Future of the Oil and Gas Industry

Hugh Gaffney Excerpts

Thursday 14th March 2019 Westminster Hall

[Pete Wishart]

I had a sneaking suspicion that I would secure an intervention based on the hon. Gentleman’s desire for fracking to be included in all this. As he knows, there was a robust debate among Committee members on the value of fracking and what we should say about it in the report. He knows that I do not share his views, although I am aware of the evidence that was given sincerely by some members of the sector. The Committee agreed a consensus that this was something we were not really concerned with as we went forward, and we have left it as such in the report.

[Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)]

Yesterday in his statement the Chancellor talked about banning gas from new homes in 2025. Surely we have to look to the benefits of oil and gas in the future. Is that not a worry for us?

[Pete Wishart]

Absolutely. I was intrigued by the message from the Chancellor yesterday, when this was mentioned. Yes, there are huge opportunities for us. I think the hon. Gentleman will agree that it was mightily impressive to see the things that could come and how these skills could be applied and transferred. Perhaps the Minister can say what more work could be done to ensure that we get this. We would be grateful for any insight into the conversation he has been having with the sector on skills transfer.

The sector deal must bring forward proposals for how the sector will address its carbon footprint, both in the process of producing and extracting oil and gas, and by finding ways to reduce emissions from their use. The report received a mixed reaction from some environmental groups—I will put is as delicately as that. That surprised me, due to the range of recommendations we made and the care and diligence that we gave to shaping up some of the transition recommendations. We believe in a just transition and said as much in the report. We believe that if that is achieved, we will get to a new future—a green and transformative future for the sector.

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[Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)]

Thank you for calling me to speak in this debate, Mr Walker. I thank all my colleagues on the Scottish Affairs Committee for their work in producing this report.

It would be an understatement to say that the oil and gas industry is a vital part of the Scottish economy. It contributed £9.2 billion in 2017 and, as we have heard, it supports about 135,000 jobs. It is essential to the UK’s energy security, and forecasts suggest that oil and gas will account for two thirds of the UK’s primary energy needs until at least 2035.

The industry has suffered in recent years, but is starting to come through a challenging downturn, although there are still worrying signs, such as the low levels of new well exploration. There are also future challenges for the industry, such as declining production, climate change targets and the decommissioning of oil and gas rigs. I agree with the report’s central finding that the Government must provide serious and credible support to the industry through the sector deal. A sector deal supported by the Government and industry has the potential to deliver £110 billion for the UK economy by 2035. It must help with the development of new technology to maximise the recovery of the 10 billion to 20 billion barrels of oil that remain in the UK. It must find ways of encouraging greater decommissioning of oil and gas rigs, while reducing the cost of doing so. It must ensure that the industry’s skills, expertise and technology are protected for the future, including by transferring them for use in renewable energy, subsea engineering and carbon capture. The oil and gas industry has many opportunities for Scotland and the whole UK, which we should not waste. That is why I endorse the report’s findings, including its key recommendations about a sector deal.

I want to touch on some of the issues raised with the Scottish Affairs Committee, particularly by Unite and the National Union of Rail, Maritime and Transport Workers. Those unions play a crucial role in organising and representing the interests of workers in the oil and gas industry. They were both keen to emphasise the need to maximise the industry’s economic recovery to its full potential. They share the sentiment of the industry and the Government.

It is welcome that the Oil and Gas Authority will lead exploration by commissioning surveys of unexplored areas of the sea bed. The creation of the Oil & Gas Technology Centre through the Aberdeen city deal was welcome. The “maximising economic recovery” strategy cannot be implemented through significant reductions in costs, given the impact that they could have on the workforce. There is a clear case for the Oil and Gas Authority working with the UK and Scottish Governments to create strategic public stakes in the implementation of the strategy. Those stakes should include infrastructure, such as pipelines, and public investment through borrowing and national investment banks. Only through co-investment by public and private stakeholders can we ensure the strategy’s success.

The fall in the oil price in recent years led to an 18% reduction in the core offshore workforce between 2014 and 2016. It also led to a reduction in the workforce’s terms and conditions. RMT highlights the growing use of short-term and zero-hours contracts. The industry and trade unions have observed practices including the application of retrospective charges for training, the exclusion of trade unions from heliports, the denial of holiday entitlements and the ignoring of TUPE requirements. I believe that Unite is right to call for the full devolution of employment law to Scotland so that we can begin to address those issues, alongside investing in skills, apprenticeships and training in the industry.

Although decommissioning must be a crucial part of the sector deal, it must be done in a way that preserves skills, expertise and technology. It is clear to me that there should be a national decommissioning strategy to ensure that decommissioning delivers for workers and our economy. The strategy must be devised through discussions between the UK and Scottish Governments, local authorities, industries and trade unions.

I would like to talk about safety in the industry. As a trade unionist, I want to ensure that all workers are safe in their workplace. It alarms me to see the findings of a recent report by Robert Gordon University, which received responses from 40% of offshore workers from the major companies in the industry. It found that 52% of workers are dissatisfied with their work-life balance; 45% said that it takes them longer to recover from their shifts, and 57% believe that the conditions of their offshore sleeping environment have worsened. Let us not ignore workers’ concerns about offshore helicopter safety. Some 62% said that they would be unlikely to fly in a Super Puma helicopter if given a choice.

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

I share the hon. Gentleman’s concerns about the safety of workers and the avoidance of accidents. What does he think the Government can do to bring the oil companies to the table for discussions with trade unions about the important matter of the safety of personnel on their rigs and in helicopters?

[Hugh Gaffney]

I will come to that point; I take an interest in it. I recently met Oil & Gas UK, with which the unions are getting together to bring the workforce on board. Without the workers on board, no company can go anywhere. Unless companies involve their workers in the process, there is no point trying to organise the company.

I declare an interest: 27 years ago today, I took an interest in North sea oil safety helicopters when a Super Puma helicopter went down, killing 11 men, of whom my brother-in-law was one. Today is the 27th anniversary of the crash, so I welcome the report. I hope that the industry will take serious steps to address those safety concerns, particularly as employers have a duty to ensure that workers are safe in their workplace and can get home safely.

To conclude, I reiterate my support for the findings of the report, including its recommendation of a sector deal. It is clear, however, that there are challenges that we will have to address: “maximising economic recovery”, decommissioning, terms and conditions and, most importantly, the safety of the workforce.

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[Richard Harrington]

The hon. Lady has caught me unawares, because I am afraid tax is not one of my specialities; I apologise to her. I will find out about that, and if she would like me to write to her—or we could have a coffee together outwith this place—I would be happy to do so.

I should make some progress, because I am testing the patience of the Chair, and he wants two minutes left over. Trevor Garlick and the team have done a lot for the industry. He has brought a diverse sector together, which is the purpose of our sector deals; previously, most relationships between Government and companies seemed to be based on a few big companies that had very effective lobbying machines and knew the way the Government worked. In the oil and gas sector, he has helped to break that and has brought a lot of things forward.

The leadership has been very good, as have many of the work streams; we have five areas of focus in the report, but it seems to me that work on them is already being undertaken. For example, the National Decommissioning Centre has already been launched, with £38 million in funding. The Oil & Gas Technology Centre continues to lead on new technology and to support MER UK, which I was happy to visit in Aberdeen, on transformative technology. The work on exports that was mentioned is progressing well.

The work streams on other things that are part of Government policy, such as diversity and inclusion as well as CCUS, have developed very well. I was pleased that the Chancellor yesterday called for evidence to identify what more should be done to make Scotland and the UK a global hub for decommissioning, as the Chair of the Select Committee has talked about.

[Hugh Gaffney]

The Chancellor yesterday mentioned, if I can rephrase him, using less gas by 2025. The Minister is talking about decommissioning. Is that not a worry for the oil and gas sector?

[Richard Harrington]

If I were the hon. Gentleman, I would not worry about that. We are also asking how the sector can support the development of UK carbon capture, usage and storage infrastructure through the effective use of legacy assets. The focus on underwater engineering proposed by industry, as part of a phased approach, is welcome. We are a global leader in subsea engineering, a market forecast to grow exponentially, but competition is fierce.

I am responsible for sector deals generally, and I am very much looking forward to advancing these proposals. What impresses me most about the way this sector has developed is that with Mr Garlick’s work and the co-operation of many people in Government, Parliament and the industry, so many of these things are already happening. I am very impressed by that; I wish I could say that was true in other sectors that I have been involved in. I commend the Committee’s report, and I look forward to developing the points in it.