Offshore Oil and Gas Industry

Callum McCaig Excerpts

Thursday 3rd March 2016 Westminster Hall

[Callum McCaig (Aberdeen South) (SNP)]

The hon. Member for Waveney (Peter Aldous) and my hon. Friend the Member for Aberdeen North (Kirsty Blackman) have discussed access to finance. My hon. Friend is making a powerful point about how innovation requires financing. Does she agree—I am sure she does—that access to finance is critical to maintaining that drive for innovation?

[Hannah Bardell]

I absolutely agree. It is critical that we send the right message not just to the industry but to the markets that we are there for them and will invest in the technology. Again, as our exports drop, we must consider how we can do better. This is an area where we are leading the world, and we must invest.

Another innovation developed was the rebreather. As I am sure many Members remember, there was a series of helicopter accidents in the North sea, and in August 2013, a helicopter went down off the coast of Shetland. I was part of the emergency response team for my company at the time; sadly, we lost someone in that accident. That experience changed me and everybody else involved, and I will certainly never forget it, but the industry’s response—we had the support of Oil & Gas UK, the police and all the various bodies—was incredible. It showed the industry’s robustness and ability to respond. Ultimately, getting in a helicopter is pretty much the only method of transport for people who work offshore. The industry’s response—developing a new breathing system and new ways to get people offshore—was important, because the accidents put significant pressure on production and on the ability to get people out and back safely.

I will touch briefly on the apprenticeship levy, which was introduced by the UK Government to deliver 3 million more apprenticeships. We welcome anything that can deliver more apprentices. However, there is a lack of clarity on the issue and a concern in the industry, which I have raised and will meet the Minister about shortly, regarding double charging. Some parts of the industry are already paying a levy to the Engineering Construction Industry Training Board for apprentices.

I urge the Government to do all they can to ensure that the levy is clear, concise and simplified, and that it delivers what it promises. Scottish Ministers have had concerns about the lack of consultation, and they are still not clear how the new body being created will work. It is important that people do not end up being put into apprenticeships that are not real apprenticeships but low-paid jobs. We must do our best to get young people into this important sector and many others. I welcome the Minister’s willingness to meet me, and I thank the Aberdeen and Grampian chamber of commerce, which has done a lot of work to bring together people in the oil and gas sector on that issue.

Oil & Gas UK’s operating expenditure report for 2017, the activity survey, says that the industry has made substantial progress. We must commend it on reducing operating costs, with total operating expenditure falling by around 15% to £8.2 billion. The industry has the wit and will to do so. Clearly, innovation comes not only in technological form but in terms of expenditure. Under massive pressure, the industry has led the world in innovation. We must do all that we can, in terms of the tax regime and the field allowances that Oil & Gas UK has called for, to reform the special taxes paid by the industry, to promote investment and maximise capacity during the downturn.

Other hon. Members and I recently met the Underwater Centre in Fort William, which trains divers across the globe, particularly in the UK and Scotland. We must remember that diving is one of the most dangerous jobs that anybody can do. The Underwater Centre told us that the average age of a diver is now more than 50. What is happening is that although people are still coming through for training from Scotland and the UK—less so globally—the centre is seriously concerned that when the upturn comes, not enough people will have been invested in and not enough divers will have been trained, and we will get back into the same cycle that we have seen before, in which only certain people have certain skills, and companies must pay a fortune for them. I saw it happen in the industry when I was there: people were paid phenomenal salaries for specialist skills, because we had not had the foresight to invest in training.

I come to the work that the Scottish Government have done with Scottish Enterprise and Scottish Development International. I know from having tried to open an arm of a business in Norway—and succeeded—how important Scottish Enterprise and SDI were. They gave us support and financing to attend, for example, the Offshore Northern Seas conference in Norway and get business, and helped us understand how to operate in a different country. The Scottish Government have been doing everything that they can to support the industry in its time of need. First Minister Nicola Sturgeon set up a jobs taskforce in January 2015 in collaboration with Scottish Enterprise, chaired by its CEO Lena Wilson. It is only fair to pay tribute to Lena Wilson, who has done a huge amount of work on the issue. She has worked tirelessly with the Oil and Gas Authority, Oil & Gas UK and many others.

The Scottish Government are also running an “adopt an apprentice” scheme through Skills Development Scotland to re-employ any modern apprentices in the industry who have lost their jobs or apprenticeships. On 1 February 2016, the Scottish Government announced £12.5 million for oil and gas innovation and further business support, including £10 million in Scottish Enterprise funding to help reduce the risks associated with carrying out research and development and enable access to specialist exports to help kick-start innovation projects in Scotland.

Finally, I would like to make a point about health and safety or, as it is often called in the oil and gas sector, HSSE or HSSEQ—health, safety, security, environment and quality. The right hon. Member for Tynemouth (Mr Campbell) also mentioned it. At a time when costs are under such huge pressure, it is important that health and safety are not compromised. I have seen the results personally, and had to deal with incidents. The industry has come a long way since Piper Alpha. It is hugely innovative and it continues to invest, but it is important that we send the message that health and safety must not be compromised in these difficult times.

In conclusion, there is a huge amount being done by Government, by industry bodies and all across the sector, including by companies and individuals, but we have to send the strongest message possible that this industry has a prosperous future and that we need to do all we can to support it. The oil and gas industry matters and the message that we have to send to our banks and to investors is that it is open for business and is here to stay.

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[Callum McCaig (Aberdeen South) (SNP)]

Me? Right. [Laughter.] Thank you, Mr Walker, for calling me to speak. I was not quite expecting to be called and there are other people in the room who I assumed were speaking before me; clearly, I assumed wrongly.

I commend the hon. Members for Waveney (Peter Aldous) and for North Tyneside (Mary Glindon), and my hon. Friend the Member for Aberdeen North (Kirsty Blackman), for securing this debate at the Backbench Business Committee. One of the unique frustrations of having the privilege of being my party’s Front-Bench spokesperson in this area is that I could not add my name to those of the Members who secured the debate, such is the importance of this industry to my constituency, to Scotland and—as we have heard today—not only to large regions of the United Kingdom but to the United Kingdom as a whole.

We have heard from the three key areas: Aberdeen; north-east England; and south-east England. We have heard of distinct challenges facing these areas and we have heard accounts in different accents from the different areas, but let us be clear that those of us here who represent these areas speak with one voice about what is required.

I add my backing to everything that has been said about support for the industry. For all of us who represent constituencies with an oil industry, whether job losses in the industry are in Aberdeen, East Anglia or the north-east of England, we all feel them. They are hugely damaging to communities and it is incumbent upon us to do everything we can to secure the bright future that I believe this industry has; with the right support, I am absolutely sure that it will have a bright future.

The hon. Member for Waveney made an absolutely superb speech to kick off this debate, covering the issues in great detail: the challenges; the opportunities; and the solutions that exist. Let us be clear—the Government do not have the silver bullet that is the cure to the industry’s ills, but they have a significant remit in terms of tackling those ills.

There are three key areas around which there are challenges facing oil and gas. The first is price, which we can do nothing about. The second is the industry’s costs, which the industry is doing its bit on; it is doing it well, but that will result in job losses as money is taken out of the system. Nevertheless, that process is required to get the industry to that bright future. And the third factor is tax.

It may seem slightly perverse that at a time when companies are not making profits and when taxes are not flowing into the Treasury that we should be calling for tax cuts, but it is precisely at this time that we need to call for tax cuts and it is at this time that they will not come at great expense to the Treasury. It will not cost the Treasury anything, or it will only cost the Treasury little, to make tax cuts, but the benefit of making them will be substantially felt in the wider economy, as they will support employment and unlock the finance that we have talked about, which in turn will drive the innovation to support our supply chain in delivering the changes, the innovation, the skills and the expertise that this industry is already world-class in and world famous for.

[Philip Davies in the Chair]

What is at stake here? As we have heard, the industry has produced 42 billion barrels. The reasonable estimate is that there are another 20 billion barrels left. Even if we do nothing, a number of those barrels will be produced; the investment has gone in and the existing platforms will continue to produce. The projects that are in development at this stage will happen.

However, a considerable amount of those reserves that are left in the North sea might not be extracted, and if they are not extracted the cost will fall upon us all. There would be a loss of jobs, particularly in the areas represented by those of us who have spoken today. That would have a knock-on impact on the wider economy—the supply chain that stretches the length and breadth of these islands.

[Kirsty Blackman]

Specifically on the point about the barrels that are still to be extracted, does my hon. Friend agree that some of them are in more difficult types of field and so are more difficult to extract? The innovation, the research and development and the funding towards that are therefore hugely important for those fields.

[Callum McCaig]

I agree wholeheartedly. The make-up of the North sea is different from what it was and what has gone past. As well as the innovation and expertise, there is also the infrastructure that is already there, as a number of Members have mentioned. Once that is gone, there are fields that will go from being marginal on the positive side to being marginal on the negative side or just entirely uneconomic.

Returning to the point I was making on the missed opportunities, every single barrel of oil that we do not produce from the North sea we will need to get from somewhere else. We import oil and gas, and we should not underestimate the importance that being an oil producer has for the UK’s balance of payments, which, frankly, are not great as it is. If we have to rely more on imported oil and gas for our supply, it will further exacerbate that issue. If we miss the opportunities to further develop and support the supply chain, the ability to provide the project management, skills, expertise and technology will go with it as oil and gas is exploited in other, perhaps more favourable basins. The prizes are clear: jobs, energy security and support for our balance of payments and exports. Those huge prizes are there, and if the industry is given the right support, they can and will be obtained.

The Prime Minister has talked about building a bridge to the future, and that is necessary and required. The same turn of phrase has been used by my colleague, the Scottish Government’s Energy Minister, Fergus Ewing. We have left a period of very high oil prices, but as day follows night, oil prices will go up. None of us can predict when that will be, but at least until now it has been the case that they have always gone back up again. The difference in supply and demand that we are talking about is not huge, but the impacts that that has over a sustained period of time change the price and make it far more volatile and far lower.

It is a curious situation, but Aberdeen is probably one of the few places in Europe where the local radio stations tell their listeners what the oil price is. At the end of every bulletin, the newsreader will say something like, “Oil trades at $36 a barrel”—folk are happy with $36 a barrel, because it is better than the $29 a barrel it was at. That is strange, and on the face of it that seems like a slightly useless snippet of information, but it signifies how important the industry is to the city that I am proud to represent.

What would a tax cut do? It would provide the clearest signal that the Government can offer that they believe in the future of oil and gas and will do everything they can to ensure that that future is realised as well as possible. We are talking about a multibillion pound investment in a platform 40 or 50 miles out into the North sea, and that is a significant investment. That investment is likely to have a lifespan well in excess of 20 years—potentially, it is 30 to 40 years. In the time that that field will be looking to make its money back, the oil price will go through many ups and downs, but when many international companies are looking across the globe at where to invest their ever-shrinking piles of capital—the oil industry globally is facing a crisis of investment—we need to be at the most competitive we can be. Part of that is the skills, innovation and expertise that I am absolutely certain we have, but that change in the headline rate of tax over the lifespan of a field can put the decision from being, “We do not proceed,” to, “Yes, let’s press the button and go ahead and develop this field.”

Reducing the headline rate of tax is the clearest single way that we can boost the efforts in exploration and in developing the fields that we know about, and it will provide the clearest way forward on the bridge to the future. It will require people to invest. Whether that is companies using the strength of their balance sheet—some are doing that, buying up other operators and such like—or whether it is borrowed money, if we can de-risk the investment decision as much as possible, there is a greater chance that someone will invest that money in the UK continental shelf, as opposed to one of the other basins.

[Stuart Blair Donaldson]

Does my hon. Friend agree with the assessment of Oil & Gas UK that to transform the basin, the UK continental shelf needs to become the most attractive mature oil and gas province in the world in which to do business? That is not just one of the most, but the most attractive place to do business.

[Callum McCaig]

I agree with my hon. Friend and Oil & Gas UK on that. The North sea, particularly at Aberdeen, benefits from being the best place to live to work in the oil and gas industry, but it needs to be the best place in terms of the assets and the tax regime.

[George Kerevan (East Lothian) (SNP)]

Does my hon. Friend also agree that another reason for having the best possible tax position is that the existing companies, particularly the smaller companies in the North sea sector, are under threat from the international credit rating agencies that, since Christmas, have been downgrading them? That worsens those companies’ ability to raise capital. Anything that puts confidence into the companies and keeps their credit ratings high gives confidence for the longer term.

[Callum McCaig]

Yes, absolutely. The international creditworthiness of the companies is fundamental to their access to finance. Speaking to the financial providers and asking that they look favourably on the sector because it has the support of Government would have an automatic benefit for their creditworthiness. Were we to do that, it would be a win-win in the clearest sense.

We should be looking to do an awful lot more exploration, and reducing the headline rate of tax is the best way of doing that. There is undoubted potential to the west of Shetland and in the Atlantic margins, but we should not give up on the core parts of the North sea, whether that is the central North sea or the southern North sea. I met with representatives of Statoil earlier this week, and they were discussing a field where they have found 2.8 billion barrels of oil and gas. That is next to the Oseberg field in the Norwegian sector, but it is in one of the most heavily explored areas of the Norwegian continental shelf. The exploration that happened in large parts of the UK side of the line happened a long time ago. The advances, whether those are in drilling technology or seismic technology, mean that we should be looking to go back around some of the old ground to see what we have left there. There is a chance that there will be significant finds, and we need to ensure that that exploration is properly incentivised, so that the companies going out to look for oil and gas get as big a return as possible. That will make it economically viable.

The asks are on tax and access to finance, as we have heard. There is a key point on the transferability of tax liabilities when it comes to decommissioning. The ability to bring new players into the market is important. Each time there has been a downturn in the North sea, there has been a reconfiguration of the companies operating, and largely speaking that has been positive. We have gone from the big US companies to the majors to the middle-ranking players, and we are perhaps looking to go to smaller players still. Those at the cutting edge of innovation are the smallest companies. Their bread and butter is making the most of ageing or smaller fields. They can devote their time, expertise and capital to doing that and getting it right.

Finally, I want to talk about Aberdeen. It has felt the impact, and my hon. Friends the Members for Aberdeen North and for West Aberdeenshire and Kincardine have touched upon the impact on our constituents. It has been significant and for many of them it has been painful. However, on the investment made by both Governments, the city deal shows proper collaborative working. Although I am disappointed that it is not bigger, there is no politician who has ever represented anywhere ever who has not wanted more from the Government when it comes to financing. I recognise it is a significant commitment. The work to establish the oil and gas technology centre is a smart use of money and builds on the expertise that is already there within our universities, making sure that we make that box a little bit more clever.

Investment in infrastructure in Aberdeen is hugely important. When we discussed the issues of oil and gas a year or more ago at the beginning of the downturn, the previous head of Oil & Gas UK said that Aberdeen was part of the problem in terms of the competitiveness of the North sea and in terms of our infrastructure, both physical and digital. Steps are under way to put that right, but we cannot rest on our laurels, and we have to up the pace of investment in infrastructure to unleash the potential that Aberdeen has.

There has been much talk about the tax regime. Again, we welcome the efforts made in last year’s Budget. I read this morning that the head of Oil & Gas UK had described the tax cuts as “so last year”, but I think the headline writer has taken a bit of a liberty because, having read the article, I am disappointed to say that she did not say that. However, because she did not, I shall. What was done, although important, was done last year; there need to be efforts this year. The Budget is coming upon us. It was welcome that a Treasury Minister was here for the opening remarks; he has not missed much by not staying to hear what I have to say. I know the Minister of State, Department of Energy and Climate Change, understands the industry and is well regarded there. I hope that she is having conversations with her colleagues in the Treasury around the same issues; I would expect nothing less.

Time is of the essence. We are at a crossroads here. There is a future for the North sea, and the Governments in Westminster and in Holyrood should make every effort to make sure that that future is the brightest possible. That requires action in the Budget and I very much hope that we will not be disappointed.

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[The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)]

It is a great pleasure to serve under your chairmanship, Mr Davies. I echo the hon. Members for Aberdeen South (Callum McCaig) and for Southampton, Test (Dr Whitehead) in saying that the good and unusual thing about this debate is that we are all on the same page. We all absolutely agree that the oil and gas industry is vital for the United Kingdom. It is currently in great difficulty, but we are all united in our determination to do everything we can to see it get through this period and continue to thrive.

I was slightly concerned to hear the hon. Member for Southampton, Test raise the question of joint enterprise and mention “Dallas” in the same speech. We will of course all remember the question, “Who shot J. R.?”; I would not like to think that there was any joint enterprise whatever.

[Callum McCaig]

I should make it clear to the Minister that some of us are not old enough to remember “Dallas”. [Laughter.]

[Andrea Leadsom]

I take that extremely personally. That is going to cost the hon. Gentleman chocolate raisins in our next debate—he knows what I mean. I am watching him very closely.

Like other Members, I was delighted that my hon. Friend the Exchequer Secretary to the Treasury was able to join us for much of the debate and hear the views of several Members on the needs of this important sector. The North sea is a mature basin, yet it is still meeting the equivalent of around 65% of the UK’s oil demand and 55% of its gas demand. As many Members have said, there is no doubt that oil and gas will remain central to the UK’s energy mix as we make the transition to a low-carbon economy in a cost-effective way for consumers, so investing in domestic oil and gas production is essential. It helps to reduce our reliance on energy imports and provides a significant input to our economy, supporting hundreds of thousands of jobs directly and indirectly.

As all speakers have pointed out, over the past year oil prices have continued to fall, dropping to below $30 a barrel earlier this year. The impact of the fall on the industry was reported last week in Oil & Gas UK’s annual activity survey, which also indicates that investment in new projects has fallen from approximately £8 billion a year over the past five years to an expected £1 billion in the coming year, and that the number of wells drilled to explore for new reserves is low. It is therefore vital that industry and Government step up and respond to the challenges facing the industry.

I assure all Members that the Government are committed in their support for the industry and have already made significant changes to the fiscal regime. In the March 2015 Budget, the Chancellor introduced a £1.3 billion package of reforms, including reductions to headline rates of tax, a new investment allowance and £20 million of funding for seismic surveys to support exploration. In fact, no other Government have made fiscal changes as extensive as the UK’s in response to falling oil prices. Both the Government and the Oil and Gas Authority will continue to listen to the industry’s views on further reforms in this area, but, as the Wood review made clear, fiscal changes are not the only solution to the issues the industry currently faces.

Several Members, including the right hon. Member for Tynemouth (Mr Campbell), spoke about the need for fiscal measures to be taken in the next Budget. I hope that he and others were reassured by the presence of my hon. Friend the Exchequer Secretary. The changes announced in the 2015 Budget were obviously significant. Several large projects have already gone ahead as a result of them, such as Maersk’s Culzean project—an investment of £3 billion in the UK, supporting 6,000 jobs—and BP’s eastern trough area project, which is a £670 million investment. In response to the March 2015 Budget package, the then CEO of Oil & Gas UK, Malcolm Webb, said:

“These measures send exactly the right signal to investors. They properly reflect the needs of this maturing oil and gas province and will allow the UK to compete internationally for investment.”

That is what we were setting out to achieve, and I think those measures were very well received.

Members have highlighted what the industry is asking for: that we address the remaining fiscal barriers to late-life activity; that we abolish the supplementary charge, or at least reduce it by 10%; that we bring the rate of the investment allowance for offshore expenditure in line with that for onshore expenditure; that we temporarily remove all special taxes from exploration, so that only basic corporation tax will apply for all discoveries made over the next five years for the whole life of the field; and that we introduce a Government loan guarantee.

The Government have been building on the evidence gathered at working groups that met over autumn 2015. The Treasury, supported by the OGA, is conducting internal analysis of the findings of the three workstreams on barriers to exploration, infrastructure access and new entrants for late-life assets. As usual, should the Chancellor make any decisions, the announcement and implementation of any changes to the tax regime will follow the fiscal policy-making process. I hope that that reassures Members, but they should understand that I cannot make any further comments. It is not a matter for me anyway, but the Budget is coming the week after next.

In addition to looking into and undertaking further fiscal reform, the Government are supporting the industry in a number of other ways. The OGA has been established as an independent regulator and asset steward for the UK continental shelf. The Energy Bill before Parliament will provide the OGA with the powers it needs to maximise the economic recovery of oil and gas from the continental shelf. The OGA is working with the industry to identify opportunities to reduce costs, and good progress has already been made, with Oil & Gas UK’s recent activity survey showing that production rose by 10% in 2015, while production costs fell by a third. That is an impressive achievement.

As the hon. Member for North Tyneside (Mary Glindon) pointed out, we have recently re-established the cross-party oil and gas group, and we are aiming to promote the competitiveness of the offshore fabrication sector. Our first meeting, in January, was very productive. I am grateful to my hon. Friend the Member for Waveney (Peter Aldous), the hon. Member for North Tyneside and other Members for their involvement in the forum. As the hon. Lady mentioned, our next meeting will be with fabricators, and we will be looking at new opportunities not only in the traditional oil and gas sector but outside it.

Supporting the industry’s supply chain is crucial at this time, as it is a vital and integral part of the UK oil and gas industry. As those Members who have constituents who work in the industry and others who themselves have worked in the industry will know, it has suffered job losses and revenues falling by around a quarter last year. We must acknowledge that. The hon. Member for Aberdeen North (Kirsty Blackman) asked whether enough is being done about job losses. I can tell her that in intergovernmental ministerial meetings, and particularly in the work I am doing with my right hon. Friend the Minister for Small Business, Industry and Enterprise, we are examining what more can be done to view the energy sector holistically to see how job losses in the oil and gas sector can be a win, not only for offshore and onshore wind but, for example, for the new nuclear efforts. We are looking at what more can be done to provide new opportunities in the energy sector.

Despite the low oil price and the downturn of work being contracted offshore, there are steps we can take to support our supply chain and put it in the best position to win contracts. The OGA is actively involved in promoting future success through its supply chain strategy and board, for which unlocking new investment and future work is a priority. The OGA is working closely with the Department for Business, Innovation and Skills and with industry to make sure that companies remain competitive. The Government are working to further develop mechanisms to provide greater transparency about upcoming business opportunities to companies in the supply chain.

I am delighted to be able to inform Members that over the past few days I have held meetings with several offshore wind developers to emphasise to them that I want to see them do more to make the industrialisation of the UK offshore wind supply chain happen. In particular, the industry needs to work collaboratively to deliver a UK jacket foundation solution and competitive UK tower solutions. Successful delivery of towers and jacket foundations will create opportunities for fabricators and enable people with the right skills to transfer across to the offshore wind sector.

In the past 48 hours, I have met a couple of developers, one of whom told me that they have been very successful in winning overseas offshore wind business by using onshore Aberdeen-based oil and gas consultants with expertise in engineering, if hon. Members can follow that tortuous thought process. Rather than using offshore wind consultants, wherever they are based, they are using the UK’s long-established expertise in onshore oil and gas to win overseas wind business. That is important, and we need to do more to promote that interesting opportunity.

I am working with my hon. Friend the Minister for Skills to develop a national college for wind energy to provide people with the right skills to work in the sector. I had a meeting yesterday with a number of hon. Members from across the House to talk about what more we can do to get it up and running. Retraining is required if we are to take the people who lose opportunities in the oil and gas sector into offshore and onshore wind and other renewables sectors. There is a big opportunity there.

The UK has a strong record on manufacturing jackets and topsides for offshore wind substations. The majority of those items are manufactured in the UK. Sembmarine SLP Ltd, which won a contract from Siemens Transmission and Distribution in 2014 to design, engineer, procure, project manage and construct its platform’s jacket substructure and topside, has begun fabrication. The offshore transformer station, which is being constructed at SLP’s yard at Lowestoft on the Suffolk coast, is providing work for up to 300 employers for the next 21 months. I encourage all hon. Members—I know they are already doing this—to work with Ministers, cross-party groups and the OGA to look at other opportunities in the energy sector, not only on direct workforce re-engagement but on supply chain opportunities. That is really important. The Government and the OGA are continuing to work with initiatives such as the Scottish energy jobs taskforce and the New Anglia local enterprise partnership to support those who have already, sadly, lost their jobs. We need to continue that work.

In addition to those measures, during his visit to Aberdeen in January, the Prime Minister announced a package of measures to support the industry, including £20 million of Government funding for a second round of new seismic surveys to unlock new exploration activity in the UK continental shelf, which is the lifeblood of the basin. That funding, together with the OGA’s flexible and pragmatic licensing strategy for frontier and mature acreage, is designed proactively to influence and incentivise exploration on the UKCS. To back genuine innovation, the data from those new surveys will be made publicly available and £1 million will be allocated to fund innovative uses of data to unlock new fields. That additional investment will help to accelerate the drilling of new wells, which will replenish our reserves and lead to new infrastructure projects.

In addition, £700,000 is to be invested in the development of world-class 3D visualisation facilities at the Lyell centre at Heriot-Watt University in Edinburgh. The appointment of a new oil and gas ambassador will help to ensure the best possible access for UK companies to markets overseas, promote the North sea around the world and boost inward investment. The new strategy to maximise the economic recovery of offshore oil and gas in the UK will, subject to the will of Parliament, come into force soon. I share the sense of urgency of my hon. Friend the Member for Waveney, who rightly pointed out that that needs to happen as soon as possible.

In addition to all those measures, Innovate UK is set to launch an energy game-changer, which will make £1.5 million available to encourage innovators, microbusinesses and small and medium-sized enterprises from outside the energy sector to come up with radical solutions and disruptive technologies in response to challenges set by the energy industry. The Natural Environment Research Council will also allocate an additional £1 million investment in the successful oil and gas centre for doctoral training, led by Heriot-Watt University in Edinburgh. Aberdeen University is another core partner. That further investment will enable the programme to be extended for another year and will take the total number of PhD students funded under the scheme to 120 by 2017.

The Government are committed to supporting regional development. Aberdeen is Europe’s energy capital, and has rightly received a package of investment through the Aberdeen city region deal, which included funding for an oil and gas technology centre that will help to strengthen the UK’s position as a global centre of expertise for offshore oil and gas and encourage future investment in the UK. However, that is not the only area that contributes to the industry. Although Scotland supports 45% of the UK’s oil and gas jobs, largely in and around Aberdeen, 55% are located in England, with concentrations in the south-east, the north-west, the west midlands and the north-east. Those areas all support thousands of highly skilled and well-paid jobs. I was very pleased that my hon. Friend the Minister for Housing and Planning was able to join us for part of the debate and that he lent his support for our doing all we can to ensure the success of the sector. It is crucial that we have a joined-up approach across the Government, the OGA, industry and the regions.

As my hon. Friend the Member for Waveney made clear, the southern North sea off the coast of the east of England is a vital part of our industry. For that reason, we are moving forward with our regional development plans. This year, the OGA will carry out an evaluation of the potential for transforming the southern North sea into an energy hub.

As many hon. Members pointed out, although the industry faces challenges, we must remember that there are still opportunities out there. It is definitely not all doom and gloom. As Sir Ian Wood pointed out recently, there is still a huge prize out there. There are still up to another 20 billion barrels of oil equivalent to recover, and 10 new developments will come online in the next two years, which will create much-needed jobs. There is a strong portfolio of new projects in the planning stage just waiting for an upturn in the oil price.