UK Oil and Gas Industry

Andrew Bowie Excerpts

Thursday 19th April 2018 Westminster Hall

[Colin Clark]

The hon. Gentleman makes a very constructive intervention. There were 460,000 people working in the oil and gas industry; there are now nearer 300,000. With the amount of redundancies and people laid off in the industry, we might have expected that unemployment in the north-east of Scotland and on the rest of the east coast would have gone up sharply, but these are highly skilled people with highly transferable skills, and many companies that I visit in my constituency are already reporting a skills shortage, which is a concern that I am sure the Minister will mention.

It is very important that our universities and colleges engage with what the industry wants. One of the criticisms I heard recently was that there is not enough training in digitalisation for engineers. One company, Aker Solutions, a Norwegian company with a large base in Aberdeen, is recruiting from Mumbai because those engineers are trained in digitalisation. It is a serious worry for me that training and recruitment are not matching up.

Returning to my point about Mozambique, DIT had companies from Aberdeen and the north-east looking at the opportunities out there. There was also the Israeli ambassador’s lunch the other day—there are now huge finds of gas in the Mediterranean. Skills in the United Kingdom, particularly in the north-east, for example in directional drilling, will play a very big part in that.

I want to focus on the importance of the industry—its longevity, future and strategic importance—as well as Government involvement and the moral questions that surround the sector. The industry has come through some very tough years. As I said, employment in the sector has dropped from 460,000 to 300,000, but most of those people have been employed elsewhere. Employment has held up well, as people have also been employed overseas. Although there has been a downturn in the oil price, the amount of oil being produced pretty well holds up, so the number of people involved may simply move to another part of the world.

By early 2016 the price had declined by 75% in 18 months, so the industry withstood an enormous price shock, as opposed to a demand shock. Other basins stepped up production to maintain market share, most notably the middle east and OPEC. There have since been OPEC cuts and caps, which are helping to provide some sort of cost stability. We are seeing the price move nearer to $70, which starts to make the UK continental shelf much more profitable, or at least more able to cover its costs.

The main point to make today is that this is not a dying industry. Production will decline from the peak of 4.5 million barrels in 1999-2000—it is now down to about 1.5 million barrels—but it is still an incredibly important industry for this country.

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

Would my hon. Friend agree that oil and gas is not a transitional industry on the journey through to a decarbonised world? There are many industries and many people who will be using oil and gas as an energy source, and for other reasons, for many years to come.

[Colin Clark]

I thank my hon. Friend for that point. I am a member of the Environmental Audit Committee, which took evidence from Lord Turner, the former chairman of the Committee on Climate Change. I asked him for how long he saw oil and gas being a major source of energy, heat and power, and he said at least into the next century, which is well over 80 years. He went on to say that in terms of an industrial raw material, we just do not know—we could be looking at hundreds of years. It is important that we realise that we probably cannot bring all the hydrocarbons we have to the surface, but that we certainly have to use them better and in a much cleaner way. I know that is a big consideration, particularly in the City of London.

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[Colin Clark]

Quite right. I mean the generic north-east.

The north-east of Scotland has 7% of the population, but 15% of the Scottish economy. I am sure that the hon. Member for Aberdeen North (Kirsty Blackman) will agree that it is the engine room of the Scottish economy. The policies of Her Majesty’s Government and the Scottish Government must encourage companies to thrive, and not be damaging. The cost of living in the north-east of Scotland is higher—house prices were driven up by the boom years, so we have the highest council tax bills—and employers feel penalised by what they see to be very high business rates. The empty business property rates have unfortunately backfired and are encouraging landlords to take buildings down. It is important that we invest in the north-east of Scotland—this is a plea to this place as much as it is to Holyrood—and that the money we raise there is spent there.

Over the lifetime of this Parliament, as much as £500 million of extra rates will be raised in the north-east of Scotland. My plea is that we spend that money in the north-east of Scotland, whether on roads, schools, hospitals or other facilities. It is important that we make the north-east of Scotland not only the right place to invest, but the right place to live. If somebody flies in from Houston or comes up from London or Europe, they have to come to somewhere they really want to live, so it is important that we invest in the area.

[Andrew Bowie]

Does my hon. Friend agree that there is a general feeling in the north-east of Scotland that the region has been undervalued and underfunded by Governments over the past few years?

[Colin Clark]

Yes, but many parts of the country feel they are underinvested in. The engine room of the Scottish economy is taxed that much more than other areas—if we do not invest in it, we risk killing the golden goose. That is the important thing. I am not saying that other areas are not deserving; I am saying that if we do not invest in the north-east of Scotland and the surrounding area, it will not be an attractive place to live, and it will be very difficult to attract people to work there.