Offshore Petroleum Licensing Bill

Baroness Jones of Moulsecoomb Excerpts

Committee stage
Tuesday 23rd April 2024 Grand Committee

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I shall speak to the two amendments in my name, Amendments 4 and 19, but I also want to say that I very much enjoyed the introduction to the amendments from the noble Lord, Lord Lennie. He said that this is a very damaging Bill, and that is absolutely true—but what offends me so deeply is that it is so old fashioned and out of date. It does not take into account any of the science that has happened over the past 10 years. But luckily, these amendments expose the falsehoods that have been told by the Government in attempting to justify new fossil fuel extraction in the midst of a climate crisis.

First, the Government are deluded in saying that new oil and gas licences can in any way be compatible with delivering our climate targets. That is impossible. Secondly, they are deluded in thinking that propping up the oil and gas industry can possibly be in the interests of workers—and doing that rather than genuinely engaging with the need for a just transition and the practicalities of how that can be delivered. Thirdly, they are deluded in thinking that new oil and gas extraction will do anything to reduce domestic energy costs rather than be exported on the world market to the highest bidder.

Amendments 3 and 8 would establish a climate test, which is very necessary. The UN Production Gap Report has warned that the worlds’ Governments already plan to produce more than double the amount of fossil fuels in 2030 than would be consistent with limiting heating to 1.5 degrees centigrade. The IPC’s sixth assessment report was clear that

“projected CO₂ emissions from existing fossil fuel infrastructure without additional abatement would exceed the remaining carbon budget for 1.5 degrees centigrade”.

Closer to home, the Climate Change Committee observed in its latest progress report that

“expansion of fossil fuel production is not in line with net zero”.

Regardless of the claims from some people, possibly on the opposite Benches, that the UK will continue to need some oil and gas up to 2050, again to use the words of the Climate Change Committee,

“this does not in itself justify the development of new North Sea fields”.

The issuance of new fossil fuel extraction licences will directly contribute towards global heating. The Government will not accept a climate test in this Bill, because they know that new oil and gas is incompatible with a safe climate. If the Minister would like to hear more about this, I would be very happy to meet him and explain it as simply as I possibly can.

My Amendments 4 and 19 set out the just transition test. It is ironic that this Government try so hard to invoke the destruction of working-class communities by the Thatcher Government when they attempt to use oil and gas workers as an excuse to continue pumping new oil and gas, which will further inflame the climate emergency and actually make life harder and harder for people. The choice that we are facing is between a managed and fair worker-led transition now, or chaos later, when the reality of the planet crisis bites even more fiercely. Without serious plans for a just transition, communities will once again be left behind and hollowed out as a result of Conservative policy.

This proposal would require just transition plans for the North Sea workforce that are compatible with limiting global heating to 1.5 degrees centigrade. It specifies that these plans must be agreed through formalised collective agreements with unions and that they apply to all workers, whether they are directly or indirectly employed, or even self-employed—which is vital, given the heavy casualisation in the oil and gas workforce. This amendment will be a step towards delivering a just transition that would see workers at the centre of transition planning, with a clear and accessible pathway out of high-carbon jobs. We have to do this—we absolutely must, if we care about people and their work.

So, rather than propping up jobs that we know will not exist in the future, the Government should be actively supporting workers to transition out of the oil and gas sectors while also addressing their very real concerns—such as around the cost of retraining, which is often borne by workers themselves. The failure to deliver a just transition is not inevitable; it is a political choice. If the Government were serious about listening to workers and protecting jobs, they should have no problem supporting this amendment, which puts job security at the heart of the transition to a green future.

[Earl Russell (LD)]

My Lords, I will speak to my Amendments 5 and 17, which would introduce a cost of living and consumer energy price test that the OGA must conduct before inviting applications for seaward area production licences. The cost of living and consumer energy price test is met in relation to a relevant year if the production of domestic natural gas will clearly, first, lower energy prices and, secondly, reduce the cost of living.

Originally, as was alluded to, the Minister in the other place claimed that this Bill would reduce energy prices but very quickly had to retract that statement from the public domain. My question is: why are we passing this Bill if it will not have any impact at all on reducing the cost of energy bills for consumers? Some 80% of all the natural oil and gas here will be exported. As we have heard, the Bill will do little, if anything, to help our energy security, protect jobs, transition and help the green economy, which is the energy of the future. Instead, we are investing in the energies of the past, and that investment seems to bear few benefits for people or the planet.

We are already seeing individuals with record debt for their energy prices. We have seen the war in Ukraine and the spike in energy prices. As long as we as a country continue not to invest in energy efficiency or renewables and continue to be dependent on the international energy markets, we will continue to suffer as those markets fluctuate. The Government themselves have had to invest £7 billion in subsidising energy bills—in effect, a continued and added subsidy to the oil and gas companies on top of the tax breaks that they already have. We have the most expensive energy prices in Europe so this amendment simply seeks to put in a test where the cost of energy to consumers should be considered.

On the other amendments in this group, Amendments 3 and 18 in the name of the noble Lord, Lord Lennie, would apply a climate change test. I fully support applying a climate change test. The question I would put to the noble Lord, in relation to these specific amendments, concerns asking the Intergovernmental Panel on Climate Change whether it is set up and in the best position to conduct that particular test for us as an individual country. I suggest that, if we want a climate change test, it might be better for the UK’s own Climate Change Committee to pass a judgment on whether that test could be met.

Finally, on to the amendment in the name of the noble Baroness, Lady Jones, of course, although we on this side recognise that we will continue to have some oil and gas as part of our energy mix—even under net zero—we want to see a move to a just transition. I welcome this amendment as an attempt to do that.

However, the amendment is slightly ill defined. I would rather see that transition come about through the profits from the extraction of this energy being directly allocated to the green economy. So, while I welcome the amendment and we do not oppose it, my personal view is that that is a more efficient way of doing it.

--- Later in debate ---

Moved by

[Baroness Jones of Moulsecoomb]

11: Clause 1, page 1, line 23, after “natural gas” insert “crude oil, and petroleum products”
Member’s explanatory statement
This amendment would mean that the carbon intensity test applies to gas, oil, and any other petroleum products on an equal basis, and probes why the government has chosen to only apply the test to natural gas.

[Baroness Jones of Moulsecoomb (GP)]

All the amendments I have tabled here reveal the scam that is absolutely built into this Bill—it is really offensive to the general public—because this carbon intensity test has been deliberately drafted so that UK oil and gas are always deemed to be low carbon, as compared to international comparisons. So there will never be any limit to the number of oil and gas licences issued. My Amendment 11 probes why the Government have chosen to apply the carbon intensity test only to natural gas. It is our first example of how the Government are fudging the numbers with egregious greenwashing.

Why is the carbon intensity of crude oil being ignored in the Government’s test? The answer is obvious: oil is more carbon intensive than gas and the North Sea produces far more oil than gas, making North Sea production more carbon intensive than most of the countries we import oil and gas from. So the Government fiddle the numbers by ignoring oil altogether, thereby making North Sea extraction look like it is somehow tackling climate change rather than pumping even more carbon into the atmosphere and making it ever harder to reach net zero.

The second part of the scam is that the Government do not compare like with like. Despite the fact that most of our imported gas comes via pipeline from Norway, which has less than half the carbon intensity of UK oil and gas, the Bill compares the UK’s gas with liquefied natural gas. LNG is almost four times as carbon intensive as a UK gas and almost 10 times as carbon intensive as gas from Norway because of the processing necessary to liquify, import and regasify the LNG. By comparing UK production with imported LNG instead of all natural gas imports, the Government have added another layer to this dubious test that will green-light new oil and gas licences for decades to come.

The Government have drafted this Bill at an extremely well liquified dinner—if my guess is right—to exclude the bulk of UK oil from the equation, despite oil being the most carbon-intensive component of North Sea production. It is an absolutely outrageous piece of draftsmanship, and yet another example of this Government legislating against reality to create whatever legal conditions are required to force through government policy.

Taken together, my amendments will ensure that the carbon intensity test compares like for like. The amended carbon intensity test will compare all UK oil and gas production with their equivalent imports and include all relevant processes for the extraction, transportation and delivery of oil and gas in usable form to its final customer. I hope that all noble Lords will agree that, if a carbon intensity test is to be used, it must properly assess the carbon intensity of North Sea oil and gas relative to their imported equivalents. It is essential to amend with the Bill along the lines that I propose. I beg to move.

[Earl Russell (LD)]

I speak in favour of the amendments in this group. They all relate to the two tests in the Bill, as the noble Baroness, Lady Jones, has said. The LPG and the UK net importer test are both one-way gates, where the answer is always yes. That is not good enough. There needs to be a proper test that counts the carbon cost of doing these things.

My slight issue with this is that a lot of the amendments in this group are not in scope in this very short, almost Private Member’s Bill-type of legislation. Inevitably, the amendments were gathered around the little bits that are in scope in the Bill to be amended. From our side’s point of view, there are lots of amendments seeking to change these tests. I am not minded to say which is the best amendment to take forward. From our side of the Room, some thought should be given to coalescing around one of those tests. I am happy to support that, but we need to go away and do some thinking to get a unified position.

On the proposal of the noble Baroness, Lady Jones, to remove Clause 1, if that were to be pushed to a vote, I would be prepared to support it. The Minister makes a lot of grand claims for this Bill. In his summing up, he keeps saying that the granting of licences do X, Y and Z. That may well be true, but nothing in the Bill commits to anyone granting any licences. The only thing that the legislation does is to say that there should be tenders. The joined-up logic that the Minister is giving us for the Bill does not, in point of fact, bear relevance, because it could be passed but no licences ever granted again. Equally, we could continue to have licences every year without this Bill.

The Bill does little other than to drive a wedge between us and our commitments to protect the environment, and serves as a way in which to politicise this issue in the run-up to the election. That is all I have to say.

--- Later in debate ---

[Lord Callanan (Con)]

The noble Baroness, Lady Jones, tabled notice of her intention to oppose Clause 1 standing part of the Bill so let me begin my remarks by briefly outlining the purpose of that clause. Under the Petroleum Act 1998, offshore oil and gas licences are administered by the Oil and Gas Authority, which is operating as the North Sea Transition Authority. A seaward production licence grants exclusive rights to the licensee to explore, bore for and produce oil and gas from the geological formations that lie beneath the UK’s offshore waters, within an area defined by the licence. Additional permissions are required before any activity can take place.

Periodically, the NSTA launches licensing rounds inviting companies to apply for such licences. During this process, interested companies submit bids and licences are awarded to bids that promise to ensure the economic recovery of the UK’s oil and gas resources, while of course supporting the drive to net zero by 2050. This existing arrangement means that industry does not have certainty as to when—or, indeed, if—the NSTA will launch a new licensing round. This clause provides that certainty by amending the Petroleum Act 1998 to place a duty on the NSTA to invite applications for seaward production licences in each annual period, which runs from October to September each year. This is subject to two tests being passed: that the average carbon intensity of domestic UK gas is lower than the average carbon intensity of imported liquified natural gas; and that the UK remains a net importer of both oil and gas.

Together, these tests, which will be conducted by the NSTA, will ensure that the annual duty on the NSTA applies only where this supports our wider energy security and energy transition objectives. If the annual duty is triggered, the NSTA proceeds with the current licensing process. It will remain a matter for the NSTA as an independent regulator to decide how many and which blocks or part-blocks to offer for applications—with a minimum of one block—and to ensure and apply the appropriate criteria for determining those applications. It will remain the responsibility of the NSTA to decide whether to offer and grant any licences at the conclusion of that process and whom to offer them to; the NSTA will retain the discretion to grant licences outside of this new annual process in the usual way where needed.

I assure noble Lords that the offering and granting of licences under the new annual process will remain subject to the existing rigorous environmental regulatory requirements. These include the obligation written into the NSTA’s strategy to assist the Secretary of State in meeting the target of net zero by 2050. Indeed, I want to be clear that nothing in this clause contradicts our steadfast and, of course, legally binding commitment to achieving net zero by 2050. We do not need to choose between either delivering net zero or supporting our domestic oil and gas sector; the two things are not mutually incompatible.

Amendments 11, 13, 14 and 16 in the name of the noble Baroness, Lady Jones, and Amendments 12 and 15 in the name of the noble Baroness, Lady Blake, seek to amend the carbon intensity test. This test looks at historical carbon dioxide emissions from the production and supply of natural gas during an assessment period spanning the preceding three years. The test is passed if, during that timeframe, per unit of energy, the carbon emissions of producing gas domestically were lower than the average carbon emissions from the production and delivery of liquefied natural gas from all geographic locations.

The amendment put forward by the noble Baroness, Lady Jones, seeks to change the test to include in the comparison all imported and produced petroleum products, including crude oil, and all forms of natural gas. The amendments put forward by the noble Baroness, Lady Blake, seek to include an assessment of the carbon intensity of all imported natural gas.

It is important to recognise that the markets for oil and gas work very differently; it is not possible to make the same comparisons for oil as it is for gas. In the case of gas, we have a choice either to maximise domestic production or to import more. The more gas we produce domestically, the less we need to import; that seems obvious to me. For oil, we do not have that same choice because oil has to be refined before it is used. For historical reasons, UK oil is generally processed abroad—predominantly in Europe, where our production supports the energy security of our European allies. So a comparison of the carbon intensity of imported oil versus domestically produced oil would be the wrong one to make.

Turning to the test for gas, LNG has been chosen as the relevant comparator as it is a critical marginal source of energy, providing an essential buffer source—especially in winter, when gas demand is higher. Over the past decade, LNG has become an increasingly important method of moving natural gas to market. This will only intensify in the coming years because UK natural gas production peaked in 2000 and the UK has been a net importer since 2004 in order to meet domestic demand.

It is fortunate that some of the UK’s gas imports, in particular pipeline imports from Norway, have relatively low production emissions. However, it is a fact that Norwegian production, like our own, is declining. We will still need gas in the coming years as we transition to net zero. With both UK and Norwegian production declining, it is likely that LNG will play an increasingly important role. During periods of high demand in winter, LNG is a key, flexible source of supply; this role will only increase over time as UK and Norwegian production declines. Producing less domestically means importing more carbon-intensive LNG, which is why a comparison with LNG is the right one to make, in our view, and why we have included it in the Bill.

With the explanation I have been able to provide, I hope that it is clear why the test focuses on LNG and not comparators with oil, which is completely different, or other forms of gas. I therefore ask the noble Baroness to withdraw her amendment.

[Baroness Jones of Moulsecoomb (GP)]

It is hard to summon up the energy to rebut anything. What the Government proved to us yesterday with the Rwanda Bill is that they are prepared to deny reality. So I beg leave to withdraw my amendment.

Amendment 11 withdrawn.

--- Later in debate ---

[Baroness Jones of Moulsecoomb (GP)]

I will speak to my Amendments 22 and 23. I see the Bill as completely pointless and, as I said before, out of date—just not in touch with reality. My two amendments are to corral it slightly so that it does not spill over in any direction.

Amendment 22 would ensure that the provisions of the Bill are not brought in before 1 September 2025 and are brought into effect only by regulation, so that this stuff has to come to the House again. Amendment 23 would sunset the Act after 10 years, which is plenty of time to waste on this, unless a Minister of the Crown intervened, and it would give Ministers the power to disapply Clause 1 in any year, after consultation.

[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.