UK Oil and Gas Industry

Alan Whitehead Excerpts

Thursday 19th April 2018 Westminster Hall

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

I concur with the hon. Member for Kilmarnock and Loudoun (Alan Brown) and congratulate the hon. Member for Gordon (Colin Clark) on securing the debate, which has been informed and thoughtful, with excellent contributions. Although we have had a not overwhelming turnout this afternoon, as the Minister reminded me on a previous occasion, there are still two speeches to go, so I hope that my contribution will be up there with those who have already spoken this afternoon.

On where the oil and gas industry is right now, I heartily concur with hon. Members that the outlook at the moment looks much better than had been thought possible a few years ago. Indeed, looking at Oil and Gas UK’s “Business Outlook” for 2018, there are substantially more greens and yellows than there have been for a long time, particularly in relation to production, new field approvals, liquids production, capital expenditure and so on. That is a credit to the way in which the industry has cut its costs, increased its efficiency and got itself much better organised in terms of what will be a very different future for the UK continental shelf than has been the case in the past. That change in approach heralds a brighter future not only for 2018, but for a longer period, because of the change in approach. As the hon. Member for Banff and Buchan (David Duguid) reminded us, the circumstances will not be characterised by, to put it bluntly, hoping for another Brent find.

The future is going to be different. It is, as the hon. Member for Aberdeen North (Kirsty Blackman) said, going to be about looking at small pools, at how exploration can advance without there being a bonanza of new fields, and at consolidation of what already exists. As the hon. Lady and the hon. Member for Banff and Buchan reminded us, it is also a question of decommissioning, and how thoughtfully we go about the process. Oil and gas is not an industry where we can just talk about various spending estimates—£35 billion, £50 billion, or whatever. There is a question of decommissioning in such a way that the process for the possible future exploitation of small pools is maintained, rather than taking all the infrastructure away and feeling bad when it comes to getting on with things subsequently because, lo and behold, the infrastructure that could help is gone. The emergence of the OGA and the success that it has already had is an important element in getting some of those issues right for the future, with a greater sense of co-ordination and understanding within the process in the next period.

In other circumstances I might have said that the hon. Member for Aberdeen North had stolen a lot of what I was thinking of saying, but I know it is a coincidence because anyone who knows my office will also know that I am the only person who knows where my notes are, among the huge pile of papers. Nevertheless, she has articulated many of the themes that I wanted to talk about, particularly how we can ensure that the UK continental shelf has a bright future not just because of oil and gas but beyond them. That includes what we are doing to ensure that carbon capture and storage can be advanced. I believe that could happen in the UKCS, not just with a UK repository but also possibly, in the future, a European one. That would also mean being very careful about what was done in decommissioning, to facilitate rather than downgrade that future industry.

The hon. Member for Waveney (Peter Aldous)—I keep wanting to call him my hon. Friend, but convention in this place does not quite allow me to go that far—made a thoughtful contribution. He will know from the various Committees and other bodies that we have both been on that the opportunity for carbon capture and storage in different forms of gas use has the potential to be important for the future of the UKCS. His suggestion that we can see the UKCS as an entity for energy as a whole was an important thought, and I hope that we shall pursue it. Indeed, my actual hon. Friend the Member for Stockton North (Alex Cunningham) mentioned that there are other practical things to be done by way of decommissioning to produce not just opportunity but infrastructure for industries of the future in the North sea.

I want to give the hon. Member for Gordon an assurance. I do not think it was deliberate, but he chanced on a characterisation of some of those who consider the climate change debate to be an imperative in considering the future of oil and gas in the North sea—that those people would suggest that oil and gas should not have a bright future there. That is not the case. I regard the climate change imperative as encompassing all that we do in connection with energy, as I think does the Minister. However, that does not mean there is not a long-term need for oil or gas; there is a need for both. The question is not whether we have the need, but what we do with the stuff once we have got it, and what sort of responsibility we take for its subsequent use.

An example, which the hon. Member for Waveney will well recall, is the future arrangements that we might have for decarbonising the gas system. One way might be to develop a hydrogen gas economy—a green gas economy—for heating our homes. The cheapest and most efficient way to produce the necessary hydrogen would be through a steam methane reforming system, and that of course needs gas. We can envisage circumstances in which we would take gas from the North sea and make hydrogen from it—possibly in the Teesside cluster that my hon. Friend the Member for Stockton North described—and, to make sure that it would be climate-efficient, the process would need CCS as well. The carbon captured in the hydrogen-making process would be put back into the North sea repositories, which would have been saved by efficiency in the decommissioning process. By a variety of devices, we could have different ways of using what we had to secure a bright future for the North sea, but it would not necessarily be the bright future that we envisaged hitherto.

It is important to be clear about our intentions for what we extract from the North sea—that what we use should be domestically sourced as far as possible. That would be good news for the UK as a whole, but we would also have the wider responsibility of the climate change imperative behind us. We need to think through what we will do with our North sea products and, on that basis, how we shall sustain the industries that have served the UK so well in the past 40 years or so. I am not one of those who says, “The North sea is finished; it is a mature basin.” There is quite a lot more to get out of that basin. We must do that in rather different ways, with rather different responsibilities, but provided we take that approach the bright future for the North sea and the oil and gas industry there is assured. I hope that we can work together on achieving that in the coming years.