Offshore Petroleum Licensing Bill

Lord Lennie Excerpts

Committee stage
Tuesday 23rd April 2024 Grand Committee

Moved by

[Lord Lennie]

3: Clause 1, page 1, line 6, at end insert—
“(aa) the climate change test (see section 4ZD);”Member’s explanatory statement
This amendment, together with the other in the name of Lord Lennie, sets out the climate change test to be applied by the Oil and Gas Authority before inviting applications for seaward new production licences.

[Lord Lennie (Lab)]

My Lords, I will speak to Amendments 3 and 18 in my name. These amendments set out the climate change test to be applied to the Oil and Gas Authority before inviting applications for new seaward production licences. Before detailing what the amendment calls for, I point out, as I said at Second Reading, that this is an unnecessary and damaging Bill. It undermines the independent authority of the NSTA and reinforces the perception around the world that the UK is rowing back from climate change, as described by Sir Alok Sharma MP, the highly respected former president of COP in the other place. So, nothing we can do in Committee or on Report would improve the Bill better than ditching it altogether; no improvements can make fresh fruit out of rotting vegetables.

The tests that the Bill sets are fundamentally flawed, and any tests that we may introduce would still be weaker than Labour’s overall position of no new exploration licences. Labour recognises—this is to reassure those who are concerned—that production will continue in the North Sea for decades to come. Oil and gas will continue to supply our domestic energy market well beyond the lifetime of most of us in the Room.

The Bill could or should have set a strategic direction or plan for how we deal with North Sea workers transitioning to new jobs in renewables, as set out by the noble Baroness, Lady Hayman. However, how we manage our North Sea assets for the long term and maximise the low carbon potential of the North Sea are also missing from the Bill. It does not do any of this; it just sets these tests that cannot be failed and demands that the NSTA carries out annual licensing of new oil and gas fields.

These tests are, first, that the carbon intensity of domestic natural gas is lower than the carbon intensity of liquefied natural gas imported into the United Kingdom. It is, and it always will be. The second test is that the UK is projected to remain a net importer of oil and gas. It is, and it always will be. The amendment that replaced these tests states the following:

“The climate change test is met in relation to a relevant year if the Intergovernmental Panel on Climate Change on the mitigation of climate change publish a report following the passing of this Act which makes a finding that the granting of additional seaward area production licences is consistent with limiting warming to 1.5 degrees centigrade”.


It is the Government’s policy to achieve 1.5 degrees centigrade. It was agreed at the Paris Agreement that 1.5 degrees centigrade is what we should achieve. This test is very straightforward and consistent with government advice of achieving 1.5 degrees of global warming. The IPCC has previously said that the Bill as it stands is not compatible with our climate change goals. However, unlike the Government’s tests, this test is not set up so that we cannot fail. If the evidence base was updated to suggest that this action was compatible with our climate goals because the climate science had changed, or because the technology around oil and gas extraction developed, the Labour test could be passed.

If we are to take our responsibilities seriously as a prime mover in the fight against climate change, we should adopt the strategy that carefully manages our North Sea oil and gas production, while maximising the low carbon potential of the North Sea. The government tests just simply do not achieve this. We need proper policy developed in the round for this to happen. The Bill as drafted does not allow for this. It is concerned only with the unnecessary mandatory licensing rounds, and as such is a nakedly political proposal, as has been suggested by others.

Does the Bill even attempt to approach the fact that demand for gas will undoubtedly decline as we decarbonise our power sector and electrify more? Can the Minister say what the Government’s strategic thinking is in this area? Instead of doing the hard work and producing holistic plans, they have played politics with the UK’s reputation and workers’ futures. We can and should do better than this.

As for the other amendments in the group, I highlight those in the name of the noble Earl, Lord Russell. They remind us that the Secretary of State for Energy Security and Net Zero confirmed that the Bill would not reduce energy bills, and that that is not its purpose. With the cost of living crisis hurting everyone, reducing energy bills should be a priority for the Government, and the Bill should reflect that—but it does not. I beg to move.

--- Later in debate ---

With the explanations I have been able to provide, I hope that noble Lords will agree to withdraw or not press their amendments.

[Lord Lennie (Lab)]

My Lords, at Second Reading, I quoted Alan Whitehead MP saying that this Bill was cooked up over a long lunch and should have been buried before the effects of that long lunch had worn off. Unfortunately, it has not been, so we have to try to deal with it. The Minister appears to be not complacent but content that we are making the progress we need to make. The Government believe that we are on track to hit 1.5 degrees Celsius by 2050 but the test would introduce an independence to the measurement of that, through the IPCC—the global body and the right body to do the test. It is not a body in this country but a global body that can measure, compare, contrast and make judgments about whether our plans do indeed meet the intended targets.

The cost of living issue is a probing one but it reminds us what the Secretary of State said in response to a question about it—the Minister has repeated it—which is that it is not the purpose of this Bill to reduce energy costs. Surely the question of how we make sure that we reduce energy costs must be fundamental to all our considerations of energy policy in this country. There has been a reduction since the massive inflationary pressures of the post-Covid years, but they are not low and we can do more to reduce those costs to customers.

On that note, I beg leave to withdraw the amendment at this stage.

Amendment 3 withdrawn.

--- Later in debate ---

[The Duke of Montrose (Con)]

I apologise for the fact that I did not participate at Second Reading. I declare an interest as a Scottish income tax payer to the noble Earl, Lord Russell, who is concerned with what comes back to Scotland. I am horrified at his idea that Scotland should be left out of the Bill.

As far as my memory serves me, in July 1998, in discussing Schedule 5, all energy was reserved to Westminster and, at a later date, renewable energy was devolved to Scotland. So if Scotland does not appear in this Bill and there is no continuing power to develop things in Scotland, this amendment would mean the end of any exploration for petroleum products in the Scottish area, in the surrounding oceans or on land.

[Lord Lennie (Lab)]

My Lords, I thank everyone who has spoken in the debate so far. I thank the noble Earl, Lord Russell, for his proposal about omitting Scotland from the Bill, and the noble Duke, the Duke of Montrose, for his horrified response to the proposal to omit Scotland from the Bill. I am not sure about the debate on Scotland, to be honest, but on balance I think I would keep Scotland in the Bill. I say to the noble Baroness, Lady Jones, that I can see why these amendments would delay the Bill coming into effect, which would not be a bad thing. It would be better if the Bill were not here at all, but, hey, we cannot have everything we want.

The Government have admitted that the Bill will not take a penny off energy bills and will do nothing for energy security, because oil and gas are sold on the international market. The Bill will send precisely the wrong signals to investors about the UK’s commitment to the green transition: Amanda Blanc, chief executive officer of Aviva said that new oil and gas drilling

“puts at … risk the jobs, growth and the additional investment the UK requires to become more climate ready”.

The Bill has been slammed from many quarters, including some surprising ones, such as Theresa May, former Prime Minister. The noble Lord, Lord Browne, former chief executive officer of BP, said it

“is not going to make any difference”

to Britain’s energy security.

Annual licencing rounds will not boost the UK’s economy, as North Sea oil and gas is already in decline, as the Minister confirmed, and over the next decade, in Scotland and England, there will be 25 new jobs in clean energy for every job that is lost in oil and gas. That is what we have to secure: the transition of workers from oil and gas to the new green, clean energy. More extraction in the North Sea will not improve any security or lower energy bills. Remaining reserves are mostly oil, not gas, and 78% of that oil is exported, as it is not in the right form for use in the United Kingdom. The UK is already feeling the devastating impact of climate change, and granting licences simply amplifies the effects. Campaign groups have indicated that the current licences will send “a wrecking ball” through the UK’s climate commitments.

[Lord Callanan (Con)]

First, I thank noble Lords for their brevity on this group.

Amendment 20 seeks to amend the Bill to exclude Scotland. Of course, the vast majority of offshore oil and gas activity takes place off the coast of Scotland to the benefit of all citizens across the United Kingdom. Excluding Scotland from the scope of the Bill, which I understand is the intention of the amendment, would significantly undermine the benefits that the Bill is intended to create. It would risk causing unnecessary confusion for industry and create considerable complexity for the independent regulator. This is particularly true as we transition towards a low-carbon economy and workforce.

As I have already mentioned in previous groups, a report by 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. Many of those, of course, are in Scotland, where OEUK estimates that over 90,000 jobs are supported by the oil and gas industry. If we rush the transition, or create additional uncertainty in the investment environment, we risk losing the jobs and skills that we will need as we scale up the clean technologies needed to realise that crucial net zero target.