Oil and Gas Industry

Lord Callanan Excerpts

Tuesday 22nd September 2020 Lords Chamber

[Lord Bruce of Bennachie]

To ask Her Majesty’s Government what steps they will take to ensure the recovery and diversification of the United Kingdom oil and gas industry supply chain.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con) [V]]

My Lords, I recognise the impact that the coronavirus pandemic and the lower oil price have had on the oil and gas supply chain. We are working closely with the sector to agree a transformational North Sea transition deal, which we have committed to delivering in this Parliament. The focus of this deal will be on ensuring that the sector can support the energy transition and on anchoring the supply chain here in the United Kingdom.

[Lord Bruce of Bennachie (LD) [V]]

My Lords, I thank the Minister for that reply. Does he agree with me that, as we transition to net-zero carbon, we will continue to require fossil fuels and that it is better to use our own, which meet high international standards, and to sustain a quarter of a million UK jobs? Will the Government work closely with the industry, the Scottish Government and local councils to help accelerate diversification into carbon capture and storage and renewable energy, and exploit the huge potential from hydrogen, using the capital and world-class expertise that exists in our industry, so that these high-quality jobs can be diversified into new, low-carbon-sector jobs, rather than be lost?

[Lord Callanan (Con) [V]]

I agree with the points made by the noble Lord. I congratulate the sector on its response to the twin crises of the pandemic and the lower oil price. The Government launched an unprecedented Covid-19 financial package because we want to support the sector, which sustains more than 270,000 jobs in the UK. As I said earlier, we are committed to a proper North Sea transition deal.

[Lord Moynihan (Con)]

My Lords, I declare my interests as set out in the register. As oil and gas supply and service companies move increasingly to offshore or renewable business, will the Minister confirm that the energy White Paper will cover the error whereby the energy transition discussions on renewable costs almost always completely ignore the system costs of coping with periods of intermittently zero or limited electron production?

[Lord Callanan (Con) [V]]

My noble friend makes a good point, as always. The White Paper will indeed address the characteristics of the electricity system as we prepare for a net-zero future, balancing the increased deployment of renewables with more flexibility and low-carbon sources of electricity that are available when the wind does not blow or the sun does not shine. Indeed, our system has already demonstrated that it can operate with a high percentage of renewable generation: 47% of electricity in the first quarter of this year was renewable, and, adding in nuclear, we had more than 60% from low-carbon generation.

[Viscount Waverley (CB) [V]]

My Lords, the key issue of training can be expressed in two ways. What support is to be provided to ensure that, as the industry migrates across to new, sustainable energy markets, UK jobs are retained by reskilling and retraining this highly skilled workforce? Coupled to that, what support is to be provided to UK companies helping developing economies in their continuing efforts to prioritise local content initiatives for sustainable economic development?

[Lord Callanan (Con) [V]]

My noble friend makes a very good point. It will be key to the sector deal to make sure that we can utilise the tremendous expertise across the oil and gas sector both for our own low-carbon transition and to help other countries with theirs.

[Lord West of Spithead (Lab)]

My Lords, the Oil and Gas Authority is only just beginning to take account of the UK’s statutory target for net-zero emissions of greenhouse gases by 2050. Official projections from the Department for Business, Energy and Industrial Strategy take no account of that requirement. Our nation is sleepwalking into an energy crisis of major proportions. National daytime electricity demand is forecast to double from 40 to 80 gigawatts by 2050, when we should have net-zero emissions. Oil and gas will have to be phased out, yet the Government’s industrial strategy does not mention the need to retrain and redeploy oil and gas workers. Although renewables can achieve much, there will always be days when wind and sun cannot meet our demands. Nuclear power provides the green option, yet we are discovering daily that the plan for nuclear power is in growing disarray. How do the Government intend to resolve this imminent crisis of secure nuclear power provision?

[Lord Callanan (Con) [V]]

I do not accept that we are sleepwalking into a crisis. We are devoting huge expertise and energy to planning for the transition. Renewables and nuclear have an important role to play in the transition, as do oil and gas. However, the noble Lord will have to be patient and wait for the energy White Paper, when all these matters will become clear.

[Lord Oates (LD)]

My Lords, what discussions have the Government had with the oil and gas industry about utilising its expertise as we establish the UK’s green hydrogen production? What assessment have the Government made of the potential for the hydrogen industry to provide replacement high-skilled jobs for those lost in oil and gas as we decarbonise the economy?

[Lord Callanan (Con) [V]]

The noble Lord is consistent in advocating for the hydrogen sector, and it is true that the oil and gas sector has an important contribution to make to the UK’s energy transition. Its world-class supply chain has many of the essential skills and capabilities to support emerging technologies such as hydrogen and carbon capture and storage. The noble Lord will be aware that we launched the Hydrogen Advisory Council on 20 July to help inform the development of a UK hydrogen strategy, which we intend to publish early next year.

[Lord Grantchester (Lab)]

The Energy Minister in the other place has said that an oil and gas sector deal will be critically important for the sector as it seeks to recover from the current crisis. There is some confusion over this, as we still know so very little. Can the Minister confirm that any oil and gas sector deal will comply with the UK’s domestic and international climate change commitments and include fully funded programmes to transfer skills into clean industries? Is this sector deal transforming into the North Sea transition deal?

[Lord Callanan (Con) [V]]

We are currently awaiting proposals from the industry and we are committed to working closely with it; it has a key role to play. We will, of course, be consistent with our international obligations.

[Baroness McIntosh of Pickering (Con)]

What is the current state of interconnectors to the energy market? What new interconnectors is my noble friend expecting to come on stream and when might that be?

[Lord Callanan (Con) [V]]

My noble friend is right that interconnectors have a key role to play. There are a number of existing electricity and gas interconnectors, which will play a key role in the transition. They also provide security of supply to both imports and exports of energy. We will be supporting them.

[Lord Truscott (Ind Lab)]

My Lords, I refer the House to my relevant interests in the register. BP has forecast that peak oil will come about in the early 2020s—much earlier than previously predicted. What plans do Her Majesty’s Government have to deal with this? Are they ready for it?

[Lord Callanan (Con) [V]]

As we have said, oil and gas have a key role to play in the transition and that is reflected by the independent Committee on Climate Change. Many of these things are, of course, a matter for the market. We have historically low oil prices at the moment, and the Government are well aware of it. We need to transition away from fossil fuel. BP, which the noble Lord mentioned, is doing a tremendous job in supporting, for example, the Net Zero Teesside scheme.

[Lord Goddard of Stockport (LD) [V]]

Will Her Majesty’s Government support carbon capture and storage technology on a regional basis across the UK, including the north-west, to meet our net-zero commitment while securing the future energy needs of our manufacturing plants, without which we will come to rely even more on imports from other countries? Without such a commitment, we will undermine our contribution to tackling climate change while putting in doubt thousands of jobs in this sector at the worst possible time.

[Lord Callanan (Con) [V]]

The noble Lord is right. Carbon capture and storage will be a key part of our future energy requirements. The Chancellor announced the new carbon capture and storage infrastructure fund of at least £800 million. We are committed to deploying carbon capture and storage in at least two industrial clusters over the next decade.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, parts of our world are burning; parts of it are melting. We are already committed to a one degree rise in temperature globally. The Government are not feeling the urgency of this. We have to stop fossil fuel burning now. It is no good talking about transitioning and having little dribs and drabs of plans. The Government need a vision. If I can help with that, I would be delighted.

[Lord Callanan (Con) [V]]

I thank the noble Baroness; I admire her commitment to these causes. In essence, we agree, albeit probably not on the scale she requires. The UK was the first major world economy to legislate for net zero. We were one of the first countries to commit to ending unabated coal generation and we intend to do that by 2024. I hope that the noble Baroness will also recognise that the oil and gas sector has a key role to play in supporting the transition through its skills, infrastructure and investment. As we move to a low-carbon economy, oil and gas will play an increasingly small role, but we need to utilise the skills that exist in the industry.

[The Senior Deputy Speaker (Lord McFall of Alcluith)]

My Lords, the time allowed for this Question has elapsed.