in this country who are dependent on the oil and gas sector, of which about 40%—80,000 or so—are in Scotland, particularly north-east Scotland?

On CCUS, the hon. Gentleman knows that the Acorn cluster is the reserve cluster, and has significant UK Government support. I have met with Storegga and many other participants in recent weeks. The transition review is led by Ofgem and of course we will look at cost and affordability in relation to transition.

I am afraid that the hon. Gentleman’s ideological opposition to nuclear, and now the increased opposition to oil and gas and the North sea transition, shows that the SNP is not fit to run an energy policy for Scotland, and the people of Scotland will be thankful that the matter is reserved.

[Sir Desmond Swayne (New Forest West) (Con)]

Nothing could be more dangerous to our position as a secure destination for investment than the imposition of windfall taxes, could it?

[Greg Hands]

My right hon. Friend makes a strong point. Of course the line from the Treasury—speaking as a former Treasury Minister—is that all taxes are always under review, but I repeat the words of the Chancellor from Thursday, that a windfall tax is “superficially appealing” but probably counterproductive. He reminded us that oil and gas companies pay corporation at twice the rate of non-oil and gas companies, and that the sector has already paid some £33.7 billion in taxes since the year 2010.

[Kerry McCarthy (Bristol East) (Lab)]

In November, the COP President was reduced to tears after ambitions to phase out fossil fuels were voted down at the last minute. Three months later, the UK Government are tanking efforts to keep us to 1.5^º by approving these six new oilfields. It is not just about looking at the energy supply and demand in this country; it is about setting an example. If we are to approve this fossil fuel exploration, what is to stop other countries from following suit?

[Greg Hands]

I very much welcome the hon. Lady’s question and the chance to put on the record the brilliant job done by the COP President. At the start of the year running up to the conference, only 30% of global GDP was covered by a net zero commitment. That rose to 90% after the conference, which sets an example. I am the co-chair of the Powering Past Coal Alliance, an international group calling for the phasing out of coal—something I am proud of.

[Adam Afriyie (Windsor) (Con)]

There is one thing that none of us in this House must ever apologise for: defending the interests of our constituents. I look across my constituency and across the country, and it is quite clear that energy bills are going to soar. That is partially due to a lack of energy security. But let us be clear: coal is a very dirty fossil fuel; gas is less so; nuclear is fairly clean; and renewable is right at the top of the tree. I commend the Government for recognising that we must never let the perfect be the enemy of the good, by ensuring that we get cheaper fuel supply to our people.

[Greg Hands]

My hon. Friend puts it very well and succinctly. The key word to use is “transition”: the transition from our existing energy mix to the energy of the future.

[Wera Hobhouse (Bath) (LD)]

Granting new oil and gas exploration in the North sea flies in the face of the Government’s net zero commitment. Closer to home, the Tory-controlled Surrey County Council is defending in court a decision to approve four oil wells in Horse Hill, Surrey. Why are the Government getting behind Surrey County Council’s defending in court the destruction of green land and the introduction of massive new CO₂ pollution, in direct conflict with their own net zero ambition?

[Greg Hands]

On the second matter, it would not be right for me to opine on planning decisions. On the first, the licences are not new—I do not think the hon. Lady heard my statement—regardless of what she may read in The Daily Telegraph. In some cases, they were granted as early as 1970. The issue is how those licences are taken forward once they have regulatory approval.

[David Duguid (Banff and Buchan) (Con)]

I welcome my right hon. Friend’s confirmation that these are not new fields and, in some cases, have been licensed for many decades. Can he confirm that these fields and their production profiles are already factored into this Government’s energy transition plans for net zero by 2050—not only the Government’s plans but the recommendations of the Climate Change Committee? As part of an already declining domestic production profile, even those and further oil and gas fields that are still to come do not close the gap between current oil and gas provision and renewables, although that gap will steadily close as time goes on.

[Greg Hands]

My hon. Friend makes some strong points. He is absolutely right that these are not new fields; they are fields that have already been licensed and that therefore have been taken into account in our net zero strategy and in our upcoming carbon budgets. What that would mean if they were to get regulatory approval—I stress that that is an independent process—is that probably, in the future, we would be importing more gas, which would come with higher emissions and at a higher price.

[Madam Deputy Speaker (Dame Rosie Winterton)]

We do have another urgent question and a statement before we even come to the main business, so I urge colleagues to keep their questions brief.

[Matt Western (Warwick and Leamington) (Lab)]

We have a Prime Minister whose approach is “Do as I say, not as I do”. In his speech to the United Nations General Assembly on 22 September last year, he stated:

“We are approaching that critical turning point—in less than two months—when we must show that we are…learning, and maturing, and finally taking responsibility for the destruction we are inflicting...It is time for humanity to grow up.”

I do not care much for the Prime Minister, but I care about this country’s reputation. Has he misled the United Nations?

[Greg Hands]

We are proud of the record and our delivery at COP, and the COP President continues to deliver. It is a fantastic achievement to get coal written into a COP document for the first time. We should be proud of the fact that we are the co-chair of the Powering Past Coal Alliance, and the fact that so much more of the world’s GDP has been under net zero obligations at the end of the UK’s year than at the beginning.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

The UK’s journey to net zero will still require some fossil fuels during the transition period. While my right hon. Friend focuses on our sustainable future, will he ensure that domestic production meets our transition needs? If we do not see that, all we will see is increased emissions.

[Greg Hands]

My hon. Friend is right: this is an industry in transition, which is why we did the North sea transition deal with the sector last March. There are obligations in both directions. For instance, the industry has an obligation to electrify offshore, while we need to work with the industry to transform jobs, skillsets and the energy mix. As my hon. Friend says, this is a transition, not an attempt to close down the sector, which I think is what the Green party is calling for.

[Sammy Wilson (East Antrim) (DUP)]

I welcome this decision, especially because it will secure important investment, create jobs, help to reduce fuel imports, give us greater fuel security, and indeed, in the longer term, help to reduce the energy crisis that the country faces. Does the Minister agree that the objective of any energy policy should be to safeguard those who are vulnerable, and that that should take precedence over the possibility that any such policy will influence global temperatures in the future?

[Greg Hands]

The right hon. Gentleman has asked a probing question. I would say that we have both those obligations. We are obligated to take action on climate change and reducing emissions, and the UK is a world leader in that regard. We are also obligated to deliver energy, at an affordable price, to the people of this country. The £9.1 billion package of support that the Chancellor announced last week, with the £350 rebate on bills, was intended to do precisely that.

[Rachael Maskell (York Central) (Lab/Co-op)]

The problem is that the Minister is still talking about 2050 when we have a crisis right now. It is clear that the Government refused to support a windfall tax on the energy companies so that they could invest in their oil and gas production, rather than the money going to our constituents who are struggling with their energy bills. That is not going to be settled, so may I ask the Minister why he will not impose a windfall tax on these companies so that they can contribute to the just transition and invest in green energy for the future?

[Greg Hands]

The Chancellor outlined the disadvantages of a windfall tax at the Dispatch Box last Thursday, when he said that it was “superficially appealing” but probably counterproductive. He also said that oil and gas companies were paying corporation tax at twice the rate paid by other companies, and that taxing UK activity on something that is traded globally would probably cost UK jobs and drive up the price of retail fuel, and would certainly make the UK less energy-secure.

[Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)]

I cautiously welcome this news. It will help to secure 100,000 jobs in the industry and in the north-east of Scotland, and I think that in the current political times it will help to deliver resilience to energy supplies not just here but across Europe.

Will the Government commit themselves to taking three actions in parallel to help to save the planet as well as saving jobs? First, will they attach a zero-carbon obligation to each new licence underpinned with fiscal and fine regimes? Secondly, will they accelerate just transition approval for the Acorn carbon capture and storage cluster? Thirdly, will the Minister meet me to discuss how to support the development of carbon capture technologies at sites such as the Mossmorran Natural Gas Liquids and Ethylene plants in my constituency?

[Greg Hands]

I thank the hon. Gentleman for taking a slightly more constructive approach than his Scottish National party colleague, the hon. Member for Aberdeen South (Stephen Flynn). He is right: we can save the planet and save jobs at the same time. He called for a zero-carbon obligation, but I suggest that he should wait to see the results of the consultation on the climate compatibility checkpoint; he will have heard what I said earlier about how the UK Government are supporting carbon capture, utilisation and storage; and as for meeting him, of course I will do so.

[Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)]

According to UK statistics, the amount of oil and gas sourced from the North and Celtic seas has ballooned. It has doubled year on year. One oil company chief executive is reported to have described his company as

“literally like a cash machine”

as he handed billions of pounds to shareholders as a result of those increased exports. Is the reality not that that exploitation has more to do with maximising profits and tax revenues than dealing with the domestic energy crisis?

[Greg Hands]

I thank the hon. Gentleman for that question. I will need to have a look at the timeframe for his statistic on doubling production, because clearly during the first year of the pandemic, in particular, production was very low. I would have to look at that. I think his call is for higher taxation, and again it is worth looking at the tax being paid by the sector. Since 2010, the sector has paid £33.7 billion in taxes, and £375 billion over the past 50 years.

[Jim Shannon (Strangford) (DUP)]

Although I, like many, welcome the fact that new gas and oil supply can be found in the North sea, the timescale will not help fuel poverty in the interim. What is the Department doing to secure fuel at appropriate prices for working families in my constituency of Strangford and, indeed, across the whole United Kingdom of Great Britain and Northern Ireland?

[Greg Hands]

The hon. Gentleman is right that matters being discussed today are for gas production in the future, but I refer him to the Chancellor’s statement to the House on Thursday for the package of support being provided by the Government. That will include £350 on bills, made up of a £200 discount on the bill and a £150 rebate on council tax. We are also raising the national minimum wage from £8.91 an hour to £9.50, we have frozen fuel duty for 12 years, and, of course, we are providing additional discretionary funds to local authorities to make sure that those who are not covered by those schemes are.