Offshore Petroleum Licensing Bill

Graham Stuart Excerpts

Committee of the whole House
Tuesday 20th February 2024 Commons Chamber

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

I rise to support amendments 17 and 19, and to speak to my amendments 22 and 24 on energy efficiency tests and amendments 23 and 25 on the energy charter treaty.

Let me start with amendment 25. At the moment, the energy charter treaty, of which we are a member, is a failed international treaty. It binds us to any contract that we sign for oil, gas or any energy. Once it is signed, we cannot get out of it without paying the hope value of that contract. What I mean by the hope value is that a member does not pay the actual material value if it wants to stop that contract now; it has to pay all the potential value of that contract if the oilfield, for example, were fully exploited.

The treaty has cost other European countries billions and billions of pounds when they have tried to implement climate mitigation policies. It is dangerous, because the decisions are made not by British courts or by international courts with a British judge, but by secretive tribunals where the corporations get to appoint the people who make the deliberations. It is so outrageous that European Union members have agreed to withdraw en masse—they are currently negotiating on how to do so in a co-ordinated way—and to do side letters with each other to ensure they are not bound by the 25-year clause under which any extant licences that have been signed must continue to be honoured, even after withdrawal.

[The Minister for Energy Security and Net Zero (Graham Stuart)]

What has that got to do with this?

[Lloyd Russell-Moyle]

Because if we sign more licences while we are still part of the energy charter treaty, the Minister is binding the hands of future generations. If we withdrew from the energy charter treaty, as our allies and partners are trying to do, and then decided to award new licences, future Governments and generations could, without penalty, withdraw or reduce those licences. That very much relates to the Bill, because I am saying: “If you want to do this for short-term gain”—I do not believe the Government’s premise to start with—“at least allow future generations and Governments to come and fix your mess; do not bind their hands under international treaties.” I think that that is relevant to the awarding of new licences.

The fact that so many countries are fleeing the energy charter treaty means that this is the moment to negotiate with our partners to work out a new way forward. The British Government themselves accept that the energy charter treaty has failed. They have tried to make significant amendments to it to allow flexibility on climate change goals. It has not been possible to amend it, which is why European partners are trying to withdraw. This test would do two things. Not only would it avoid binding future generations, but it would put a rocket up the derrière of our Ministers and Departments to ensure that they fulfil the pledge of reform or withdrawal, which is a pledge that we have already made.

Let me address amendments 22 and 24 on the energy efficiency test for home heating. In reality, the biggest proportion of domestic energy is spent on home heating. Huge domestic bills will not be solved one iota by the Bill, as the Minister has admitted, because the product will be sold on the international market and the marginal price at which we buy it back will still be inflated. Our electricity market, which is linked to that marginal price, will continue to be inflated. The best and most efficient way to reduce energy bills and the demand and need for gas—the way that we all know needs to happen—is to ensure that our homes meet decent energy efficiency standards.

The amendments set out that the Government need to redouble their efforts to ensure energy efficiency before we commit to and invest in new licences for offshore drilling, and that we need a median rating of band B in energy performance. At the moment, C is seen as standard and D is common in private rentals. Privately let homes are the worst in the sector, and greater help is needed. We cannot continue to rely on Government programmes that do not touch the sides. We need a proper approach in which we go street by street with councils and local government, fully funded by central Government, with clawbacks in future years.

However, we cannot expect our citizens to pay a penny out of their pockets up front. Homeowners are already overstretched, with huge additional bills, in a mortgage market that has been destroyed by the Government. They cannot afford an extra cent, an extra penny, for home improvements. That all needs to be covered by the Government. My amendments would incentivise the Government to do that and to ensure that we have made every effort to reduce gas demand before we go ahead with the foolish endeavour of drilling more oil and gas, which will not reduce prices, will not stop fuel poverty in this country and will not deal with any of our long-lasting problems. It would be a sticking plaster that does not even stick.

I worked with the Opposition Front Benchers on amendment 17, which sets out the climate change test, so I am delighted that they have tabled it. A similar amendment has been tabled by my constituency neighbour, the hon. Member for Brighton, Pavilion (Caroline Lucas). It is important to say that we cannot meet our climate targets if we do not honour and respect the IPCC’s work and reports. We are on a hiding to nothing if we think that we can keep drilling and extracting more while meeting our energy targets.

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On that basis, it is about time that we committed into statute that Scotland’s oil will be refined in Scotland’s refinery. Our workers and our country should expect no less. It is not a great deal of money that is being sought—we are talking about tens of millions to provide the hydrocracker that will increase profitability threefold, which the hon. Member for Angus (Dave Doogan) should take into account. If we do not get that hydrocracker going, we will not have a plant by the time biofuels are brought into consideration. It is for that reason that of the £6.1 billion that the UK Government will get in receipts from the North sea, a modicum or a fraction must be put into ensuring that Petroineos or its successor remains in Grangemouth.

[Graham Stuart]

It is a pleasure to take part in the debate this afternoon, which has been wide-ranging, well informed and genuinely interesting. I thank Members from across the Committee for their participation and for playing an important role in scrutinising this important piece of legislation.

Before I move on to specific amendments I will, if you allow me, Dame Rosie, briefly outline the importance of this Bill. The UK leads the world on tackling climate change, and is the first major economy to halve emissions. The Bill will protect jobs, tax receipts and sovereign capability, so that we can continue that world leadership. As one of the world’s most decarbonised major economies, the UK remains dependent on oil and gas and will continue to be, albeit in reducing amounts, according to the Climate Change Committee. Even when we are at net zero in 2050, we will require oil and gas. However, we are a net importer and, as has been discussed, UK production is falling fast.

The ambition of the right hon. Member for Doncaster North (Edward Miliband) to destroy UK supply ignores industry, the unions and his own Back Benchers, and would simply replace UK oil and gas with higher-emission imports. That is at the heart of this; that is why we want to pass this legislation—it is because of the policies of the parties opposite. The hon. Member for Angus (Dave Doogan) looks a little confused. The parties opposite are very clear that they want to end new licensing, and we would thus have to import more from abroad. It is as simple as that. That would mean more LNG, which has four times the embedded emissions of domestically produced gas. That is the reality. That is at the heart of the Bill; that is why it is so important that we legislate today to send a signal to industry that continued fast-declining production in the North sea is the right thing to do environmentally, economically, in terms of tax—on every front. If it was not, we should not and would not do it.

[Barry Gardiner]

Will the Minister give way?

[Graham Stuart]

I will make a little more progress.

Annual licensing will improve our energy security and that of our neighbours. It will support 200,000 jobs and safeguard billions in tax revenue and, as my hon. Friend the Member for Banff and Buchan (David Duguid) set out so well, it will safeguard the skills needed for successful energy transition. Hon. Members can listen to everyone from Offshore Energies UK to Robert Gordon University for evidence of the need for that. These things are not in tension; they mutually complement each other and need to be supported.

[Barry Gardiner]

Is the Minister going to give way?

[Graham Stuart]

I promise to come to the hon. Gentleman before I finish.

Turning to the amendments selected today, I first thank my right hon. Friend the Member for Reading West (Sir Alok Sharma) for amendment 12 on flaring and venting. As has been discussed, the guidance from the North Sea Transition Authority is clear that all new developments should be planned on the basis of zero routine flaring and venting. The Government have already committed to ending routine flaring and venting by 2030, going further than the World Bank’s zero routine flaring initiative. That voluntary North sea transition deal is reaping rewards. Based on the latest data, North sea flaring is down 50% since 2018, and the sector is on track to deliver the 2030 target.

I fear that the amendment would risk replacing voluntary momentum with a slower, compliance-based, more resistant approach from industry. However, I will continue to engage with my right hon. Friend as the Bill moves to the other place, with a view to delivering the end of flaring and venting by 2030 at the latest, which is an ambition he and I share, as do the Government.

With that, if the hon. Member for Brent North (Barry Gardiner) has not lost his mojo and his moment, I shall give way to him.

[Barry Gardiner]

I am very grateful to the Minister for giving way, and no—I would not lose my mojo on this. We all know that there is 110% more oil and gas already in the world than we can use if we are to remain within the 1.5°C threshold. Does the Minister think the climate really cares where that oil and gas are used? His argument about imports implies that he does believe that the atmosphere cares. The damage will be done; the only way we can reduce its impact is by ensuring that the proposed additional exploration licences are not achieved.

[Graham Stuart]

I thank the hon. Gentleman for his question. He has taken a long and deep interest in this issue, for which I pay him respect. It is the burning of oil and gas that is the primary issue. He mentions 110%—we probably have 200%, 300% or 400%. There are countries setting out to massively increase their production. That is all driven by demand. If we—as a species, as a globe—are to get to net zero, we will have to cap wells all over the world. We will have to leave it in the ground. The most important thing is to ensure that the demand curve is going in the right direction. Despite all the issues, challenges and difficulties of maintaining our role as the leading major economy in cutting emissions, the UK’s biggest challenge in dealing with climate change is not domestic, despite the difficulty of that; it is to get others to join us on a net zero pathway. The idea of producing our own emissions to ever-lower standards and replacing them with higher-emission products from abroad is for the birds. It makes no sense.

[Dave Doogan]

Will the Minister give way?

[Graham Stuart]

I am going to press on. [Interruption.] I do not mean to be rude, but I think I am unlikely, given his previous performance, to be terribly afeared of hearing from the hon. Member for Angus.

I turn to a series of amendments that seek to place conditions on when oil and gas licensing rounds are run. Amendment 15 relates to carbon capture, usage and storage, and the Grangemouth refinery. The oil and gas sector provides a significant portion of the investment that the UK needs to go into wind, CCUS and hydrogen, and I fear that the amendment would drive that investment elsewhere. It would also tie UK production of oil and natural gas to the refining activities of one refinery—Grangemouth—which I am sure Members across the House would agree is neither practical nor desirable.

Amendments 22 and 24 would result in an inconsistent approach between oil and gas licensing and our ambition for domestic energy efficiency. The Government already have a clear aim for as many homes as possible to reach energy performance certificate band C by 2035 where cost-effective, affordable and practical. That is the minimum standard required to replace fossil fuel boilers with low-carbon heating such as heat pumps.

On amendments 23 and 25, we are already reviewing our energy charter treaty membership. As far as we are concerned, there is no longer a clear route for modernisation. We will update the House in due course.

New clause 2 was tabled by my hon. Friend the Member for North Devon (Selaine Saxby), who was right to highlight the importance of achieving strategic co-existence between different uses while maintaining environmental protection. Work is under way to ensure that we strike the right balance between our different marine priorities. The soon-to-be-commissioned strategic spatial energy plan and cross-Government marine spatial prioritisation programme will ensure, as she rightly outlines, that we take a strategic approach to identifying future sites for marine developments and energy infrastructure, and that these can co-exist with our environmental and wider marine priorities. I appreciate what my hon. Friend seeks to achieve and assure her that the Government share her desire to protect the marine environment—not least, of course, in the Celtic sea.

Amendments 2, 3, 13 and 18 seek to add an additional climate test to the Bill. The UK produces far less oil and gas than we need, and even with new licences, production is expected to decline faster than the average that is required globally to align with the UN’s 1.5°C pathways. All that this test would do is stop licensing and increase dependence on imported products like LNG, which has production emissions that are four times higher than those of domestically produced gas. The right hon. Member for Doncaster North knows this—he must—so what, other than ideology and a desire to please his Just Stop Oil backers, could lead him to table an amendment that could raise emissions, lose British jobs and hammer our economy? Truly, it is a mystery.

[Dominic Raab (Esher and Walton) (Con)]

My right hon. Friend is making a powerful speech. Is the reality not that reducing producer emissions in this country only to increase reliance on imported consumer emissions is entirely counterproductive for the environment and very damaging in terms of public support for the direction of travel?

[Graham Stuart]

My right hon. Friend is absolutely right. That is the absurdity: ending licences will simply increase our imports. It will not change our consumption. If imports such as liquefied natural gas have higher emissions embedded in them, they are counter to our net zero aims.

I now turn to amendments 8 and 9, which together add a new energy and job security test to the Bill. The test, with its complex set of criteria, would damage investor confidence and cause confusion for industry, risking our energy security, jobs, and the skills and investment needed for the green transition we all want to see. It would make our system of administration of this area as opaque as the answers the hon. Member for Angus gave to straightforward questions earlier.

Amendments 10, 11, 13 and 14 introduce additional just transition tests to the Bill. We are absolutely clear on the importance of achieving a net zero basin by 2050 and are on track to deliver that. We need the skills, expertise and resources of the oil and gas industry to support our transition to cleaner technologies, maintaining oil and gas jobs so that they are not lost before renewables and other clean technologies grow to take up those skills.

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[Sir Alok Sharma]

I have listened intently to the Minister and I welcome his willingness to work together on the issue of flaring and venting. What I did not hear from him was the clarity that I wanted on whether Government would look to introducing an amendment similar to amendment 12 in the other place. Perhaps that is something we can discuss before the Bill returns to this House.

[Graham Stuart]

indicated assent.

[Sir Alok Sharma]

I am delighted to see the Minister nodding. I would just point out that even if the Government do not support a similar amendment in the other place, I am fairly confident that a similar amendment will be moved and I expect supported in the other place. This place will then have the opportunity to opine on that particular amendment, so I will not divide the Committee on this occasion. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 10, page 1, line 6, at end insert—

“(aa) the just transition test (see section 4ZD)”.—(Dave Doogan.)

This paving amendment, together with Amendment 11, introduces a new test to be applied by the OGA before inviting applications for seaward new production licences.

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[Graham Stuart]

I beg to move, That the Bill be now read the Third time.

It is my great pleasure to thank everyone who has supported the progress of the Bill. I recognise the excellent contributions of Members from across the House who have engaged closely with this important piece of legislation. I thank those on the Government Benches who spoke for their engagement with the Bill. In particular, I thank my right hon. Friend the Member for Reading West (Sir Alok Sharma), and my hon. Friends the Members for North Devon (Selaine Saxby), for Waveney (Peter Aldous), and for Banff and Buchan (David Duguid), for their contributions and the excellent points that they have raised in Committee.

I also welcome the robust scrutiny from the hon. Member for Southampton, Test (Dr Whitehead), the hon. Member for Angus (Dave Doogan), who spoke for the Scottish nationalists, the hon. Members for Kirkcaldy and Cowdenbeath (Neale Hanvey), and for East Lothian (Kenny MacAskill), who represent the Alba party, and others. I thank them all for their participation. I also pay tribute to my officials for their work over these past months, as well to Parliamentary Counsel for their commendable work, the House authorities, parliamentary staff, Clerks and Doorkeepers.

The Offshore Petroleum Licensing Bill will give industry the certainty that it needs to continue to invest in the North sea, to strengthen our energy security and to support the transition to net zero. The UK is leading the world on our journey to net zero emissions. We have the fastest reduction in emissions of any major economy —of any member of the G20 on the planet. In fact, we recently celebrated not only fulfilling and even exceeding the targets of the sixth carbon budget coming out of the landmark Climate Change Act 2008, but officially halving our emissions since 1990; we are the first major economy on the planet to do so.

Even when we have reached net zero in 2050, oil and gas will still play an important part in meeting our energy needs, as data from the Climate Change Committee shows. As the most decarbonised major economy in the world, 75% of our primary energy comes from oil and gas. Those who work in the North sea producing oil and gas—there are 200,000 jobs supported by the industry—should not be ashamed of what they do. It is the demand end—our cars, our homes and our factories—that we need to change. We need to meet that challenge; like Don Quixote, we will be tilting at windmills if we, a net importer, try to make our production the problem, rather than demand. [Interruption.] The hon. Member for Glasgow Central (Alison Thewliss), who could not be with us earlier, but is very welcome now, asks me for the evidence of that. The evidence is that we have cut our emissions more than any other major economy.

[Alison Thewliss (Glasgow Central) (SNP)]

That was not what I was asking. The Minister says that we need to look at demand; where is the national insulation programme, so that we can insulate all our homes and reduce demand in that way? There isn’t one.

[Graham Stuart]

The hon. Lady may not have been present for the previous stage of this Bill, but as she has been present for other debates in this House, I cannot claim that she is an absentee Member, so it is extraordinary that she is unaware of the amazing transformation in insulation in this country since 2010. Is she not aware that, in 2010, just 14% of homes were decently insulated? Today, the figure is well over 50%. We are spending £6.5 billion in this Parliament, and will commit another £6 billion between 2025 and 2028, precisely to deliver the transformation that she calls for. On top of that, we have the eco schemes, and obligations on industry. That is how we have taken ourselves from the parlous, shameful situation left behind by the Labour party in 2010 to one where, although there is still much more to do, 50% of homes are decently insulated.

[Jim Shannon (Strangford) (DUP)]

The Minister was very kind to come to my constituency in Northern Ireland to look at the potential schemes for sea turbines and the contract for difference arrangements. At the time, he indicated that, whenever the Assembly was up and running, the contract for difference scheme would be the responsibility of the Northern Ireland Assembly. He was very keen and eager to assist the Assembly. Is it his intention to contact the Northern Ireland Assembly to ensure that the CfD scheme can be promoted? His input into that will make a big difference.

[Graham Stuart]

I thank the hon. Gentleman, who is a consistent champion not only for his constituents but for the clean transition. I look forward to meeting and working with the new Minister for the Economy, who I believe has the energy portfolio in Northern Ireland.

The Bill will give industry the certainty that it needs to continue investing in the North sea, to strengthen our energy security, and to support the transition to net zero. The Government’s position is clear: we should, as far as possible, seek to meet continued UK demand for oil and gas from the UK’s own sources. That means continuing to use the North sea—a UK success story that has contributed billions of pounds in tax revenue and supports an industry of around 200,000 workers. The oil and gas industry, with its strong supply chains, expertise and skills, is vital to driving forward the net zero transition and the investment in clean technologies that we need to meet our net zero targets.

We all want the energy transition delivered in an orderly way that does not risk thousands of those jobs. Artificially reducing our production from the North sea or banning new licensing would do just that and jeopardise the energy transition, our progress towards net zero and our climate leadership, not to mention the billions of pounds in lost tax revenue. The Bill is about ensuring a smooth and orderly transition. New licences awarded under the Bill will manage the decline in domestic oil and gas production, rather than increase production above current levels, and they will give industry certainty by sending a strong signal of support for continued investment in the sector—investment that is necessary both for our energy security and to help deliver the energy transition. I commend the Bill to the House.

[Dr Whitehead]

It is customary on Third Reading to start with thanks, and I would like to thank two groups of people. First, I thank the civil servants who held their noses to write this pile of rubbish for the House’s consideration. Secondly, I thank the Government for introducing the Bill, because as a number of people will know, it has led directly to the election of a new Labour Member of Parliament for Kingswood, following the resignation of the former Government climate tsar, who wrote the net zero report and had this to say about the Bill:

“This bill would in effect allow more frequent new oil and gas licences and the increased production of new fossil fuels in the North Sea… I can also no longer condone nor continue to support a government that is committed to a course of action that I know is wrong and will cause future harm.”

He then resigned, and the rest is history. Thank you, Minister, for increasing Labour’s representation in this Chamber by one seat. Although we hope to have a lot more seats in the very near future, that is progress.

The Minister has form on this. He was the Minister in the Adjournment debate on fracking some while ago—

[Graham Stuart]

It was not an Adjournment debate—get it right!

[Dr Whitehead]

Sorry; the Opposition day debate on fracking, which effectively brought down the Truss Government as a result of the various prevarications at the time. I thank the Minister for that.

What I do not thank the Minister for is the completely misleading and almost erroneous way in which he has characterised the future under the Bill. On licences, the Bill will do things that are already done, and it will not make any change. It will not suddenly increase confidence across the sector, because the sector knows that the Bill is just a piece of performative theatre; and it will do nothing—contrary to what the Minister and others have claimed—to cut energy bills, tackle the cost of living or improve our energy security.

At a time when people across this country have suffered two years of crushing energy costs and an inflationary crisis driven in large part by our significant exposure to gas prices—which, as we all know by now, are set internationally—the Bill offers no solutions. The Secretary of State herself admitted that it would not cut bills, and Lord Browne, the former chief executive officer of British Petroleum, said that it was

“not going to not make any difference”

to energy security. The board of the North Sea Transition Authority, which is responsible for giving out licences, unanimously agreed that the Bill is unnecessary and would challenge its independence. However, even though the Bill will achieve none of its stated aims, it is far from consequence-free.

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[Graham Stuart]

Offshore Energies UK has said that if Labour’s policy was implemented, it could cost this country 42,000 jobs and £26 billion of economic value. Perhaps the shadow Minister will respond to that consequence.

[Dr Whitehead]

We are talking about what the Government are doing through this policy—that is what we are concentrating on today. I hope we will have another much wider debate about the effect that a comprehensive transition policy for the whole North sea field would have, with associated arrangements for the transition of investment, energy security and worker and job security, in the context of future jobs and future energy security. Many people in the industry have already said that that is exactly what we need to secure the future of the North sea. It is a declining basin; its output will not change greatly as a result of the measures that the Government are proposing. On the other hand, unless urgent action is taken to secure a holistic transition for the North sea, it certainly will not have the investment and the future that so many of us want to see. We need to put that overall consideration alongside some people’s shorter-term concerns about what will happen to the oil and gas industry right this minute.

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[Graham Stuart]

The data simply does not exist, as I think I set out. It does not exist and we cannot make a comparison if the data does not exist. We are world-leading in having that data; others do not have it. On the methane comparison, we are already below the internationally set goal; we have very low methane emissions in the North sea. On the comparison with LNG— which is the buffer fuel, which is why it is the true comparator, rather than Norwegian gas, which the hon. Gentleman is failing to admit—methane is emitted as it is shipped, so the methane story would make it even worse for LNG versus domestically produced fuel. Perhaps the hon. Gentleman would put that into his argument.

[Dr Whitehead]

I would not put it into my argument, but I am a little puzzled under those circumstances that the North Sea Transition Authority recently published a factsheet on precisely this point about the relative emissions of various contributors to gas and oil into the UK, which looked at the contribution from various countries and at the various emissions levels of those contributions, and set out how those contributions arise. I do not know whether the Minister is quite up to date with what his own North Sea Transition Authority is doing, but perhaps he ought to have a little look at that because he would see that actually the data is there. It does exist, and we can draw the sort of conclusions I drew this afternoon from it, and indeed from a number of other international data sources that are coming in.

The argument that the marginal unit of gas must always be LNG is simply not correct, because the Bill makes no provision whatsoever for the shape of UK gas demand at the point at which the gas is extracted and used. It effectively assumes that our national demand for gas will remain unchanged in perpetuity. When we are in a crisis caused by our reliance on fossil fuels and committed to a net zero transition, that assumption is patently wrong.

[Graham Stuart]

I hesitate to intervene again, but to suggest that this Bill has the assumption that our gas demand remains the same is absolute nonsense. Of course it is coming right down. We are on a net zero pathway. We are leading the world in that and our demand is falling fast; it is just that our production will fall even faster. The hon. Gentleman should not mislead the House, and I am sure he would not want to do so.

[Dr Whitehead]

I think I have already indicated that gas production is predicted to fall by 95% by 2050. The addition of one or two licences will not make any difference at all to that precipitous fall in practice, as it will be four days more of gas over the period. That is the basis for why we say that the Government’s commitment to net zero transition while producing large amounts of additional gas and oil is patently wrong. We should be sprinting towards clean energy. We should be investing in renewables, rather than banning them, as the Conservatives have done with onshore wind. We should be saving the country billions by moving to decarbonise power systems by 2030 and making far greater efforts to insulate homes and reduce gas demand there.

On climate change, on energy security, on jobs and on bills, this Bill has nothing to offer but false promises that frankly insult the public’s intelligence. To support this Bill, we would need to believe that we can double down on the causes of the cost of living crisis and still solve it; that we can somehow defy geology in the North sea and change the fundamental nature of international energy markets; and that we can ignore all the science and credible experts on climate change and still meet our commitments, including our commitment to transition away from fossil fuels made by the Minister at COP28 a few short months ago. It is clearly nonsense, but it is emblematic of a Government who have run out of ideas and run out of road—a Government who can see the many real challenges our country faces, but have no answer to them beyond confected political drama. In their misguided pursuit of a political dividing line, they have shrunk our country on the international stage, made us hypocrites in the eyes of the world and opened the door in this country to a new divisive politics on climate change that I sincerely believe the Ministers sitting opposite me today are not comfortable with, do not want as their legacy and will come to regret profoundly. This Bill will deliver nothing, but it threatens much. For that reason, I urge the House to vote against it.