Offshore Oil and Gas Industry

Alan Campbell Excerpts

Thursday 3rd March 2016 Westminster Hall

[Mr Alan Campbell (Tynemouth) (Lab)]

As ever, it is a pleasure to serve under your chairmanship, Mr Walker, in what will be a brief contribution. I congratulate the hon. Members for Waveney (Peter Aldous) and for Aberdeen North (Kirsty Blackman) and my hon. Friend the Member for North Tyneside (Mary Glindon), who is my very good friend and neighbour, on securing this debate on an important and timely subject. They have made a strong case for the industry; I will concentrate very much on my locality.

Hundreds of jobs in my constituency depend on the oil and gas industry, where times are, to put it mildly, very tough. Sixteen years ago almost to the day in this very Chamber, I initiated a debate on the plight of the shipbuilding and offshore industry on the River Tyne, because there were similar concerns about jobs being lost and an ageing workforce. We feared losing skills but, as my hon. Friend the Member for North Tyneside said, the offshore industry has provided some continuity. The situation at the time was alleviated by the then Government, who placed warship orders on to the Tyne. Of course, that is not an option for any Government when it comes to the oil and gas industry, because no Government procure rigs or jackets. The common theme in that debate, as in this one, was the vital importance of jobs and the concern at the loss of jobs, whether those jobs were in Waveney, Aberdeen or North Tyneside.

As MPs, in our surgeries and postbags, we receive letters and emails often from the wives and partners of men who work in the industry and who have lost their jobs. The importance of jobs was well understood by the former owner of Swan Hunter, Jaap Kroese, who asked me, following that debate 16 years ago, to chair the then new North East Maritime and Offshore Cluster. I am sad to say that he died at the end of last year. Although he was Dutch, he was an honorary Geordie for the way he championed the maritime industries on the River Tyne, and we shall miss him very much indeed. In all the work that was done, his emphasis was, “Can we bring jobs to our communities and can we safeguard jobs in our communities?”

Those involved in the offshore oil and gas industry—those in fabrication and those who work offshore—in the north-east face serious challenges. The decline, as the hon. Member for Waveney said, partly reflects the maturity of the industry in the North sea, but the scale and speed of job losses reflect the collapse of oil prices. The situation requires action now on a number of fronts. In these particular circumstances we need action, but we also need to ensure when we emerge from this period that companies are competitive, so that the North sea remains competitive and we can keep those jobs.

There is a role for the Government. A number of measures in the Energy Bill currently before Parliament are very welcome indeed. In particular, the establishment of the OGA is important. Of course, the immediate opportunity comes with the Budget, where steps are needed to further alleviate pressure and boost investment. I will not go through each of the tax measures—I could not even if I tried—but I was very pleased that, until a moment ago, the Exchequer Secretary to the Treasury, was in the debate. I am sure the industry is talking to the Government, and I do hope the Government are listening.

I want to make one general point and one specific point about the tax framework. It seems that although there have been changes—I accept that the Government have done a great deal to help—the overall tax regime has not really kept pace with changes in the price of oil. It cannot be right that a tax regime with supplementary charges reflects a time when oil prices were higher than the $30 to $35 or so that they are now. I hope the Chancellor has at the forefront of his mind the need to take action to create a tax environment more in keeping with the current situation than the one that prevailed earlier.

A specific area that I hope the Chancellor will look at—and which was mentioned by the hon. Member for Aberdeen North—is the issue of asset transfer. If companies wish to leave the North sea, we need to ensure that it is easier than it is now to transfer assets, whether to companies that are already in place or, indeed, to people who want to enter the oil and gas fields. Sometimes, those are acorn companies. In my experience, they are people who have worked for bigger companies and who see an opportunity for applying technology in a better way. They are welcome additions and we should not put any barriers in their way. If it were possible to transfer decommissioning tax relief with the asset, that may boost activity, and that would come at little or no cost to the Treasury.

If the Treasury is to play its part, so too must companies. Many are trying to reduce costs below the point at which it is necessary to get a profit if oil is $30 a barrel, but that leaves margins very tight indeed. As my hon. Friend the Member for North Tyneside said, if the price of oil remains at its current level for the rest of 2016, almost half of North sea oil fields will operate at a loss, and that simply is not sustainable.

Advanced Industrial Solutions, which I am pleased to say is an expanding company in my constituency, is working hard, particularly on skills training, but also on supplying equipment and components to the oil and gas industry, especially the offshore industry. By working with major companies, it is cutting costs without cutting standards or cutting health and safety, which is the kind of collaboration that the hon. Member for Waveney mentioned at a local level. The company is upskilling workers for a time when the industry recovers—as we hope it will—or at least for a time when oil prices begin to rise again. It is also upskilling workers who have worked in the offshore industry for new and emerging industries such as onshore and offshore wind turbines and the construction industry. Many jobs that can be done offshore are valued in those industries and in construction. My hon. Friend the Member for North Tyneside and I watched people being upskilled to use complicated rope methods of painting and repairing. If people can use those skills offshore on rigs, albeit in a more dangerous situation, they can use them in construction, and on onshore and offshore turbines too. Such skills are very transferable.

Sometimes, the cost of training is paid by employers, but often it is paid either by employees or by former employees who, if they have been made redundant, pay for it from their redundancy or from their own savings. If someone is willing, has worked hard and saved money, and wants to upskill because they want to work hard again, make money and pay taxes, it cannot be right that the course they go on to upskill is subject to VAT. It just does not make sense that we are putting VAT on such businesses. I understand that any Government will say that once VAT is on, it has to stay on, but—this is my plea—we have previously reduced VAT in some situations. I would ask the Government to consider that.

Finally, I have followed carefully what the hon. Member for Waveney is trying to do. I said earlier that my debate was 16 years ago, which sadly makes me an elder statesman, if that is the right phrase—it is simply code for getting on a bit. I am slightly cynical when I hear the word “taskforce”, which is a bit like “action plan”, where the emphasis is on the plan and often not on the action. I honestly hope that he will be successful with his taskforce, and I wish him well. I am interested in the Government’s view on taskforces and whether they favour the establishment of taskforces locally, or whether it is up to local areas themselves and that the Government do not have a view. Should such taskforces be focused on skills? Previously, in 2000, I would be knocking on the door of the regional development agency and saying, “What are you going to do about retaining skills, and how are you going to show the world that the River Tyne is a centre of excellence for shipbuilding, and for the offshore industry, too?” I am not convinced that the local enterprise partnership is as well placed or is set up in that way. Even if it is, I wonder whether the Government will consider extra resources in some areas for taskforces, perhaps based on local enterprise partnerships, because some areas have been affected worse than others.

I reiterate: we need action, and we need action now. We may talk about the price of oil, about millions and billions of barrels left in the North sea, and about billions of pounds of investment, but ultimately it comes down to jobs. We have to be doing, and be seen to be doing, everything we can to safeguard those jobs, because they are some of the most highly skilled and dangerous jobs, and they are done by some of the most hard-working people I know.