Offshore Petroleum Licensing Bill

Lord Sharma Excerpts

2nd reading
Monday 22nd January 2024 Commons Chamber

[Sir Alok Sharma (Reading West) (Con)]

I refer the House to my entry in the Register of Members’ Financial Interests.

I agree with the Secretary of State, who I hold in high regard, that the United Kingdom has been a leader in climate action internationally. We have cut our emissions in half over the past 30 years, faster than any other major economy in recent years. We have set ambitious domestic emission reduction targets, in particular ahead of COP26. Through our COP26 presidency, we managed to get over 90% of the global economy signed up to net zero. Just about every G20 nation signed up to a net zero commitment. We led on climate action domestically and we translated that into leading the world on climate action.

Just a few weeks ago at COP28, the UK, alongside other nations, signed up to transition away from fossil fuels. On his return from COP28, the Minister for Energy Security and Net Zero, my right hon. Friend the Member for Beverley and Holderness (Graham Stuart) welcomed that global agreement from the Dispatch Box. He spoke about the importance of listening to the voices of the most climate-vulnerable island nations, who, as we know, wanted the world to agree to stronger language to phase out fossil fuels. Indeed, my right hon. Friend himself tweeted at COP28:

“There must be a phase-out of unabated fossil fuels to meet our climate goals.”

I commend the work that he and the whole UK team did in Dubai.

But today we have a Bill before the House, the sole purpose of which is to double-down on granting more oil and gas production licences. I do not believe, and it pains me to say this, that the Bill will advance that commitment to transition away from fossil fuels. I also do not believe that those climate-vulnerable nations my right hon. Friend referred to will think the Bill is consistent with the pledge that we, along with every other nation, made in Dubai.

As for the substance of the Bill, I think that, as currently drafted—and it pains me to say this—it is something of a distraction. I do not think it is necessary. The North Sea Transition Authority can already grant licences annually, or, indeed, when it considers it necessary. It has been doing that regularly for the past few years. The Department’s own explanatory notes make that clear by stating:

“ The NSTA will remain free to grant licences outside this new annual duty in the usual way, whether or not the new statutory tests are met.”

As for those two statutory tests, they seem to override the already non-binding climate compatibility checkpoint, and I have to say that I think they have been designed in such a way that the computer will always say yes to new oil and gas licences. Overall, the ability of the NSTA to grant new licences will not change materially as a result of the Bill.

Sadly, however—this is my opinion, and others will have theirs—what the Bill does do is reinforce the unfortunate perception of the UK’s rowing back from climate action, as indeed we saw last autumn with the chopping and changing of some policies, and that does make our international partners question the seriousness with which we take our international commitments. I said “it pains me to say this” because I know that the Government have been coming forward, under this Secretary of State, with commitments to try to tackle climate change and deliver on a clean energy transition.

We have heard that the Bill is about improving domestic energy security, but I think we all understand 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. Moreover, I think it is acknowledged that the Bill would not necessarily lower domestic energy bills in the UK, given that the price of oil and gas as a commodity is set internationally. I think that the best way to enhance our energy security, and ultimately bring down bills, is for the Government to continue to deliver on their ambitious plans for expanding home-grown clean energy, to which I know the Secretary of State and her Ministers are absolutely committed. That means more wind power, more solar and more nuclear as part of a diversified clean energy mix, and I back the Secretary of State in the work that she and her team are doing in delivering that clean energy mix.

We have heard that the Bill will secure 200,000 jobs. Of course people’s jobs and livelihoods matter, and we must ensure that we secure those jobs, but we must recognise that we are in the process of an energy transition. I support an orderly transition; for me, this is not about turning off the taps overnight on oil and gas. We must also acknowledge that more than 200,000 jobs, supported by the oil and gas industry, have been lost over the past decade, despite hundreds of new drilling licences being issued. We know that many of the skills used in the oil and gas sector are transferable to clean energy—to offshore wind and geothermal. If we want to truly turbocharge a clean energy transition, we need to help, support and retrain the workers who are making the transition, over time, from the fossil fuel sector into the many tens of thousands of jobs that are being created in clean energy as a result of the work that the Secretary of State and her team are doing.

[Matt Western (Warwick and Leamington) (Lab)]

The right hon. Gentleman is making some powerful points, and I have huge respect for him when it comes to this topic. Does he agree that we are in real danger of turning off the interest and the investment appetite among many other nations, such as Korea and Japan, which see the UK as having vast expertise in offshore wind development sites, and that legislation of this kind will undermine that market?

[Sir Alok Sharma]

There was some commentary expressing concern about investment appetite following some of the statements that were made in the autumn, but I think we must acknowledge that, over the last few months, the Government have managed to secure billions of pounds of extra investment committed within clean energy to the UK.

Turning to the carbon intensity test for granting new licences, I have to say again that I am not sure that the Government recognise the whole picture of where we get our imports from. The majority of the gas that the UK imports comes via a pipeline from Norway. It is not imported LNG. The carbon intensity of Norwegian gas production is around half that of UK domestic gas. If that is the test that the Government want to apply in deciding whether to issue new licences, I think they should take into account the average carbon intensity of all imported gas, not just LNG. Given that around 70% of remaining North sea reserves are oil, perhaps the tests should also include the carbon intensity of UK-produced oil, which is higher than the global average.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

I put that very point to the Secretary of State in our Select Committee, and her response was that because almost all our oil is exported out of the UK for processing, we do not know what its full carbon intensity is. Is that not a great example of why our oil is not used in Britain and why this will not help British people?

[Sir Alok Sharma]

The Secretary of State has set out her position very clearly and eloquently. I am trying to set out my position on the Bill.

The Government said that the independent Climate Change Committee’s own data showed that we were going to need new oil and gas in the decade ahead, but I respectfully say that that is not the same as saying that new licences should be granted. The weekend before this Bill was originally due to have its Second Reading, the interim chair of the committee put out a tweet to reconfirm the CCC’s position. He wrote that

“@theCCCuk evidence is that continued expansion of new oil and gas reserves is inconsistent with our climate commitments, especially more so in light of the recent Global Stocktake COP agreement we just signed.”

For the reasons that I have outlined, I will not vote for this Bill today, but assuming that it proceeds beyond its Second Reading, I hope that it will be possible to work with like- minded colleagues—and indeed the Government, the Secretary of State and her Ministers—to amend and improve the tests that are required to be met before any new oil and gas production licences are granted in the future.

In conclusion, delivering on the UK’s clean energy transition matters on many levels: for jobs, for inward investment, for lower bills, for real energy security and of course for the environment. We see the impacts of the changing climate around us daily: 2023 was the hottest year on record globally, and in recent weeks many people have faced flooding again in our country, including in my own constituency. We really should not need any more wake-up calls to put aside the distractions and act with the urgency that the situation demands.