Future of the Oil and Gas Industry

Debate between Charles Walker and Douglas Chapman

Thursday 14th March 2019 Westminster Hall

[Douglas Chapman]

The UK Government has had a spend, spend, spend approach, but as I said, I would like us to put away much more of that wealth for future generations. Perhaps it is a bit late to do that now; we probably should have started doing it from the beginning. It is easy to say in hindsight, but it should have been part of the overall oil and gas strategy right from the start.

It was interesting to hear the Chancellor’s reply to my hon. Friend the Member for Aberdeen North (Kirsty Blackman) during the spring statement yesterday. He said:

“Scotland gets its share of…capital and resource, but precious little thanks do we ever hear from…the SNP Benches”.—[Official Report, 13 March 2019; Vol. 656, c. 360.]

The fact that £350 billion went into Treasury coffers but not a brass farthing went directly into the Scottish economy underlines the point made by my hon. Friend the Member for Edinburgh North and Leith (Deidre Brock) about what Scotland has got out of oil and gas. We could have had an awful lot more to benefit every man, woman and child in our country. The Chancellor’s concept of pooling and sharing is much different from mine.

I am grateful that the control, stewardship and the tax take will soon be back in Scotland’s hands—“stewardship” is the key word rather than “management”. I return to the eloquent point made by the hon. Member for Coatbridge, Chryston and Bellshill (Hugh Gaffney) on safety: if companies are being brought to the table to talk about how to license certain fields, surely that is a fantastic opportunity to talk about their responsibilities for trade union recognition, and the safety and security of people who work on rigs far out in the North sea.

Scotland does not underestimate the vital part the oil and gas sector plays in meeting our energy needs; as the Committee points out, it is forecast that two thirds of the UK’s primary energy needs will be met from the North sea until at least 2035. However, we must also appreciate that we need to transition to a low-energy, low-carbon economy. Our world-leading, export-oriented supply chain already plays a positive role in that respect by looking at ways to reduce its carbon footprint at every turn. Average emissions per unit of production on the UK continental shelf have fallen year on year since 2013, and total emissions have been in decline since their peak in 2000.

Our oil and gas industry is awash with highly skilled individuals in possession of world-leading expertise. The sector currently supports 283,000 jobs across the UK. We must seek to hold on to those workers to retain the value they add to our economy. As I said, the Scottish Government’s transition training fund has made good progress in that regard, facilitating training for many oil and gas workers to move into renewables such as tidal, onshore and offshore wind, wave power and solar. However, the UK Government’s decision to slash funding for the renewable energy sector does not give us much encouragement. In fact, it does exactly the opposite, removing opportunities for talented individuals to utilise their skills to develop new wind technology and other low-carbon technologies such as carbon capture and storage—not so much opportunity knocks as an opportunity lost.

Brexit looms large in many people’s minds. We stand at a Brexit crossroads, with freefall into no deal on one side and a car crash of a bad deal on the other. It is inevitable that business across the UK will suffer if we ever actually leave the EU, but the oil and gas industry is likely to be one of the hardest hit, due to its highly globalised nature. With approximately £61 billion of oil and gas-related goods traded with the rest of the world, the threat of tariffs looms over the industry. In a worst-case scenario where the UK reverted to World Trade Organisation rules with the EU and the rest of the world, the cost of trade would likely almost double to around £1.1 billion per annum, assuming trading behaviours remained unchanged.

[Mr Charles Walker (in the Chair)]

Order. I remind the hon. Gentleman that we want to share the time out: if he could wrap up in two minutes, that would be great.

[Douglas Chapman]

Certainly, Mr Walker; I will move on to my final comment.

The report’s conclusions focus on the positives: developing an ambitious deal for the sector as a whole, which I hope will be supported; developing new technology, which many Members spoke about, so we can recover more of what we need; reducing the costs of decommissioning; exporting the sector’s skills and experience, not just in exploration but in subsea work; and making the vital transition from carbon energy such as oil and gas to renewables—especially hydrogen, which could be a game changer and might just help save the planet. The opportunities remain immense, and the sector deal outlined by the Committee would offer energy security for decades to come and allow Scotland to remain a sector leader.