Tuesday 26th March 2024
(8 months, 3 weeks ago)
Lords ChamberOffshore Petroleum Licensing Bill 2023-24 View all Offshore Petroleum Licensing Bill 2023-24 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 20 February 2024 - (20 Feb 2024)
The Parliamentary Under-Secretary of State, Department for Energy Security and Net Zero (Lord Callanan) (Con)
My Lords, the UK recently achieved an important milestone in the global fight against climate change. We were the first major economy to set a net-zero target in law, and we are now the first major economy to have halved our emissions since 1990. Of course, we are not resting on our laurels as we pursue our goal to reduce greenhouse gas emissions by at least 68% by 2030. Between 2010 and 2023, the UK has seen £300 billion of investment into low-carbon sectors, demonstrating that our approach to net zero is working. That is because it is an approach that is proportionate, fair and grounded in reality.
We recognise, of course, that the UK still depends on fossil fuels for meeting around 75% of the energy demand and that that is something that cannot be changed overnight. The independent Climate Change Committee’s data shows that even in 2050, when we reach net zero, oil and gas are expected to continue to play an important, albeit smaller, part in meeting demand and maintaining our national energy security, so managing our remaining reserves effectively will be critical to the transition, and that is why the Government are bringing forward this Bill.
I believe that many of us across the House agree that as a country we must reduce our reliance on oil and gas, but as we do so the question we must answer is: from where do we want to source that oil and gas to meet that residual demand? Oil and gas production in the North Sea has been hugely successful. It has created and supported hundreds of thousands of British jobs and contributed billions in tax revenue over many decades. It continues to provide us with secure, reliable energy and to support jobs and the economy.
North Sea gas currently provides around half the UK demand. OEUK figures show that the sector supports around 200,000 jobs, adds around £16 billion annually to the economy and brings in billions in tax revenue. I think particularly of how important tax revenue like that was in supporting thousands of households with their energy bills following Russia’s illegal invasion of Ukraine. This unprecedented support, among the most generous in Europe, was equal to around half the average family’s energy bill or about £1,500. Without tax revenue from industry, that burden would have fallen to taxpayers alone.
Domestic production is also an important part of our national energy security and the energy security of many of our European neighbours. The simple fact is that if we did not have access to this secure and reliable source of energy, we would be even more reliant on imports. The Government’s position is clear: where oil and gas are needed in the decades to come, as much as possible should come from our own waters.
Having said all that, the North Sea is a mature basin and production is in decline. Even with continued exploration and development, production from the basin is expected to decline by around 7% a year, which is, incidentally, faster than the average that is globally required to align with the IPCC’s 1.5 degrees Celsius pathway. By 2050, the UK’s North Sea oil and gas production is projected to fall by over 90% from today’s levels. The choice before us is whether we seek to reduce our reliance on imports through continuing to issue UK production licences or stop investment in British oil and gas and import even more from abroad.
Without investment in new UK oil and gas fields, we would lose out on more than 1 billion barrels of oil and gas, worth billions in revenue. More than this, our production would decline faster than we could build low-carbon replacements and before the workers in the sector could smoothly transition to jobs in renewable industries. We estimate that such a decline would increase UK import dependence from around 60% now to 70% by 2035. That is more liquefied natural gas with higher production emissions and none of the economic or energy security benefits.
If there was no investment, tens of thousands of skilled British jobs would be placed in jeopardy. Industry leaders have already warned that North Sea workers are at risk of becoming
“the coal miners of our generation”
if we fail to manage the declining North Sea basin in a sustainable way. We cannot allow this to happen.
A recent report from Robert Gordon University found that over 90% of the UK’s oil and gas workforce have medium to high skills transferability to the offshore renewables sector. A key commitment of the North Sea transition deal is to ensure that people and skills from the existing oil and gas workforce are transferrable across the wider energy sector. Make no mistake: these skills are in demand the world over. If they are not wanted here to deliver our own production and our own energy transition, they will surely go overseas and deliver someone else’s.
The general secretary of the GMB—not somebody I quote very often—recently wrote:
“In an increasingly volatile world the UK needs plans and not bans for the future of our energy sector and the transition to net zero”.
In this particular case, the Government could not agree more. We need oil and gas and our domestic oil and gas sector. Industry knows it, the unions know it, everybody knows it—except, perhaps, the noble Lord opposite—and I urge those opposed to continued licensing to think again.
We all want a successful energy transition. This means accepting that oil and gas will continue to play a role in meeting our energy demands for decades to come, and supporting investment and jobs in the North Sea through new licensing so that we can continue to produce that oil and gas from our own resources. However, it also means that during this transition, while we are decarbonising all other sectors of the economy, we should also produce these fuels in the cleanest way possible.
Since 2019, the carbon intensity of global oil and gas production has fallen by around 3%. From the North Sea, it has fallen by 14%. We will go further. The North Sea transition deal commits the offshore oil and gas sector to reducing emissions from operations to 50% of 2018 levels by 2030, with emissions already falling by 23% by 2022. To support this, we have committed to zero routine flaring and venting for both oil and gas by 2030, going further than the World Bank’s zero routine flaring initiative. Industry has made significant progress in meeting this target, with already a near 50% reduction in flaring since 2018. The NSTA already expects all new developments to have zero routine flaring and venting.
This Bill is part of the effective management of the energy transition. This new legislation will require the North Sea Transition Authority to run an annual process for new exploration and production licences in the UK continental shelf, subject to several key tests being met: first, that the UK is projected to remain a net importer of both oil and gas, and, secondly, that carbon emissions associated with UK gas are lower than imported liquefied natural gas. The tests ensure that annual licensing can take place only where it remains the right thing to do.
A more predictable licensing regime will not take us back to the era of peak production in the North Sea; as I said, the reality is that this is a fast-declining basin. Instead, new licensing will simply seek to manage that decline rather than to increase oil and gas production above current levels. However, it will give industry the certainty and confidence it needs to support the continued investment necessary both for our energy security and to help deliver the energy transition. That is an investment worth billions of pounds from companies such as Shell—which is also planning major investment in low-carbon and zero-carbon infrastructure, including offshore wind, hydrogen and carbon capture, utilisation and storage—and BP, which plans to invest up to £18 billion in the UK’s energy system by the end of 2030, in addition to its operating spend in the United Kingdom. The Bill demonstrates the Government’s ongoing commitment to the industry and helps to provide the certainty to ensure that the UK continental shelf remains an attractive investment as we transition to renewables.
The UK is a world leader on climate. We are one of the most decarbonised economies in the world and have met every one of our legally binding carbon budgets, but the fact remains that we will still need oil and gas in 2050, and it is simply common sense to use what we have. If we produce oil and gas here, it is the British public and our European allies—not foreign, and potentially hostile, regimes—that will benefit. If we produce here, we can be safe in the knowledge that our stringent regulations have kept the environment safe. If we produce here, we can reduce our reliance on imports, such as LNG, that have up to four times the production emissions of domestic production. If we produce here, we support a vibrant industrial sector, British jobs and communities that will be key to delivering the energy transition, rather than see them disappear overseas to help to deliver someone else’s. I believe that the choice is clear.
I will leave the House with the words of the chief executive of the NSTA, who said that
“we won’t get to net zero without oil and gas”
and that
“producing as much of the oil and gas we need as possible domestically is the right thing to do, for security and the economy”.
The North Sea has powered us through the last half century and, if we manage the transition correctly, it will power us through the next. I beg to move.
Lord Lennie (Lab)
My Lords, it is a pleasure to follow the Minister, who set out the Government’s reasoning for the Bill. It is very straightforward in what it does: it would require the North Sea Transition Authority to run an annual oil and gas licensing round, inviting applications for new production licences in our offshore waters.
What is less clear is what the Bill will actually achieve. While families and businesses across the country are feeling the impact of the Government’s energy policy, which has left us the worst hit in western Europe, the Government have brought forward this Bill. It is a Bill that the Government have already admitted will not take a penny off the outrageously high energy bills that people are struggling to pay. It was our high dependency on fossil fuels that put British households in the recent situation that they have been in, so the Bill doubles down.
It is a Bill that will not do anything to address our energy security, as oil and gas are sold, as the Minister knows, on the international market—a case made expertly by the noble Lord, Lord Browne of Madingley, who, I suggest, knows his stuff. The more we depend on fossil fuels, the more we will depend on those who control, and set the prices on, that market.
It is a Bill that is not necessary to bring down energy imports; the only way to do that for good is to produce more clean power at home that we can control. It will not send the right signal to investors on the UK’s commitment to green industry. It is not good for jobs as the number of North Sea workers decreases, or for the public purse, which has spent far more on subsidies recently than any possible tax revenue. It is certainly not good for the environment; in the words of the Government’s former net zero tsar:
“There is no such thing as a new net zero oilfield”.
So what exactly is it intended to achieve? All we can see is areas where it takes us in the wrong direction, not least on protecting the environment. We are certainly not alone in this view. The way to enhance energy security, according to the National Infrastructure Commission, is to move away from fossil fuels. In its words:
“Reliance on fossil fuels means exposure to geopolitical shocks that impact the price of these internationally traded commodities”.
This Bill does the opposite.
As for investment, the CEO of Aviva made it very clear that new oil and gas drilling
“puts at clear risk the jobs, growth and the additional investment the UK requires to become more climate ready”.
Then there are the thoughts of the former net zero tsar who quit Parliament over this Bill, the right honourable Chris Skidmore, and the widely respected former COP president, the right honourable Alok Sharma. Chris Skidmore called the Bill
“another historic mistake and a grave error”
that is
“totally against the sentiment and direction of the global stocktake”.
Furthermore, he reported from Dubai that the UK’s international leadership will be undermined until a moratorium on new licences is resumed. Alok Sharma said that it would
“reinforce the … perception of the UK’s rowing back from climate action … and that does make our international partners question the seriousness with which we take our international commitments”.—[Official Report, Commons, 22/1/24; col. 52.]
With how little of substance the Bill will achieve, the only obvious answer is that the Government see it as a symbol. As we have made clear, the symbol that is being sent is very much the wrong one.
We will try to improve the Bill during the remaining stages, but let me be clear. First, what is needed is not an improvement to the Bill but a whole different approach. We need the UK to be made a clean energy superpower with cheap and secure energy so that families and businesses are protected from spiralling bills, and jobs and investment are boosted across the country. That is the Labour Party’s mission: to cut bills, create jobs, deliver energy security and provide climate leadership. This Bill does pretty much the opposite. But given that the Government are determined to press on with a Bill that will achieve nothing, it would be irresponsible not to seek to improve it. So we will look to see what we can do.
The Bill contains two tests that should be passed before the North Sea Transition Authority can proceed to issue a licence—but these tests, as drafted, cannot be failed. Liquefied natural gas will always be more greenhouse gas intensive in production than UK natural gas. There is no situation in which the North Sea field will meet our total demand for gas and oil. Tests that cannot be failed are simply pointless. We seek to replace these tests with ones that produce a proper judgment about whether a licence should be issued. These tests will be based first and foremost on whether issuing a licence would be in line with our climate change goals. I also look forward to the House considering other areas in Committee—methane, leak detection, protection of green areas—and seeing where we can find cross-party agreement to maybe even give this purposeless Bill some purpose.
The Bill does, however, have one merit. It has given rise to one of the most remarkable speeches made in the other place, by Dr Alan Whitehead MP. I will finish by quoting part of his speech:
“The whole Bill appears to have come about as a result of a wheeze, cooked up by a couple of strategy advisers over a heavy lunch, to put the Opposition on the wrong foot … Quite honestly, that wheeze should have been put down as soon as the effects of the heavy lunch wore off, but instead it has … finally made it to the Floor of the House in the shape of this risible Bill”.—[Official Report, Commons, 22/1/24; col. 105.]
Exactly so.
Baroness Hayman (CB)
My Lords, I declare my interests as chair of Peers for the Planet and director of the associated company. Perhaps I will take up from where the noble Lord, Lord Lennie, left off.
With just one substantive clause, this could be called a modest Bill, but I am afraid that, to coin a phrase, it has much to be modest about. Its central provision, providing for an annual round of licensing, was deemed unnecessary by the North Sea Transition Authority. We learn from the Financial Times that the authority was concerned not only that it was an unnecessary “wheeze”, to use the words of the noble Lord, Lord Lennie, but that potentially it undermines the independence of that authority. The two so-called tests to be fulfilled before licences are granted are, as has been pointed out, essentially unfailable—so what about the Government’s justification that the Bill would strengthen the UK’s energy security and reduce reliance on volatile energy markets?
A coruscating commentary from academics at the UK Energy Research Centre described it as a distraction, saying:
“Annual licensing rounds will not ensure the UK’s energy security … Any oil and gas developed as a consequence of new licences is unlikely to come to market quickly and will be sold at international market prices”.
These themes were taken up by the former COP 26 president, Sir Alok Sharma, during debates in the other place, who emphasised that
“the oil and gas extracted from the North sea is owned by private enterprises and the Government do not get to control to whom it is sold”.—[Official Report, Commons, 22/1/24; col. 52.]
Not even the Secretary of State for the Environment still claims that this legislation will help customers with their energy bills because, as Sir Alok pointed out, the products will be sold on the international market. The flaws in our domestic pricing systems mean that the unnecessarily high costs of sustainably produced energy will continue to be high until we solve the problem of the pegging of energy prices. No wonder the Bill was what finally broke the camel’s back for Chris Skidmore, the man who signed the net-zero target into law for the Conservative Government, who was chosen by the Government to undertake the net-zero review and who, as has been said, resigned over it.
We all recognise that we are in transition and—as the Minister often reminds us and did again today—we will need supplies, albeit reducing supplies, of oil and gas for some time. However, we need to move that transition along with more investment in cheaper, cleaner, homegrown power and in the alternative sources that are necessary to cater for the issues of intermittency.
Rather than offering encouragement to oil and gas companies, which, despite their claims, do very little in the renewable sector—it receives only a tiny percentage of their UK investment—we should focus attention and incentives on investing in onshore and offshore wind, tidal power, nuclear power, battery storage and the back to basics energy efficiency with which the Minister knows many in this House are deeply concerned. Moreover, the Institute for Energy Economics and Financial Analysis is concerned that the Bill could make our existing challenge of decarbonising, to which the Minister referred, harder. The institute says:
“Stimulating both offshore wind and oil and gas sectors will spur competition over limited supply chain resources. This will increase costs which will disproportionately affect the offshore wind sector”.
The Explanatory Notes to the Bill state that annual licensing will
“provide greater certainty to the industry and potential investors”,
but we need that certainty and encouragement for the industries and technologies of the future, not of the past. We need to look at the interests of workers in the energy sector in terms of their future and how we can transfer their invaluable skills—not abroad, as the Minister said, but into the sustainable, clean energies in this country where the opportunities are and where the growth is higher than it is in oil and gas.
New licensing rounds are unlikely to restore offshore oil and gas jobs that have been lost steadily over the years as the basin declines, as the Minister said. Despite increasingly favourable tax regimes having been implemented since 2015 and high levels of investment, North Sea oil is a declining basin and roles in oil and gas in Scotland decreased by 36%. Over the same period, renewable roles increased by 70%. In hard numbers, recent ONS figures stated that there were nearly 48,000 roles in renewable energy—considerably more than the roughly 30,000 direct roles remaining in oil and gas. This is the growth economy of the future and we should invest in its workers. We should recognise that the net-zero economy is outstripping the rest of the economy, with 9% year-on-year growth, as recently reported by the ECIU.
In many ways, the Bill is a paradox. It achieves very little in energy security and in fulfilling the Government’s stated aims. It does not do what it claims or what is necessary. But because it does not do very much that does not mean that it is harmless. It has a very clear impact in the negative messages that it conveys about the Government’s real commitment to the action that we need to transition successfully to the economy powered by clean energy that we need. Sadly, it reinforces the messaging that has been dripping out from the Government in the last 18 months and the perception of “slowing UK climate ambition”, as the CCC puts it. That perception—indeed, that reality—is deeply damaging to the international reputation on climate change that the UK has built, certainly since the passing of the Climate Change Act and arguably since Margaret Thatcher recognised the centrality of the issue of climate change in her speech 35 years ago. We cannot continue to lead, as the Government say that they have been proud to, if we continually water down our national commitments and priorities.
It is a modest Bill but, sadly, a damaging one, which looks backwards to the technologies and industries of the past rather than to the sustainable growth of the future. However, this House concentrates on improving legislation so, however wrong-headed in principle we consider this to be, I look forward with others to our discussions in Committee and on Report and to exploring amendments on the marine environment, on supporting workers transitioning to new roles in clean energy and on ending the unnecessary practice of venting and flaring, which continues to add such potent pollution to our atmosphere.
I do not hold out much hope that the Minister will move much on the objections in principle to the Bill, but I hope that he will at least be willing to look seriously at changes that could contribute to the thriving low-carbon and nature-positive economy which the Government recognise that the UK needs.
Lord Lilley (Con)
My Lords, it is a great pleasure to follow the noble Baroness, Lady Hayman, and the noble Lord, Lord Lennie, both of whom seem to be against the Bill because the positives are small. One is normally against things because they are negative. The only negative the noble Baroness, Lady Hayman, came up with was that it sends out the wrong messages. I have observed a general rule in politics, that when the only argument anyone has against something is that it sends out the wrong messages, they do not really have an argument against it at all.
The question that faces us is whether this Bill is compatible with our commitment to reach net zero by 2050. It is a huge challenge: a huge engineering challenge that, according to the former chief scientific adviser to the Department for Environment and professor of engineering at Cambridge, Professor Kelly, is impossible to achieve; let us hope he is wrong. It is a huge economic challenge that, according to a former economist at the World Bank and now professor of energy economics at Edinburgh University, is economically impossible to achieve; let us hope that he too is wrong. Let us assume for the purposes of this debate that these objectives are achievable. What we cannot do is add problems, even small ones, to those mammoth engineering and economics problems by doing things that add to emissions, rather than reduce them; that add to costs, rather than reduce them; and that reduce, albeit by a small amount, our own GDP and tax revenues, which we will need to pay for the transition to net zero.
The sensible path to net zero that we, like other like- minded countries, have adopted is to phase out demand for fossil fuels, not their supply. If energy companies choose to invest in more fossil fuel capacity than is needed, they will lose money; that should not be our primary concern, except for those who happen to have a financial interest in the oil industry. If the UK unilaterally stops producing fossil fuels, which would be a bizarre thing to do if we do not ban their import, others will step in and supply the fossil fuels that we failed to produce but could have. They will also replace any fossil fuels that we provided to the rest of the world. If the whole world were to try to reduce the supply of fossil fuels, as well as phasing out demand, that would have no effect if we did not phase out the supply as rapidly as we reduced the demand. Or, if we phased out the supply more rapidly than we reduced the demand, it would create shortages, massive price rises and huge profits for the oil industry. It would do to ourselves and the world exactly what Putin did to us when he invaded Ukraine and reduced supplies. Is that what the opponents of this Bill want to achieve? Or are they solely interested in the UK stopping the production of oil and gas, rather than the rest of the world stopping it?
Even if our fossil fuels did not involve fewer emissions in extraction and transport, or, in the case of gas, additional emissions over and above that in liquefaction and regasification, there would still be a very sensible case for us to keep producing such oil and gas as is available in the North Sea. Remember, the UK plans to reduce emissions not just by reducing demand for and use of fossil fuels, but by employing carbon capture and storage. That is a sensible thing to do because, according to the Climate Change Committee, our estimates and those of others suggest that without resort to carbon capture and storage, the cost of meeting the 2050 targets would be twice as high. We will use carbon capture and storage, which means we will continue to use oil and gas up to and after 2050—unless, of course, people on the other side want to double the cost of meeting the net-zero commitment.
I got the impression from the noble Lord, Lord Lennie, that the Labour Party’s approach to this is based on the assumption that there is a choice between continuing to produce new oil and gas fields in the North Sea and developing renewables in the North Sea and elsewhere. There is no such alternative. We can do both, we are doing both and we should continue to do so. He also argued, as did the noble Baroness, that all the benefits of producing oil and gas in the North Sea are small ones: there will be only a small benefit in emissions reductions; there will be only a small benefit to the economy; there will be only a small benefit in extra tax revenues; and there will be only a small benefit in saving jobs and energy security. Well, small benefits are better than none, and we should pocket them if we can. The noble Baroness quoted Global Witness evidence that the claim that the oil and gas industry employs 200,000 jobs is wrong. She said— and I have no reason to doubt her or Global Witness—that the real figure is 27,600. Global Witness says that this does not matter, but it still seems a lot of jobs. It is pretty heartless to say to those 27,600 people, who are largely in Scotland, that their jobs do not matter and they can probably find a job in the renewables industry, if they are lucky, because they have transferable skills, notwithstanding the disruption and the need to move.
The other argument—
Baroness Hayman (CB)
I am grateful to the noble Lord for giving way. He quoted me; otherwise, I would not interrupt him on Second Reading. I did not quote the Global Witness figures—which I do have—because they are complicated and quite difficult to discern. I quoted the ONS figures, which state that, over the period to which they refer, renewable roles increased by 70%, whereas in hard numbers, there were nearly 48,000 roles in renewable energy, which is considerably more than the 30,000 direct roles remaining in oil and gas. I did not talk about the 200,000 figure; I gave simply the ONS figures showing that there are more jobs in renewables than in oil and gas, and they are growing faster.
Lord Lilley (Con)
I am grateful to the noble Baroness for that clarification. Somebody used the 200,000 figure—it must have been the noble Lord, Lord Lennie. Anyway, it does not matter.
Lord Lilley (Con)
The Minister did. The noble Baroness has acknowledged that the figure is about 30,000, rather than 27,600; I do not really see the difference, frankly. The point is not which figure is bigger. Why should we sacrifice 30,000 jobs?
Lord Lilley (Con)
The proposal is to sacrifice them if we phase out that industry more rapidly than would otherwise occur. I give way to the noble Baroness if she has some alternative.
Baroness Hayman (CB)
I think I quoted the Minister correctly. He talked about the invaluable skills of people in the oil and gas industry, and how those could be transferred into our own industries and not lost to foreign competitors. When I went to a wind farm, the guy who was helping us to go right to the top of the wind turbine told me that he used to work on the oil rigs in the North Sea. He had seen the way the wind was blowing—if that is the correct term—and he took a job in renewable energy, so I am not in the business of sacrificing anybody’s jobs.
Lord Lilley (Con)
I mentioned the possibility that people were claiming they could move across, and some of them will, but it will mean disruption. We should not unnecessarily require people to give up a job and —hopefully—take on another one. As the noble Baroness said, these jobs already exist and will go on increasing in number if we increase investment in renewables. I have not argued against that at all. The two types of job are perfectly compatible. Both can exist side by side, instead of there being only one lot of jobs.
The other argument is that 80% of our oil is sent overseas to be refined, and so production of our own crude oil does not result in any security. I used to be an oil analyst in the City, examining how these things work. If, in a crisis, a country has supplies of crude, it can trade it for other types of crude that work in its own refineries. This is how the market works. It does give you security because you can say, “We will send you that and, in return, we want products or the equivalent amount of crude that we can refine ourselves”. It gives greater security—not a huge amount because we do not have a huge amount of oil and gas, but a bit of security is better than none.
The arguments used by the noble Baroness and the noble Lord, Lord Lennie, and in most of the briefing notes that I have seen, are all about how small the advantages from the Bill will be. The Climate Change Committee—the Government’s official independent adviser—has come out against this Bill and the Government’s decision to continue licensing new fields in the North Sea. I put the arguments I have made so far to its outgoing chairman, the noble Lord, Lord Deben, who is a colleague and my old friend, when he appeared before the Environment and Climate Change Committee. I asked him whether he wanted the whole world to phase out oil and gas, or just the UK. He said, in effect, “Just the UK”. He said:
“The world is producing oil sufficient to meet our needs … There are many countries in the world that will still be producing oil and have no intention of reducing that. There are other countries that could produce oil and gas and have to make a choice between going down that route and going down the route of renewables. We have a duty to try to get them to make the right decision because otherwise we will destroy our world and ourselves … We have to get other countries to do the right thing … If you say to a country that does not have oil, ‘You have a chance to produce oil and your future will be with oil’, I am afraid it will not go for renewables, even though this is the real answer … We have to set an example”.
I find that argument absolutely pathetic and incredible. The idea that phasing out production in the North Sea more rapidly than need be is going to persuade some African country which finds oil not to produce its oil but to go down the route of producing renewables is just ludicrous. It could, of course, do both. We should recognise that this is the only argument that the Government’s own independent advisers have against the Bill.
We should recognise that, in law, the Climate Change Committee has no role in advising about the supply of oil and gas. Its role is about phasing out emissions, so it is acting ultra vires even in coming out with its recommendations against this Bill. That is as maybe.
Other arguments suggest that it would be bad for the environment—that dolphins and other wildlife would be disturbed by offshore oilfields. Of course, they would be equally disturbed by offshore wind farms. This does not seem a wholly credible argument.
Most people argue as if allowing petroleum licences and producing renewables are alternatives. The Bill will not stop renewables at all. In so far as it boosts the economy and tax revenues, it will help fund the transition. There is no time limit on speeches. In my view, by the same logic that applies to the Bill, we should also allow the production of oil and gas on shore. We should license onshore exploration and drilling for shale gas, subject to a local referendum in the area where it occurs, and to allowing the companies that wish to drill to offer incentives to those in that area. I have been told that they are prepared to pay £1,000 per head and subsequently to offer cheap gas if they find it.
Why do we not do this? I know enough about the oil industry to know that everything is uncertain, but there is a lot down there. I do not know whether or not we can get it out of the shale. If we can, all the arguments that there is only a small amount disappear because the potential quantities are very large.
I hope that we will not be carried away by those who object to producing oil and gas. It is a luxury belief. They can oppose production because it has no direct effect on them, but it will marginally impoverish the rest of us. This is not something to which we should give in.
Baroness Jones of Moulsecoomb (GP)
My Lords, I shall do my best to not be long-winded and boring.
This Bill is yet another example of this Government’s colossal stupidity. They are a deliquescent Government that really should stop putting Bills through both Houses. It is also quite dangerous. It is a climate change deniers’ charter. I guess it came from Tufton Street and all the Conservative Party donors attached to the Global Warming Policy Foundation, probably helped by people in the oil and gas industry kindly donating millions of pounds to the Conservative Party.
These people make profit from pollution. They want to carry on doing so for as long as they can. They do not like net zero and renewables because they mean less money for them. They do not like the idea of less plastic in the world because plastic means oil and that is a money-spinner for them as well. They do not like new solar and heat pumps being standard on new homes because this affects their profits too. These people are killing the planet while helping to keep the Conservative Party solvent.
What is their solution to the climate crisis facing us all? It is carbon capture and storage, on which the Government are spending billions. At the same time—the irony—they are bringing in this Bill, which will severely damage nature’s own carbon capture and storage system: the ocean. It has proof of concept over probably a couple of billion years. This is far more efficient than anything we can dream up.
As an aside, I was delighted to hear the noble Lord, Lord Lennie, talk about Labour’s commitments after the next election. I shall look forward to helping it and holding it to account on that.
The Government’s big idea is to use taxpayers’ money to pump all the carbon down oil and gas wells so that they can make a lot of money from it. Perhaps the Minister can confirm this.
It is almost five years since Theresa May signed the 2050 net-zero target into law. We have now wasted one-sixth of the time available to meet the 2050 target. This Government have failed to set out any realistic plans to reach net zero. The solutions are obvious. As I have said before, I can give the Government the Green Party’s manifesto to make sure that they have enough policies to do what they ought to be doing. The solutions include rapid delivery of insulation, energy efficiency and energy reduction on a street-by-street model, and a wholesale transition to renewables, including onshore wind, with a full-scale retraining programme of the existing workforce. We should send a clear message to investors and businesses that fossil fuel extraction is a dying industry, carrying stranded assets, with no prospect of making a return on any investment.
Instead of reducing fossil fuel production and ending new licences in line with COP agreements, the Conservatives bring us this Bill. In justification, the Chancellor of the Exchequer has claimed that domestic oil and gas is four times cleaner than imported oil and gas. This is such incoherent nonsense. I can hardly believe that anyone could say this, let alone someone in that position. We do not keep our oil. It also means that we would be using international markets just as they are at the moment.
The Bill establishes a totally meaningless test that new licences can be granted so long as imports of fossil fuels exceed exports. This would allow the UK to extract every last drop of oil and gas from the North Sea, as long as we continue to import more and more oil and gas to balance it out.
Finally, the continued expansion of fossil fuel production is incompatible with a liveable planet for humans and for millions of species. It does not matter from where on earth those fossil fuels are extracted or what the balance of trade is; we need to cut our carbon emissions massively.
I was absolutely astounded to see the environmental statement in the Bill, which says that
“the Bill will not have the effect of reducing the level of environmental protection provided for by any existing environmental law”.
That is nonsense.
I wish all noble Lords a happy Easter and that they come back refreshed.
Baroness Young of Old Scone (Lab)
My Lords, it is difficult to follow the noble Baroness—I seem to have drawn the short straw on that one—but it is also difficult to follow the noble Lord, Lord Lilley, because it is quite distressing to witness the death throes of a dinosaur.
This is a wholly unnecessary Bill. Its only virtue is that it is brief. The noble Baroness, Lady Hayman, said that the North Sea Transition Authority, for which the Bill is allegedly meant, has been quoted as saying that it does not need or want it.
The Minister kindly wrote to us in February and held a briefing meeting early in March. He tried, and I should say failed, to outline the benefits of the Bill, so let us look at some of the anticipated and promoted benefits. One is jobs. Whether or not it is 200,000 for oil and gas and associated industries, the argument pursued by the Government is that we have to keep these jobs up and that it would be really bad for us to see all these people becoming unemployed or having to change their profession. In fact, they have skills that would admirably fit the transition to low-carbon technologies. Rather than giving the go-ahead for continued licensing in the North Sea and slowing the decline path of North Sea gas and oil, we should get a greater move on with the development of new low-carbon technologies, including by attracting the billions of pounds of potential investments that the Government tell us are out there.
New green jobs using these people’s skills is the humane way to transition from old to new technology, rather than perpetuating oil and gas to support old jobs. This is the sort of illogical thinking that we have come to expect from this Government, in this area. It is like the logic that we heard them use when talking about commissioning new gas-fired power stations to provide resilience to fluctuations in sun and wind power renewables, rather than going straight towards low-carbon, hydrogen, medium-term storage solutions, as advocated by the Science and Technology Select Committee. The only result of commissioning new gas-fired power stations is likely to be a whole load of stranded assets.
The Minister also talked about energy security, and new oil and gas licences helping to safeguard that energy security to ensure that we do not rely on hostile states. That argument does not stack up either. Only 20% of the oil produced in the UK is refined here; 70% is refined in Europe. I do not accept the belief of the noble Lord, Lord Lilley, that we can force trade from having the wrong sort of oil here, with the remainder bartered with Europe. If we end up in a situation where there is a lack of security, international tension or even an international war, having 70% refinable in only Europe will leave us vulnerable.
Some 75% of our oil is exported, since it is the wrong grade for domestic consumption, and 50% of our natural gas comes from outside the UK. None of us wants to see that rise, as liquefied natural gas has a higher carbon footprint than domestic gas, but the answer is not to slow down the transition from a fossil fuel that is on its way out, but to speed it up through increased investment in renewables. They are the future, after all, and that is the most secure way forward.
I too believe that we should increase the burden on carbon capture, storage and use to meet the net-zero target. Carbon capture needs a whole load more technological development before we can really dream of relying on it for carbon removal in any major way. The proof of concept, developed into real schemes on the ground, simply is not happening fast enough or with enough security and science.
Lord Lilley (Con)
After the noble Baroness’s gratuitous insult at the beginning, I am grateful to her for giving way at this point.
Baroness Jones of Moulsecoomb (GP)
It is the industry that is the dinosaur, not you.
Lord Lilley (Con)
That was very kind of the noble Baroness, Lady Jones. She is an apologist for the noble Baroness, Lady Young. Now I have almost forgotten what I was going to ask. Is the noble Baroness, Lady Young, happy that we should do without carbon capture and storage at a risk, according to the estimates of the Climate Change Committee, of doubling the total cost—trillions of pounds—of meeting the net-zero target?
Baroness Young of Old Scone (Lab)
I would be delighted to be confident that carbon capture and storage would fill a substantial gap, but so far we do not have the practical evidence that it can be done. Until that is so, we should not increase the burden on a technology that is not yet established or proven. I personally think that, when the Climate Change Committee put the carbon capture and storage element into the net-zero budget, it was being a bit optimistic, as it was about some other issues. When one looks at the amount of public subsidy going towards Drax—the ultimate dream for carbon capture, storage and reuse—one wonders whether this is another example of the overdue influence of industry.
The noble Lord talked about tax revenues and I was a bit speechless in response: “We are getting tax revenues from something that is quite harmful, but the tax revenues are important; therefore, we have to keep doing the harmful thing”. That is like saying that people smuggling is pretty profitable, even if it is harmful, so we should have a national people smuggling enterprise that brings in some reserves and revenue for the Government. I do not accept the tax revenue issue.
The benefits of the Bill are far from what they are cracked up to be and I am sure that the noble Lord, Lord Lilley, will be glad that I will talk about some downsides. The first is marine protected areas. We know that more than a quarter of the oil and gas blocks approved in the October 2023 round were within marine protected areas. Our marine protected areas are in poor condition; only 8% offer effective protection for nature, which is the reason they were created. The clue is in the title. MPAs are an important component of the Government’s Environment Act targets and their international commitment, under the global biodiversity framework, to protect nature effectively in 30% of the sea by 2030. We helped lead that framework at COP and now we are authorising additional licensing of blocks in marine protected areas, as part of the commitment in the Bill.
The International Union for Conservation of Nature, which is the United Nations official body, has guidance that recommends that no industrialised activities take place within MPAs. The Bill clearly rejects that guidance. Just in case noble Lords do not know what the impacts on MPAs are, I should say that they are not the same as for wind power. Some of them are about oil itself. That does not include gross oil spills; generally speaking, we must praise the oil industry around this country—not necessarily elsewhere—for having been fairly successful in reducing the risk of major oil pollution incidents. However, persistent micro-spills do quite a lot of damage to the water quality, from the top to the bottom of the sea. There are also other pollutants from other chemicals used in the operation of oil and gas extraction.
The second issue sounds a bit weird, but is quite important. There is a lot of evidence that seismic survey noise really impacts marine mammals in particular, as well as commercially important fish species and the invertebrates on which they all live. We do not yet know enough about how strong the harm is, but we know that it is substantial.
The third issue is direct destruction of seabed habitats—for example, cold-water corals and deep-sea sponge communities. It is not just that I am carrying a flag for deep-sea sponges, though as a biodiversity fan I am sure they are very lovely; they are actually important carbon storage mechanisms, as mentioned by the noble Baroness, Lady Jones, my partner in crime, and important for nutrient cycles that help keep our oceans clean. We ignore at our peril the biodiversity and conservation downsides.
I personally think this Bill is unnecessary, unwanted and damaging to climate, biodiversity and, as we have said before, our own international reputation, which should not be discounted. It is very easy to say that the only argument we can put is that it will not look good, but that is not what we are talking about. We have taken a leadership role in the world on this issue, and persuaded other countries—of the sort that the noble Lord, Lord Lilley, felt would not be persuaded—to do the right thing rather than the wrong thing. We would be junking that international reputation, as we have done successively with several announcements over the last year and a half.
If the Government really want to waste their political capital driving this Bill through, it needs substantial amendment. First, we need to exempt completely marine protected areas from the oil and gas exploration and production blocks. Secondly—and you would expect this from somebody who has spent their life in government on a land use framework—we need a sea use framework. I understand that the Government are already working on a marine spatial prioritisation programme, designed to allocate and prioritise sea space for currently competing activities. Exactly the same problem that we have on land, we have at sea. I urge the Government to complete that work programme quickly, and to add a further test—a spatial prioritisation test—to the carbon intensity and net importer tests already in the Bill, inadequate as they are. This would make blocks available for licensing only if such activities could be shown to be compatible with the achievement of the objectives of the Environment Act and climate change targets. That would be set out in a marine spatial prioritisation programme.
To be honest, the Minister knows in his heart that the North Sea Transition Authority and the nation do not need this Bill. The Climate Change Committee says that there will be a need for some oil and gas after net zero, but that does not justify the development of new North Sea fields. Although we could amend this Bill, it is bit like the pig in lipstick: we could put lipstick on the pig but it will still be a pig. Why does the Minister not just withdraw this silly Bill and we can all go home for Easter?
Lord Bruce of Bennachie (LD)
My Lords, it is a pleasure to follow the noble Baroness, Lady Young, with her very long credibility and experience in environmental protection. I am interested in some of the points she made; if they do come to amendments, I think we could work together.
I feel that, in some ways, I might be holding the ring in this debate. The whole transition to net zero is incredibly complicated and the energy mix is incredibly complicated. Many people seem to me to reduce it to a binary choice, in a very difficult way.
I declare a political and economic interest, if not a personal one. I have no financial stake in the oil and gas industry, but I have lived for over 50 years in the north-east of Scotland and represented it for many years, and have monitored the industry closely for more than 50 years. I have seen what it has achieved. As the Minister said, it has made a huge contribution to this country economically—jobs, balance of payments and technical innovation—of which we should be proud, while facing very great challenges. There have been mistakes, yes, and disasters on occasion, but also fantastic achievements, and it still has a lot to give. I agree with much of the analysis of the Minister’s introduction, but I do not see the value of the Bill at all—I will develop that point a little later.
Living as I do in the north-east of Scotland, the people I meet absolutely accept that this is a declining industry and that we have to move towards net zero. However, they are hurt and resentful that they are demonised as part of the problem, when they actually delivered what people wanted for the last 50 years, and believe they can help deliver what people want for the next 50 years, if they have the time and space to make that transition in an orderly and reasonable fashion. Quite a lot of the things that are green, and which we wish to have and which are happening fast, are still not happening fast enough to move us away from fossil fuel as quickly as some people think we can or would wish—all the projections make that absolutely clear.
It is still quite a significant industry, worth over £20 billion to the economy—it is not entirely clear because it spreads wide. Directly and indirectly, the figure is around 200,000 jobs, thousands of which are in the north-east of Scotland but the majority of which, believe it or not, are in England. We deliver a third of the subsea technology in the world, and it is an £8 billion to £10 billion industry.
New exploration and development, even if it is allowed to go forward, will not reverse the decline—that decline is inevitable and historic—but it will slow it. However, halting licences will unnecessarily accelerate the decline. It is not about new oil fields; very often it is about tying back existing reserves to the existing infra- structure, which can then be upgraded and decarbonised in the process, so that you are actually cleaning it up as well as getting the benefit of the revenue. As has been said, all the forecasts to and through achieving net zero include oil and gas in the mix. Obviously, the UK has been a net importer for 20 years, and we will import more and more, whatever happens in the future. The faster we build up renewables the better. In the process of doing that, we will naturally suppress oil demand, because people can switch to the alternatives, but it will not eliminate it.
The Minister made a reasonably rational statement, but it did not justify the case for the Bill. The Government are putting out very confused messages, claiming that we are doing really well on climate change but then saying that we need to issue more licences, which, as I said, the industry does not really feel the need for. The industry wants to know that, as and when needed, on a case-by-case basis and where it is appropriate, it will be considered and allowed for. We have never had to have an annual licence; it has just been done on a case-by-case basis, as and when needed. My position is that the Bill is unnecessary, and I do not think it is wise to have a policy of saying that there will be no more licences. The circumstances may well dictate that, rationally, some licences will be required. It is sensible to leave some space for that.
In addition, the Government have—this is not a slight confusion—in a separate decision, pushed back the date for electric cars by five years. Whether you think it is a good or bad idea, the message it sends is that we are in favour of addressing climate change but in an Augustinian way—not just yet. We need to be a little clearer about what we are doing.
We also need to recognise that baseload electricity is a challenge. Some green campaigners say that nuclear is the answer, and it may be the only alternative. I have never had a visceral objection to nuclear, but my experience of monitoring the nuclear industry is that it takes a hell of a long time, costs a hell of a lot, and creates a waste problem that is costly and intractable. On the other hand, I am not sure what the alternative is. It is difficult to see—I do not see it—any projections for 10 or 15 years from now where we are not still generating electricity with gas. It makes sense not to get rid of it faster than we have to, when we are still importing it anyway.
We have another issue, with offshore wind. I happened to fly in from Finland on Saturday, over massive offshore installations as you come to the shore of the UK. It is impressive, but I hear that there are problems with getting connections and landfall. It is no good generating the wind if you cannot get it into the system. We need to address those problems, and fast.
We need to make the investment, and we need to do it as fast as we can, and we need to recognise that climate change is real and probably accelerating. The people who say that we should have no licences, but that we are not shutting down production and are happy to allow any licences that have been granted to continue, seem a little inconsistent. If you are happy to accept them, why would you stop them? I think I have made the point that we need a sensible, balanced approach.
It is interesting to ask which of the oil and gas-producing countries in the world are operating a planned reduction of commercially viable production? The answer is only those that have not got very much. Norway certainly is not; Norway has made it clear that it will produce all the oil and gas that it can. That is not surprising, as it has one big customer just desperate for it, and that is where most of our gas is coming from. I do not see why we should swap Norwegian gas for UK gas when we need both, but that is the reality.
The sector will continue to decline, but, from meeting people in the industry and attending their various events, I know that every company in the supply chain that I meet is increasingly focusing their attention on developing renewable technology. They see it as the future, and they want to be part of the future. They tell me that they are transferring their expertise into that sector and using the revenue they get from oil and gas in the short run to fund it, and that if that revenue chokes off faster, their ability to fund the transition will be lower.
I would be perfectly happy—maybe this could be an amendment—to make it a condition of licensing that operators must ensure that a proportion of their profits is invested in UK renewable technology. They might also be required to demonstrate that they can contribute to lowering energy costs or the cost of living. I am in favour of making the industry contribute more, but I am not in favour of artificially depressing it and leaving us, potentially, risking supply gaps and cost overruns.
We export most of our oil to the Netherlands for refining, and there exists an argument that, because we export it, we should not bother to produce it. I can remember the 1970 election, when one bad month of balance of payments led to a change of Government. Nobody seems to care about the balance of payments any more, but what of the idea that £15 billion-worth of exports should just be discarded? As the noble Lord, Lord Lilley, to be fair, acknowledged, we pay for the imported product, to some extent, by the exports that we make. It is disingenuous to suggest that, because we export it, it has no value to our economy. That goes against normal economics.
We need to focus on how we can get the industry and the public to adopt renewable technologies as fast as possible, and to harness the energies across the energy sector—including oil and gas—towards that, while recognising that managing the transition requires neither a ridiculous stoking up of oil and gas exploration nor an unnecessarily rapid depression of oil and gas. It is naturally declining, and the industry, left to its own devices, will diminish, because it is not there to be invested.
The Bill creates the wrong signal and is completely unnecessary. The industry does not want it, but rather wants recognition that it is part of the solution and should not simply be demonised as being the cause of the problem. That is not a good way to treat an industry that has been the backbone of our economy for 50 years.
Baroness Willis of Summertown (CB)
My Lords, many have already commented on the apparent disconnect between the OPL Bill and the UK’s net-zero ambitions. Although I support and share these concerns, I would like to focus on a different aspect of the Bill, alluded to by the noble Baroness, Lady Young: the impact of increased offshore licensing on our marine protected areas.
I start with the good news. In the past few years, the UK Government have made good strides to protect critically important areas in the ocean by designating them as marine protected areas. There are now 377 of these, covering 38% of the UK’s seas. These are designated to protect and enhance specific species, habitats and ecosystems. We are rightly proud of them, and they have now been included in our target of protecting 30% of our seas for nature by 2030—the international commitment that the Government signed up to at COP 15 in December 2022.
However, to be included in this target, the Government’s own suggested criteria are to
“have long-term protection and/or management in place that works against adverse pressures on the area’s biodiversity objectives, or actively results in improved outcomes for biodiversity”.
This is all good, until we come to the Bill, which makes no mention of not allowing production licences in MPAs. In many ways, this is a classic case of a Bill from one department not aligning with the aims, aspirations and even policies of another—in this case, Defra. The Bill could in fact dramatically reverse progress towards meeting the 30% target, since there is nothing to prevent the North Sea Transition Authority offering up and licensing multiple oil and gas exploration licences in MPAs. It is depressing to look at the licences granted since October 2023: of the 27 granted, six were in marine protected areas. These are some of our most critically endangered sea habitats in the UK.
Does this matter? Is the footprint of new drilling wells on MPAs and nature just too small to worry about? Is it just dolphins, as the noble Lord, Lord Lilley, commented? I hope, in the next couple of minutes, to convince your Lordships otherwise, and to demonstrate that, in many ways, deep-sea oil and gas production is possibly more damaging to the environment than bottom trawling, because it affects all parts of the ecosystem that species use to navigate, reproduce, feed and even breathe.
We can be under no illusion that these impacts are major, and that each stage of oil and gas production causes damage. The noble Baroness, Lady Young, mentioned that, in the exploration stage—before a single drop of oil or molecule of gas has been extracted—surveys must be done to see the geological structure of the seabed, and this uses seismic airgun surveys. These surveys emit an ear-splitting noise that is 100,000 times more intense than a jet engine—imagine that. These blasts deafen the highly sensitive hearing systems of marine mammals that rely on echolocation to navigate the sea, including sperm, minke and long-finned pilot whales, as well as orca and Atlantic white-sided dolphins —animals that we celebrate whenever we see Attenborough on television, thinking what a fantastic environment we have in our seas and on our shores. If the Bill passes without these MPA safeguards in place, we will see changes in migration patterns, fatal deformities in these marine animals, and even death and further loss of these iconic species.
The next stage is the exploratory and appraisal stage, where extensive physical damage is caused to habitats and the seabed. To go back to the point of the noble Baroness, Lady Young, this will smother and damage critical habitats—for example, for deep-sea sponges and our very rare cold-water corals. It is not just these organisms that are being lost but the critical ecosystem services that they provide, particularly in carbon sequestration. These are also important nesting habitats for commercial fish stocks, so this starts to damage our economic viability for commercial fishing.
Finally—another point picked up by the noble Baroness, Lady Young—there is the damage from oil spills. It is not the large oil spills that we sometimes see, which thankfully are rare; the vast majority come from a process called produced water, which is extracted from the deposits in the production process and contains soluble and non-soluble oil and various chemicals. All these small processes join together to create big slicks of oil—last year, a couple were noted that were up to 12 to 14 kilometres long. A study by an international body overseeing the protection of offshore activities in the north-east Atlantic showed that this produced water accounts for between 95% and 99% of oil discharges. This is killing our seabirds and significantly impacting life changes. This will happen when we have drilling going on, but my argument is this: please can we not have it happening in our marine protected areas.
If that is not enough, there are two further impacts: toxic chemicals and microplastic waste. We have seen many examples of them and we know the impacts.
In summary, if the Bill is allowed to proceed in its current form, without stopping new oil and gas licences in MPAs, it will be a serious obstacle to achieving the Government’s agreed environmental targets. I do not see how we can protect 30% of our marine environments by 2030 and achieve the Environment Act target that 70% of designated features in MPAs should in a favourable condition by 2042 while we continue to drill in these marine protected areas and cause huge amounts of damage to these critically important environments.
I urge the Government to remove the North Sea Transition Authority’s ability to grant new oil and gas licences within MPAs. This could be achieved by a simple amendment to Clause 1, prohibiting the NSTA inviting any applications for oil and gas exploration and extraction activities in any of the 377 marine protected areas in UK seas. I intend to explore this proposal further in Committee.
The Lord Bishop of Norwich
My Lords, for many years the UK could rightly claim to be a world leader in responding to the dangers of climate change by taking action to reduce our carbon emissions. We rightly showcased that when we hosted COP 26 in Glasgow. However, I am increasingly concerned that our global leadership is slipping away. At COP 28, we joined the rest of the world in committing to:
“Transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner”.
This Bill commits us to fossil fuel production at the same time as we are asking other nations to transition away. Our messages are, at best, confused. Various noble Lords have contributed their concerns during this debate, including on methane venting and flaring, which I share.
It is a privilege to follow the excellent speech by the noble Baroness, Lady Willis, because I can jettison much of what I wanted to say. I also want to speak about marine protected areas. Her expertise in this area has been important to hear. With the analysis that she has given us and our knowledge that the International Union for Conservation of Nature, which the noble Baroness, Lady Young, referenced, recommends that no industrialised activities should take place within marine protected areas, my question to the Minister is: what steps are His Majesty’s Government taking to safeguard these marine protected areas, and why are they not taking the IUCN’s recommendation seriously by excluding MPAs from extraction in this Bill? I would certainly support the amendment that the noble Baroness, Lady Willis, proposes.
My second point is about our 30 by 30 commitment. Our biodiversity commitments do not stop at the deckchairs on the beach. The Government have committed to preserving 30% of land and sea for biodiversity by 2030. The 30 by 30 pledge is backed by targets set out in the Environment Act to halt the decline in species abundance, both on land and at sea. My second question to the Minister is: how do His Majesty’s Government intend to meet the 30 by 30 target while expanding offshore drilling?
My third point is about spatial planning. The UK Government are signatories of the Kunming-Montreal global biodiversity framework, target 1 of which states that Governments will:
“Ensure that all areas are under participatory, integrated, and biodiversity inclusive spatial planning and/or effective management processes addressing land and sea use change, to bring the loss of areas of high biodiversity importance … close to zero by 2030”.
This marine spatial planning is essential for managing the inevitable conflicts that arise from different activities at sea, yet a 2023 Defra report assessing the east marine plans found they were outdated and that the
“intended outcomes are no longer aligned to the UK’s national priorities”.
These marine plans should set nature and climate as the major priorities for the use of the sea and, at the very least, protect MPAs from drilling. That brings me to my third question to the Minister: will His Majesty’s Government commit to create a spatial plan outlining where and when activities could take place, with a hierarchy of priority that makes space for 30 by 30 and decarbonisation first, and not allow more drilling in MPAs while this is being finalised?
The King’s Speech at the opening of this Session of Parliament spoke about holding
“other countries to their environmental commitments”.—[Official Report, 7/11/23; col. 4.]
At the time, I noted in my maiden speech in your Lordships’ House that
“the UK Government can do that with credibility only if we are an exemplar ourselves”.—[Official Report, 13/11/23; col. 310.]
Ensuring the protection of our marine life would put us back in the leadership chair, not slumbering in that deckchair on the beach.
In the gospels, we meet the first disciples, including St Peter, on the beach, mending their nets. They were fishermen and knew well the beauty and diversity present in the sea. In one famous story, Jesus encourages the disciples to do something totally different from what they were used to: to cast out into the deep. We too are now in an era when we need to do things differently and not follow the same old ways. We need to put away the old way of damaging nature and instead do all we can to preserve and protect it. Psalm 104 speaks of the sea,
“vast and spacious, teeming with creatures beyond number—living things both large and small”.
My concern is that this Bill risks further damaging that vision of the psalmist: of the sea “teeming with creatures”.
Lord Moynihan (Con)
My Lords, it is a pleasure and an honour to follow the right reverend Prelate the Bishop of Norwich, although I humbly reflect that I see nothing in the Bill that detracts from the energy transition. I will try to set out the arguments why.
I am in agreement with the noble Lord, Lord Bruce. It reminds me of the time many years ago when I had the privilege of being Minister for Energy, back in 1990. He set out a very reasoned case about how difficult this Bill is in many respects in trying to balance the importance of energy transition with recognising the truism that this is not a zero-sum game with oil and gas production in the North Sea.
I declare my interests as set out in the register. I welcome the Bill, although I share the views of noble Lords on both sides of the House in that I am uncertain that it is needed. We call on the Minister a great deal to do admirable work in this House; I think this might have been an opportunity when we did not require his presence. The reason why I think it may not be needed is that it just confirms the policy framework to which existing legislation, licensing rounds, customs and practices in the North Sea already apply.
Why this Bill may prove to be important is that it can underpin a prioritisation of the security of supply as we move towards the sustainable energy policy structured on the net-zero ambitions we all share. I mentioned 1990, when I was Minister for Energy when Margaret Thatcher’s Government first introduced a renewable energy programme into the UK, as has been mentioned, following the seminal speech she gave in 1989, and we launched the non-fossil fuel obligation to provide a market framework to help accelerate the move to renewables and nuclear power. We now measure our trajectory towards net zero by using 1990 as our baseline and my noble friend the Minister is right that we lead the world in the journey to net zero and should retain energy transition as our major priority.
Some 34 years on, we are now half way to net zero. However, we should be under no illusion that this has been, to a large degree, a function of the imposition of measures, with only marginal consumer sensitivity, knowledge or reaction. Changes from oil- and coal-fired power generation to renewables and gas are key policy developments in power generation and have been significant in the build of the combined-cycle gas turbine market and the declining use of coal for power generation in the UK. But to achieve the next 50% of the reductions to get to net zero, we will be asking consumers for something far greater, to go far further in changing their lifestyle—what cars they drive, how they travel, how they heat and insulate their houses and, ultimately, what they eat. We have only 26 years left to achieve that important social and behavioural revolution. I share my noble friend Lord Lilley’s view that there is considerable doubt as to whether we will be carbon-neutral by 2050, but, if we are, it will a private-sector driven change which helps us reach that goal. There is nothing in the Bill that would negatively impact on the vital energy transition measures.
Additionally, a holistic approach to the environmental impact of everything we do offshore must be a priority—being as clean as possible, improving efficiency, significantly reducing all forms of pollution and substantially mitigating carbon emissions. By employing these measures, it will not be difficult to demonstrate as central to the Bill that improved environmental practice will ensure that gas production in the UK will meet one of the Government’s key criteria; namely, that the carbon intensity of natural gas is lower than that of liquefied natural gas imported into the UK. The baseload demand—to which add the demand for firm power, as mentioned by the noble Lord, Lord Bruce, as opposed to the intermittent power generated by renewables when the wind blows—will ensure that the UK is projected to remain an importer of both oil and gas for many decades to come.
This is a function—it is so important—of both the need for firm power and the actions of a responsible Government to recognise that security of supply is achieved by diversity of supply, and nothing is more secure than the production of energy at home rather than an increasing dependence on imported oil and gas, whether in the form of LNG or interconnectors. I prefer to think that the Bill was not the product of a good lunch but what my noble friend the Minister referred to as the “energy shock” created at the time of Putin’s invasion of Ukraine, which supports the critical importance of maximising domestic production.
Philip Lambert, one of the foremost energy specialists in the UK, has noted:
“The starting point is that the offshore oil and gas sector in the UK is an existentially important foundation stone of the UK industrial base and UK energy security future—the maturing but still prolifically producing UK North Sea oil and gas province, still incredibly producing just over 1.3 million barrels of oil a day, or, to put it another way, 50% of our needs, 50 years on from first production”.
The key point of this and the hoped-for outcome of the Bill is to emphasise that what the UK industrial sector now needs is greater help from the Government, both to build up renewables and to maximise oil and gas production from the 1.3 million barrels of oil today, resulting in a postponement of decommissioning across the UKCS and genuine maximisation of tax proceeds, while preserving hundreds of thousands of oil and gas-related jobs as they migrate across through energy transition to renewables.
We should not pander to those who welcome the fact that we would, unforgivably, be leaving stranded under the seabed over 10 billion barrels and upwards of $700 billion-worth of UK national wealth by revenue, notably in the prolific and still highly prospective west of Shetlands region but also in the central and southern North Sea, where new seismic and technical breakthroughs are facilitating renewed hydrocarbon promise, with enhanced and improved carbon reduction techniques, services and systems.
Of course, the noble Baroness, Lady Willis, and the right reverend Prelate are right that it is vital that the industry focuses on its impact on special marine environments. I am pleased that that will be debated in Committee as it is an exceptionally important point. It should be a major factor in determining where licences are issued and under what conditions. But the ideologically enforced stranding of the North Sea’s responsible hydrocarbon reserves, which I think is a misplaced tenet of net-zero ideology, will, paradoxically, be highly damaging to the UK’s decarbonisation efforts, which, as I have mentioned, I fully support.
The ironic and perverse outlook is based on the estimate of UK oil and gas demand. Increased demand is a reality, despite the very welcome transition measures which will support the development of renewables and the early green shoots of a functioning and growing nuclear programme, which, I might add, nobody believes is going to have a significant impact on the UK economy until 2035 and later—sadly; I wish it was much sooner. That is the reality and we have to look at the energy balance now and recognise that there is a balance between growing renewables and the need for firm power which comes principally through our own gas reserves but also imported gas.
The moves to diminish oil and gas production will inevitably cause a rapid increase in imports of higher carbon per barrel oil and gas from countries with much less responsible adherence to best practices, as well as causing an unnecessary reduction in home-grown production. If you combine that with the possible shutdown of the aged Rough storage field due to well integrity problems, we risk either energy and power shortages in the UK or an emergency fall back to coal. Genuine decarbonisation efforts by facilitating the seminally important UK/European coal to gas switch continue to be essential and I am sorry that that is not more clearly stated as an objective in the legislation we are considering.
This policy, based on the tenet that we proactively maximise our gas reserves to demonstrate irrefutably and boldly to Putin and his henchmen that not only will he never win the military war but he is comprehensively losing his westward-facing, gas-driven energy war on Europe, is welcome. Upholding national and global energy security has therefore now become an even more integral and vital part of the wider struggle against regimes determined to destabilise western Europe.
Failure to combine the Bill with a supportive tax regime merely disincentivises new investment, accelerates oil and gas production declines, accelerates the economic need to abandon maturing fields and thereby, paradoxically, reduces the net tax receipts for the Government. It costs potentially hundreds of thousands of skilled jobs and denies the UK tens of billions of dollars of badly needed inward investment into the economy. My noble friend Lord Lilley mentioned the key point: it stunts the supply but does not address the demand.
The still prolific and prosperous UK North Sea sector, with 3.5 billion barrels of already discovered but still to be developed reserves, could have a similar bright future to underpin the necessary transition to renewables by supplying us with firm power in the interim period. Rapidly increasing renewables without gas means intermittency in the energy system, which, in effect, leads to more energy insecurity, not less. Just look at California’s woes if you want to underpin this point.
In very few countries is oil and gas so important and coal so unimportant to the energy security and economic well-being of a nation than in the UK today. Oil and gas represents 75% of the energy lifeblood of the UK, a percentage which will remain robust over the new two decades, with gas gaining and oil failing. As I said at the outset, energy transition remains the most important point—focused on mitigating carbon emissions in the exploration, appraisal and production of oil and gas remaining paramount and new technologies and new renewables coming on stream.
Baroness Boycott (CB)
My Lords, it is a pleasure to follow the noble Lord, but I feel reluctant to stand up because the Bill seems to have little genuine purpose. It is distracting us from what we need to concentrate on, which is tackling the twin threats of climate change and biodiversity loss. The context of the Bill and our international reputation are really important, as several noble Lords have said. This is one of the biggest election years in history and one of the most important too, as the fight against climate change becomes so pivotal. We cannot have it both ways: wanting to be a leader in the world and then doing something that contradicts that.
People do read the headlines and they will see the one that says, “UK set to open more oil and gas fields”. What does it tell the world? That we think this is okay and in some weird way compatible with the Paris Agreement? We know that is not the case. The International Energy Agency has been clear about that and, last year, global temperatures were 1.46 degrees above their global pre-industrial average. As we all know, in Paris we agreed to try to shoot for 1.5 degrees. I think I heard the noble Lord, Lord Lilley, correctly when he said that trying to have a non-carbon economy was a luxury belief, but it does not feel much like luxury—
Lord Lilley (Con)
I was saying that stopping supply, rather than phasing out demand, is a luxury belief.
Baroness Boycott (CB)
I would contradict that too, because we do not have the time to figure out the difference between them. At the end of the day, they are the same thing. Many people who live in California, which was just mentioned, have lost their homes. If you live in Bangladesh, you have lost your homes; if you are a farmer in this country, you have been unable to plant your crops this year because of the level of rain. This is not a fantasy. It is something that is with us.
Personally, if we lived in an ideal world the Bill should be scrapped, and in doing so the Government would find themselves extraordinarily popular with a lot of people. But specifically, I congratulate whoever creatively came up with two tests that are impossible to fail, while ignoring the emissions associated with the predominant commodity in the North Sea—oil. They might as well read, “If autumn has arrived, run a licensing round”. However, we are not in an ideal world so, if the Bill passes, we have to improve it. Thankfully, there are things we can do.
One, of course, is protecting the marine environments or, as the noble Baroness, Lady Willis, just said, having no exploration in MPAs. I hope she will put in an amendment on that at the next stage. We could also look at the weak emissions reduction targets of 50% by 2030 and go instead for what the CCC recommended, which is a feasible 68%. We could do this.
The Bill could also make progress on banning venting and flaring, which has been illegal in Norway since the 1970s. Even though Norway produces a lot of oil, at least it has managed to cut down the methane which, as we know, is 80 times more potent over a 20-year period, so that is something we could do. I urge Ministers to implement the recommendation by the Commons EAC to implement that ban by the end of next year.
Jobs have been in decline, as we have heard, for many years yet there is still no skills passport available for workers who want to transition. We could try to do that.
Taking a step back, let us think about what is going on in the world. This month, the CEO of Saudi Aramco said in Houston at the annual hydrocarbon festival known as CERAWeek:
“We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately, reflecting realistic demand assumptions”.
However, we can meet the demand we need with renewables if they are sufficiently scaled up. It is more about where the power, or the fuel, comes from: thousands of miles into the earth or from our own natural elements.
Recent policy changes mean that we will need more carbon fuels. For example, the analysis by New AutoMotive shows that the potential supply from future licensing would be completely offset by reduced demand if we returned to the original 2030 target for ICE—internal combustion engine—phaseout. We claim that we are helping people but, in reality, we are not. Money, it seems, always triumphs. This month, Exxon CEO Darren Woods explained it simply as an all-out fight to derail anything green because it would not return “above average profits”. This shows that we can never rely on the industry to take the lead in reducing emissions. The Government have to act.
Let us be clear: the Bill will not help the average citizen of this country or indeed any other. We are kidding ourselves if we think that the oil and gas companies, and increasingly private equity firms, really care about reducing emissions. The Government make great emphasis in their carbon budgets on our having CCS technology, as the noble Baroness, Lady Young, referred to, but despite the fine words this is unproven.
In my role as vice-chair of Peers for the Planet, I recently invited Sir Tim Smit, the founder of the Eden Project, to speak to colleagues. During his speech, he said that we should remember the person—the adult—we wanted to be at 19, stand there and make them proud. It is obviously a challenge to remember what it felt like at 19 but I can remember that I thought it was my role to try to make the world a better place. I suspect that everybody who has found their way on to these Benches had similar thoughts: make the world better and use what energy you have—what God has given you.
At that point when I was 19, fossil fuel companies were just discovering exactly the kind of damage they were doing, but now we know. We have just had the hottest year on record. I would be aghast, as a 19 year- old, that I had to sit here and fight against something that seems so palpably obvious. At 19, I was fighting for women’s rights—quite honestly, there were no women in this place then—and we proved that was right, so now we are having another extraordinary fight about scientific facts.
It is clear that the Bill is the wrong thing to legislate for. I urge noble Lords that if they cannot justify the Bill to themselves, they should at least try to justify it to their children and their grandchildren.
Lord Ashcombe (Con)
My Lords, it is a pleasure to be able to follow the noble Baroness. I declare my interest as an insurance broker for the energy sector, but I work with companies from America rather than the UK.
I believe that the Bill brings only benefits to the United Kingdom in energy security, assisting the climate goals to which we are committed and, importantly, supporting the economy in many parts of the country. As a country, we are fortunate to have several oil and gas basins within our territorial waters. Since their discovery and development in the late 1960s and early 1970s, they have enabled us to reduce our dependence on imports. At their peak in 1999, they produced some 4.5 million barrels of oil equivalent a day. It is projected that this year, that will reduce to 1.1 million barrels of oil a day. Since demand is currently somewhere around 2.7 million barrels of oil equivalent a day, the country is a net importer of both oil and gas.
The UK’s dependence on hydrocarbon fuels for our energy needs is about 75%, as we have heard. It is predicted to be still 25% when we reach net zero. Sadly, the reserves are becoming depleted; the decline is predicted to be 7% per annum going forward and we will be ever more reliant on imports. The UK’s oil and gas industry is regarded as a leader on the world stage, employing, as we have heard, a highly valued, skilled and diverse workforce of a debated 200,000 directly for and associated with the offshore industry. Many of these jobs will, over time, move into the energy industry of the future: more offshore wind, hydrogen production and carbon sequestration. It is essential that we keep these skills alive, as they will be required in the transition of the UK to net zero by 2050.
Earlier this afternoon, we were using about 15% from wind, 8% from solar, 17% from the interconnectors and a further 12% from our ageing nuclear fleet to generate electricity. Even with the significant and welcome increased projection in these areas, there will be a shortfall. The sun goes down every night and the wind does not always blow; it is gas that makes up the difference—37% this afternoon. We produce only about 47% of the total current gas demand in the country, remembering particularly home heat in addition to its use in generating electricity. The shortfall must come from somewhere until renewable resources provide sufficient energy, which I wholeheartedly support.
The position with oil is slightly different as, again, there is a significant shortfall, as described by the noble Lord, Lord Lilley. The options we can take to ensure the energy security of the country are limited, particularly when considering our net-zero commitments. We can either start to rely more heavily on imports of oil and gas, which is more carbon intensive, or be able to exploit our domestic reserves, which is less so.
The Bill has two logical climate targets to meet: the carbon intensity test and the net importer test. In respect of gas, the average carbon intensity of domestic gas produced during the assessment period was lower than the average carbon intensity of liquefied natural gas imported into the United Kingdom during that period.
Gas is imported in two ways. The first is natural gas via the pipeline system from Norway, which is the majority. Norway certainly produces the cleanest gas—it is cleaner than our production—but its reserves are not infinite. While the Ukraine conflict sadly continues, with sanctions preventing Russian gas entering the European system, gas from the Norwegian fields is highly desirable and in demand across northern Europe. However, there is to be a significant decline in Norway’s gas production before the end of the decade.
The second alternative is importing LNG, which we also do. Wherever it comes from, it imposes a significant increase to our carbon footprint, of three to four times that of our domestic production, notwithstanding the challenges of getting it here. Let us not forget that in the United States, from where we import most of our LNG, the Biden Administration has imposed a ban on the development of more LNG liquefaction plants designed for export. We bring LNG also from the Middle East via the Red Sea, which has its own issues. We bring it too from Peru via the Panama Canal, which has water restrictions. On this basis, the country needs to limit LNG imports as much as possible.
The net importer test is important for gas, and it is the key test for the continued production of domestic oil. As I said, we are a net importer of oil. At this time, the North Sea Transition Authority—the licensing authority—has no requirement to offer blocks or parts thereof with any frequency, other than when it deems licences are required. There was a four-year gap between the two most recent licensing rounds. This Bill ensures that licences will be offered annually, allowing industry participants to plan with more predictability. It is they who have the expertise and capacity to fund a significant number of wind, solar, hydrogen, and carbon sequestration projects driven by their oil and gas revenues. That will continue to ensure that the energy industry benefits the economy and provides significant tax revenues. Most importantly, it will help secure the jobs currently in the industry and transfer them to the renewable industry as demand requires. This is against a backdrop of added energy security for the country while keeping to our climate commitments and goals by using the two embedded tests in the Bill. I am pleased to support this Bill.
Baroness Sheehan (LD)
My Lords, I thank the House for allowing me to speak in the gap. Before I move on to what I had planned to say, I will ask the Minister three questions. First, will the successful licensees be eligible for grants? If so, how much will they be? Secondly, who will be responsible for decommissioning costs throughout the lifetime of the new fields? Thirdly, if in the fullness of time any of the new fields become stranded assets, what safeguards will he put in place to make sure that the British taxpayer is not liable for the bill?
I will keep my remarks very short. I want to make just a few points on the Bill’s conflict with the legally, morally and ethically binding net-zero commitments that the UK has made both domestically and in international fora.
I will start with the Bill’s conflict with the IEA, the International Energy Agency, which knows a thing or two about global energy security. In its 2021 report, Net Zero by 2050 A Roadmap for the Global Energy Sector, the IEA stated that there could be no new oil and gas fields after 2021 if we are to limit warming to 1.5 degrees centigrade. It reiterated this in 2023. Our own Climate Change Committee, in its COP28: Key Outcomes report of January this year, stated very politely that
“the UK should reassess whether further exploration for new sources of fossil fuels is aligned with the UNFCCC principle of Common but Differentiated Responsibility and the Global Stocktake”.
It refers, of course, to our NDC.
A red alert warning from the World Meteorological Organization just last week confirmed that 2023 was the hottest year on record by a clear margin. According to the FT’s editorial team in an opinion article just two days ago, on 24 March:
“More than 90 per cent of the world’s oceans suffered heatwave conditions, glaciers lost the most ice on record and the extent of Antarctic sea ice fell to by far the lowest levels ever measured”.
Given all that, surely discretion is the greater part of valour, and we must proceed with extreme caution and seek to reduce the greenhouse gas inventory as quickly as possible. I know that the Minister will say that he agrees with me and will assert that this Bill does not derail the UK’s direction of travel. But that is exactly what it does. The Bill does not sit comfortably with the Government’s commitments made at COP 28 just a few short months ago, along with 200 other countries, to transition away from fossil fuels and accelerate action in this critical decade. We cannot maintain credibility on the global stage while we say one thing and do exactly the opposite.
Earl Russell (LD)
My Lords, like the noble Baroness, Lady Jones, I will try not to be too boring and go on too long. I will also try not to damage any animals, either living or extinct, during my speech. On these Benches, we will oppose this Bill. I notice that, as in the other place, the opposition parties here are united in opposing it.
If the Bill passes, it will be remembered for two things: being mostly pointless and being needlessly politically divisive. The noble Lord, Lord Lennie, said that it is a straightforward Bill. The noble Baroness, Lady Young, said that its only virtue is that it is brief. The length of the Bill reflects any usefulness that flows from its consequences. The Bill does what it claims—somebody said this, but I am not sure who—but sadly what it does is damaging.
I venture to suggest that the Bill is not about energy security at all; instead, it is much more about performance politics and the need for political security on the Benches opposite. The clue to the whole Bill is contained in the first four words: “Duty to invite applications”. I want the House to note that this is not a duty to grant any applications—at all at any point. It is entirely possible that the Bill will be passed and enacted for not one more single North Sea licence ever to be granted again. The Bill is barely longer than a Private Member’s Bill. Who knew that the answer to all our energy security needs lay in a little over 250 words?
The Government have made grand claims that the Bill will provide energy security and protect jobs, and that it is more environmentally friendly than importing LPG. As the noble Lord, Lord Lennie, said, the Energy Secretary in the other place also claimed that it would lower energy bills, but that was quickly retracted. In truth, the Bill achieves none of these things.
I was interested in the story the noble Lord, Lord Lennie, told about the lunch where the Bill was supposedly cooked up over a few glasses of wine as a skewer to pin the opposition down on a political wedge and divisive issue. To my mind, the Government have created a heffalump trap for themselves.
The Government also argue that the Bill provides energy security. Fundamentally, it will make no difference at all, in my mind, as NSTA already has the power to grant licences and has done so almost every year since it was set up. NSTA itself, at its own board meeting, said that it did not want or require the powers contained in the Bill. Therefore, the Bill undermines the independence of the organisation that the Government set up to deal with granting new licences. As Alok Sharma said in the other place, the Bill, as drafted, is “something of a distraction”, and NSTA’s ability to grant new licences will not change materially because of it.
The oil and gas is all owned by private companies and is sold, as people have said, on the global markets. The Government have no say or control over where it is sold or to whom. As has been discussed, Global Witness has argued that up to 80% of that goes on to the international market and does not come in any way to the UK. It has been estimated that the gas supply created will be the equivalent of just four days on average per year. This is hardly going to provide us with energy security in the future. I do not believe that the Bill will do anything for energy security or to reduce bills.
The Government have made a series of arguments about securing jobs in the North Sea. It is undoubtedly true that North Sea oil is in decline, as everyone across this House has agreed and the Minister himself has noted. To my mind, the only way to protect jobs is through a real and meaningful plan, investment and a shift to a green economy, but this Bill does not do any of those things. I want to be clear that we on these Benches believe in a just transition. We recognise, fundamentally, the importance of protecting the jobs involved in this industry—between 30,000 and 200,000. We have heard different numbers, but I do not think we should argue about numbers. We should be respectful to all those who work in this industry, and I think the last thing they want is us having petty political arguments about the future of their jobs.
I welcome the contribution of the noble Lord, Lord Bruce, with his knowledge and experience of this industry. I welcome his basic message that these people want to be part of the future and do not want us arguing about their jobs. They want us to work together to create a transition for the North Sea towards a green economy, which is the only future they have. All of us need to find ways that we can do that. As the noble Baroness, Lady Hayman, said, new licences will not protect industry or workers to secure that just transition. For that to happen, there need to be allocated funds and plans, but, again, the Bill does not do that. As the noble Lord, Lord Bruce, said, they know what they want, and they want to be part of the future, so it is a shame that this Bill does nothing to secure or provide that future for these people. I honestly wish that it did, as not a single extra penny of taxpayer revenue will be allocated to the transition as a direct result of this Bill.
Three-quarters of all the oil and gas companies that operate in the North Sea do not invest a penny in UK renewables. Why do we allow them to have licences but not require them to invest in the transition? The tests to attain those licences are, in the words of the noble Baroness, Lady Boycott, “impossible to fail”, or, in the words of the noble Baroness, Lady Hayman, “unfailable”. The importing of LPG is not a fair equivalence, when, as the Minister knows, a lot of our oil comes through the pipelines from Norway. The consequences of these tests are all negative, and they are damaging for our reputation abroad and our standing on the world stage.
I welcome the £30 billion investment in the low-carbon economy, mentioned by the Minister. I thank the Conservatives for halving our CO2 emissions; they are now at the lowest levels since 1837. What a tremendous achievement this Government have made, and I am grateful for it. However, at a time when they should be basking in the warm glow of their achievements, the Government come forward with a politically divisive Bill. It is a shame; we should be leading the world, not having arguments at home.
We freely recognise that, under net zero, we will need some oil and gas, not just for our energy but for industrial and other processes. As the noble Lord, Lord Lilley, says, it is a huge challenge, and we need to phase out demand for fossil fuels—I completely agree with him there. The war in Ukraine has had damaging impacts on energy prices, and the Government have spent some £70 billion supporting bill payers. I welcome that, but it is money we could have put into the green economy. We cannot continue going round the mulberry bush and investing in old energies; this money should be going into the energy of the future.
I welcome the contributions about the need for spatial plans and the need to protect marine protection areas. These are important issues raised in this Bill that need to be discussed. We will have an opportunity to discuss, through amendments, how we balance these protections with our need to do different things with our seabed.
As the right reverend Prelate the Bishop of Norwich said, the Bill is damaging to our international reputation. It will make it harder for us to secure the investment that we need in our green industries going forward. I call on the Government to accept Alok Sharma’s amendment which was tabled in the other place and which will, I think, be tabled here. It is the one that the Minister in the other place said the Government might be prepared to consider. If the Government are going to be doing this anyway, why not put it in the Bill and give the signal to industry that this is their intention? We are here to provide certainty to industry, so let us put it in the Bill.
We really have to leave fossil fuels in the ground. We have to wean ourselves off these things that are killing our planet. Alternatives do exist; the transition will be difficult and painful, but we must make that journey and seize the nettle. We have no choice. We need to work together as politicians to make sure that the transition happens and that it is a just one. Drilling for more oil is like offering an extra duvet to someone in the middle of a burning building. Rishi Sunak has said that he wants to max out North Sea oil.
The Bill will achieve nothing and will weaken our climate commitments. It sows division and weakens our international reputation. It makes the UK look like a riskier place to invest, just when we need that investment so that we can transition. That is why the Bill is so damaging. It does nothing but send out a signal that the Government’s policy on the environment is not clear, consistent or dependable, and, as a result of that, that the UK is not as safe a place as it should be to invest in the energy needs of the future. That is a bad message.
My party is committed to boosting renewable energy and increasing funding for wind, solar, marine power and tidal schemes. We will also enact an emergency programme to insulate all British homes by 2030, cutting emissions and fuel bills and ending fuel poverty.
Baroness Blake of Leeds (Lab)
I thank noble Lords for their constructive comments this afternoon, despite repeated concerns from around the House that the Bill is far from benign and could have damaging consequences, as was eloquently outlined by the noble Baronesses, Lady Young, Lady Willis and Lady Hayman, and others. The noble Lord, Lord Bruce, reflected the conclusions from the other place that the Bill is a distraction from the serious challenges facing us on our path to net zero. It is clear, I have to be honest, that the Bill will not be scrapped, despite the opposition to it, so all of us have a responsibility to limit any potential damage that it might cause, especially as the noble Baroness, Lady Boycott, outlined.
As we heard—although this has not been emphasised enough—the Bill will bring in a duty for the North Sea Transition Authority to run annual licensing rounds for oil and gas extraction in the UK by amending the Petroleum Act 1998. It outlines the two tests that have to be met and, as we have heard repeatedly, it is clear that, as they stand, it is virtually impossible for these tests to fail. The question we need to ask is: why are we being asked to legislate for something that happens anyway?
The stated aim of the Bill is to boost the UK economy, strengthen the UK’s energy security and assist the transition to net zero, while enhancing investor and industry confidence. We have heard excellent contributions explaining why these laudable objectives will not be achieved. The Bill will make no difference to the staggering household bills individuals have to pay, which, frankly, is undermining the economy. As we heard, the Secretary of State has made this absolutely apparent. As my noble friend Lord Lennie said, our dependency on gas has been fuelling these staggering price rises. Households are currently in a record amount of debt, estimated to be £3.1 billion, to energy suppliers. Debt levels have doubled since 2020. Surely this should focus all our minds on the challenges facing us.
This will also not make a difference to our energy security, according to the former chair of BP, the noble Lord, Lord Browne. It will undermine the independence of the NSTA, according to its own board minutes. Also, unforgivably—we have to keep mentioning this point—it will continue the reputational damage to the UK on the global stage in moving towards net zero. I need do no more than ask everyone to look at the speech by the former MP Chris Skidmore and his reasons for resigning. That was an extraordinary action to take, and it was taken because of his serious disappointment with and anxiety about the proposed legislation and the message this is sending across the world. Many noble Lords expressed this concern, and we have repeatedly tried to impress upon the Government that this damage is serious and is affecting our reputation and, therefore, investment in the important work on renewables outlined today.
It is a false premise to present tests that cannot be failed. It feels like manipulation: it is disingenuous, and it needs calling out. Surely the best test would be to demonstrate that a particular action is compatible with our climate change goals. Where is the reference to this legitimate demand in the Bill? The current climate compatibility checkpoint does not have a legislative basis. I make it absolutely clear that Labour recognises that oil and gas will be produced at existing sites in the North Sea over the coming years; to suggest otherwise is wrong and is designed to cause mischief. What needs to be recognised is that such production will taper, as the Minister outlined, to make way for the switch to low-carbon energy sources, coupled with demand reduction through investing in retrofitting our buildings and, in particular, our housing stock. Suggesting that the few new licences that the Bill might deliver are essential to our long-term objective of a transition to clean energy is misleading and provocative. We need a strategy to deliver for those North Sea workers new opportunities that will be enhanced by transitioning to floating offshore wind, carbon capture usage and storage, and hydrogen. We need a clear plan to deliver these opportunities.
Another serious flaw in the Bill is that there is no reference to methane emissions. I am grateful to noble Lords who highlighted this, and, for the sake of time, I will not go into the details. The Bill talks about measuring carbon dioxide emissions, but it therefore focuses on production emissions and does not take on board that methane emissions at different stages of production and transportation of LNG are, in aggregate terms, worse than the emissions of UK-produced and piped natural gas.
I listened with interest to the debate in the other place. It was clear that the right honourable Alok Sharma was concerned about the whole issue of methane. He looked to the debates in the House of Lords to come up with some answers to the amendment that he put forward. Can the Minister enlighten us on where the Government have got to in these discussions? Will there be movement? If not, I am sure this subject will come up in Committee. There have already been demands for a ban on flaring from the CCC and the Environmental Audit Committee.
Does the Minister have an answer to the concern that more licensing could have a chilling effect on the Government’s offshore wind target of 50 gigawatts by 2030, caused by their failure to publish their spatial plan for the UK seabed? The lack of any consideration of a marine spatial prioritisation test is further increasing alarm over the risk to marine health, especially given the lack of regard for protected marine areas. I pay tribute to my noble friend Lady Young and the noble Baroness, Lady Willis, for their contributions in this important area. I understand that there will be further debate on this in Committee, and I look forward to those discussions and the amendments they will generate.
All of us know that cross-party consensus on the important long-term consequences of climate change has been invaluable over recent years. I believe the Bill undermines that consensus for the expectation of short-term political advantage. This was clearly articulated by my noble friend Lord Lennie, and we will not be silent on this point. We need a collective, serious and responsible approach, not a distraction that will contribute nothing to achieving our climate and energy production goals. We need a serious plan, reflecting energy security concerns, the need to provide new jobs and the transition from the current high-skilled jobs to the new jobs that are being created. We need a functioning industrial strategy, as clearly laid out by Labour in its proposals for the future. I assure everyone that we do not want to see a disastrous repeat of the deindustrialisation policies of the 1980s that laid waste to whole communities, especially in the north, where I come from.
The limitations of the Bill offer us little opportunity to secure improvements. However, I am confident that further discussions will take place in Committee and improvements will be sought through amendments concerning, as we have heard, methane, including leak detection, as well as the protection of marine areas and enhancing new job opportunities, to name but a few. The hope is that we can achieve cross-party agreement to secure at least some benefit from this distracting and frustrating legislation.
Lord Callanan (Con)
My Lords, I thank all Members from across the House for what has been quite a good debate, for the interest that they have taken in the Bill and for the many insightful contributions that we have had today. I think the debate has shown how interconnected the future of North Sea oil and gas production is with the huge effort we are making—and I am grateful to the noble Earl, Lord Russell, for instance, for pointing out the huge effort we are making —to decarbonise the UK economy through what is a renewables revolution. Nobody disputes that. I do not think anybody in the debate disputed the importance of net zero.
The Government’s position is entirely consistent with delivering on our targets, but we have to manage the decline of North Sea oil and gas production in a predictable and responsible way. I thought that was an excellent point made by the noble Lord, Lord Bruce, from the Liberal Democrat Benches. It is a pity that his two colleagues did not reflect his excellent contribution.
Restrictions on future licensing would be a grave act of national self-sabotage and would place in jeopardy more than 200,000 jobs that OEUK figures show are currently supported by our domestic oil and gas industry. It would forego up to 1 billion barrels of oil equivalent and, equally importantly, remove an important source of tax revenue. That would mean more imports, including of liquefied natural gas, which has up to four times the production emissions of our own natural gas—a point well made by my noble friends Lord Lilley, Lord Moynihan and Lord Ashcombe. It would mean that we forego investment in clean technologies and the energy transition that our oil and gas industry is vital to driving forward, and it would leave us more vulnerable to hostile states, as we saw during the invasion of Ukraine. We need this investment, and we need the sector’s existing supply chains, expertise and skills. Introducing annual licensing rounds through this Bill will help to protect this investment. It will strengthen our energy security and support that essential transition to net zero.
Let me now deal with some of the specific point made during the debate. I thank my noble friends Lord Moynihan and Lord Ashcombe for their speeches, which recognised that the Bill will support our essential energy security. However, I am aware that other noble Lords, including the noble Lord, Lord Lennie, the noble Baronesses, Lady Hayman and Lady Young, and the noble Earl, Lord Russell, suggested the opposite. As I outlined in my opening speech, the UK still relies on oil and gas for most of our energy needs and will continue to do so well into the future, despite our excellent record on rolling out renewables. The UK is exceptionally well placed to support our own energy security and that of our neighbours and allies. As has been pointed out, we have pipelines connecting us to Norway, the Netherlands, Ireland and Belgium. We have the second-largest liquefied natural gas port infrastructure in Europe, and our infrastructure was essential to helping out our European friends and allies during the Russian crisis that they all suffered last winter.
Of course, we also have our domestic oil and gas production, which is a vital part of ensuring our own and our allies’ energy security. We currently produce about half our gas demand from the North Sea. The vast majority of UK-produced gas lands in the UK and combines with imports and storage to provide a healthy and well-supplied gas market. While 80% of the oil produced here is indeed refined abroad, 90% of that takes place in Europe, where it is made into the products that we need in the UK. Maintaining this resource reduces our vulnerability and that of our European allies to hostile states and leaves us less exposed to unpredictable international events. If the invasion of Ukraine pointed out anything to us, surely it pointed out that. Following that invasion, it was our domestic capability that helped us to support our European neighbours to wean themselves off Russian gas and oil, which most European states have now successfully done. By giving industry certainty about the future of licensing rounds, the Bill will help safeguard our domestic production and, in doing so, enhance the UK’s energy security.
Next, let me respond to the points raised by the noble Lord, Lord Lennie, and the noble Baroness, Lady Hayman, that the Bill will not reduce energy bills. Of course, it is true that oil and gas are traded on a global market. As a net importer of oil and gas, this benefits us. The Government have also ensured that excess energy profits are being used to ease pressures on families across the country. This support helped to save the average household £1,500 on its energy bill last winter. The difficult but necessary decision to further extend the energy profits levy for one more year will raise an additional £1.5 billion contribution from the sector to help us cut taxes for hard-working families, reward hard work and support economic growth.
I have also heard claims that the Bill affects the UK’s international leadership on climate. I thank my noble friend Lord Lilley for his excellent speech, which showed why that is not the case. By contrast, some noble Lords—the noble Lord, Lord Lennie, the noble Baronesses, Lady Hayman, Lady Sheehan and Lady Blake, and the right reverend Prelate the Bishop of Norwich—suggested that somehow the Bill would negatively impact our climate leadership. Our record speaks for itself. We are, as I constantly repeat, the first major economy to halve our emissions, and we are leading the world with our climate performance. Our 2030 target is one of the most ambitious among major economies, and again I am glad that the noble Earl, Lord Russell, recognised this. The Bill, I repeat, will not undermine those commitments.
Not proceeding with new licensing, as is the Opposition’s policy, is the real risk to our climate leadership. If we lose the skilled jobs that will transfer from oil and gas to renewables, we put at risk the transition to renewables and net zero. Some other noble Lords, including the noble Baroness, Lady Hayman, and the noble Baroness, Lady Jones, who I am sorry to say is no longer in her place—apologies, she is sitting on the Bishops’ Bench, which is a great surprise to us all; I did not see the noble Baroness down there—raised concerns about the tests in the Bill. These tests have been carefully designed to ensure that new licensing supports our important net-zero commitments. The tests are in fact meaningful. Those tests being met would be a reflection of the fact that the UK is a net importer and that production emissions associated with North Sea gas are lower than imported liquefied natural gas.
There was also some discussion of carbon capture, usage and storage. This point was raised by the noble Baronesses, Lady Jones and Lady Young. The Climate Change Committee, often quoted in this debate, has described CCUS as
“a necessity not an option”
for the transition to net zero. CCUS will be essential to meeting the UK’s 2050 net-zero target, playing a vital role in levelling up the economy, supporting the low-carbon economic transformation of our industrial regions and creating new high-value jobs. The first two CCUS clusters are in the north-west and north-east of England, and we are proceeding as fast as possible to final investment decisions for those clusters. They are already generating thousands of jobs in Merseyside in the north-west and in Teesside, areas that the noble Lord, Lord Lennie, and I know well.
I move on to the points raised about marine protected areas. The noble Baronesses, Lady Hayman, Lady Willis and Lady Boycott, raised the important matter of marine protection. Let me also address the questions posed by the right reverend Prelate the Bishop of Norwich. I assure the House that the Government share the desire to protect the marine environment. Indeed, we have committed that we will be the first generation to leave the environment in a better state than that in which we found it. The UK is committed to the 30 by 30 global target under the Kunming-Montreal global biodiversity framework.
We already have a robust regulatory framework in place to ensure that marine protected areas are effectively protected. Licences will be awarded only after ensuring that the environmental regulator OPRED is satisfied that activities will not have negative effects on those important protected areas. Future licensing will not affect our ability to reach our targets for ensuring that our marine protected areas are in a good or recovering state.
Furthermore, it is important to emphasise that human activity is not banned in marine protected areas. We constrain activities in MPAs, but the intention of the policy is not to forbid activity, especially where the environmental impact is assessed as not causing damage and is closely evaluated and monitored. Work is under way to ensure that we strike the right, important balance between our different marine priorities. The soon-to-be-commissioned strategic spatial energy plan and the cross-government marine spatial prioritisation programme will ensure that we take a more strategic approach to identifying future sites for marine developments and energy infrastructure, while allowing for nature’s important recovery.
In response to the questions from the noble Baroness, Lady Sheehan, the North Sea Transition Authority is responsible for ensuring that operators decommission abandoned wells within the recommended timeframe of two to five years. The noble Baroness also asked me if we would be giving any grants for oil production: no is the answer. In fact, the opposite is the case: any new production will generate billions in tax revenues, the very opposite of giving out government grants. The Government continue to work with the NSTA and the Health and—
Baroness Sheehan (LD)
The Minister has not addressed my third question, about stranded assets. Should these fields become so in the fullness of time, will he put in place safeguards to make sure that the British taxpayer is not liable for the costs?
Lord Callanan (Con)
The noble Baroness often raises this point. The industry pays billions of pounds in taxes every year, and oil companies are ultimately responsible for decommissioning their assets. As has been pointed out, they are commercial operations. If the fields are stranded assets and the oil companies lose money on them, I doubt whether anybody will shed any tears for them. They are responsible for decommissioning the assets, as is taking place now in many of the depleted fields. I think she needs to have a friendly cup of coffee with her noble friend Lord Bruce, who will fill her in on the details of how the industry works.
Baroness Sheehan (LD)
Yes, we get billions in taxes; that is because trillions are made in profits. What I am really concerned about is that if the businesses fold, the profits have been pocketed but the taxpayer will be left with the costs. Does the Minister accept that?
Lord Callanan (Con)
If the noble Baroness is asking me if they pay billions in taxes and make billions in profits, then yes, I guess the answer is that the international oil companies do very well out of it. Of course, some of them are also financing renewable infrastructure. Some of the big oil and gas companies are helping to invest in CCUS in this country. We very much hope that they will continue to make profits, because it pays our pension funds and a lot of investors, and a huge amount of money into the UK Exchequer that the Liberal Democrats are normally very keen on spending. The noble Baroness needs to allow that money to be raised in the first place. The companies are responsible for decommissioning their assets.
The Government continue to work with the NSTA and the Health and Safety Executive to ensure that well decommissioning is progressing in line with the relevant safety and environmental regulations and standards. That is exactly the same as has been happening previously. The UK has a very robust decommissioning regime whereby operators are responsible for decommissioning their assets at the end of their useful life. This regime of course includes protections for taxpayers, so that the costs fall on those operators. I hope the noble Baroness is reassured by that.
I was of course also pleased to hear the support of the noble Lord, Lord Bruce, for the jobs in the sector. He has a lot of relevant experience, particularly in north-east Scotland. This is in line with the words of Sir Ian Wood:
“Owing to a world-class oil and gas sector, the North East … is home to the critical mass in skills and expertise that will be crucial to ensuring that we successfully accelerate new and green energies, protecting and creating jobs as we do so”.
I am pleased to have the support of the Labour Party, but we must retain those skilled jobs in the industry, and our firm belief is that this Bill will help us to achieve exactly that.
To conclude, the Bill will give industry the certainty and confidence it needs to continue to invest in the North Sea, strengthening our energy security and supporting the energy transition as we move towards our goal of net zero, through the introduction of annual licensing rounds, subject, of course, to all the appropriate tests being met. I look forward to continuing the scrutiny of the Bill as it progresses through the House, but in the meantime, I beg to move.
Baroness Blake of Leeds (Lab)
Before the Minister sits down, could he answer my question about whether discussions are continuing on the issue of methane, as was raised in the other place, and particularly the withdrawal of the amendment from the right honourable Alok Sharma? Can we expect to have some discussion on where those conversations might lead us, if they are indeed taking place?
Lord Callanan (Con)
As I always do, I will listen very carefully to the point of view the House expresses in Committee, and, as is normal practice, as a Government we will then consider whether there are any concessions or changes we want to offer in the Bill. I am sure we will want to talk further to the noble Baroness and her colleagues at that point.