Coryton Oil Refinery
Debate between Ian Lavery and Charles Hendry(12 years, 4 months ago)
Commons ChamberRead Full debate Read Hansard Text
Charles Hendry
I will respond specifically to the hon. Gentleman’s point, which goes to the heart of the situation we face.
First, the UK faces extremely tough competition from other refineries in Europe and, increasingly, Asia. It is well known that there is overcapacity in the refinery sector in the UK and right across Europe. Eight European refineries have closed since 2009 and more closures are likely to happen in future. The International Energy Agency has reported that since 2008-09, more than 3 million barrels of oil per day of crude distillation capacity has closed and more is at risk. At the same time, significant refinery expansions are taking place in Asia in particular, outpacing expected demand growth. All this means that, as the hon. Gentleman said, profit margins are low for refineries in the UK.
Secondly, the UK’s refineries produce broadly the right amount of fuel to meet demand in the UK but not the right type. Put simply, we produce more petrol than we consume and we use much more diesel than we produce. Since 2000, demand for petrol in the UK has decreased by 35%—more than a third—while demand for diesel has increased by 34%. These are evidently sustained trends and not a short-term blip. Overall, there has been a 9% decrease in the demand for fuel in the last decade due to economic conditions and better fuel economy from new cars. We have now put in place work to develop a refining strategy. That should have happened long ago, right the way back in the previous Administration when there was a 34% drop in demand for petrol. This was an entirely evident trend and it is a great shame that that work was not started before now so that we could have had a more structured approach.
Thirdly, significant levels of capital investment were needed in the Coryton refinery to maintain refinery operations. These included the cost of the three-yearly turnaround—about £150 million—and any expenditure on adaptation to rebalance output between petrol and diesel products, which would have cost in the order of hundreds of millions of pounds. These evidently posed a massive barrier to potential new owners. In addition, the Coryton site is of exceptional value as an import terminal because of its location and amenities, with one of the biggest jetties anywhere, so it is not surprising that it has a higher sale value as an import terminal, which does not require the extra investment a refinery would need. It is clear that the market is very tough, and these conditions made the sale of Coryton as a refinery challenging.
I want to reassure the House, and particularly my hon. Friend the Member for South Basildon and East Thurrock, that the Government considered very carefully whether financial assistance could be provided. There were extensive discussions between my Department, the Department for Business, Innovation and Skills and the Treasury. Right across Government, all Departments that it was appropriate to involve were involved. Like my hon. Friend, the Government would have wished for a different outcome, but we did not believe it was right to put public money into a refinery.
Charles Hendry
Forgive me; this is a half-hour debate and there is not time to take further interventions.
As I mentioned, there is existing overcapacity in the refining industry in the UK and Europe, and the declining demand for petrol means that it would not have been sustainable to put public money into the refinery. It would not have been a long-term solution, as simply funding the gap between a bid for an import terminal and a bid for the refinery would not have guaranteed the refinery’s long-term commercial success. It was clear that significant investment would have been needed over time to keep the refinery open. I was reassured by the Government’s work with fuel suppliers that Coryton’s closure would not have an impact on the security of supply of fuel to London and the south-east, because many other supply points and operational refineries could be used.
To respond to the specific question asked by my hon. Friend the Member for South Basildon and East Thurrock, the administrators made a formal request on 15 May for the provision of Government assistance for one option of a number that they were considering. Such negotiations are inevitably controversial, but only one option on the table at the time required such assistance. The consideration of the case for financial assistance involved a range of issues, including the impact on security of supply, on energy resilience and on jobs in the local community. On each of those grounds, we concluded that there was not a sufficiently compelling case to intervene. Given that that was so clear, there was no case for seeking approval from the Commission, because that simply would not have been considered. While we accept that it is extremely sad that the refinery will close, I hope that there is some comfort from the investment for the new facility as an import terminal.
My hon. Friend asked whether there should be a parliamentary inquiry, but that is a matter for the relevant Select Committee. Given the work that we are doing on developing a long-term strategic approach, I would welcome an investigation that would take that approach into account, and we would work closely with the Committee. However, it would be unlikely that such an inquiry would be completed in a time scale that would mean that it would make any difference to the situation at Coryton.
In view of my hon. Friend’s comments, I shall write to PricewaterhouseCoopers in the morning to ask it to respond formally to each and every point that he made, and to seek the assurances that it should give him about the process. We have found it to be professional and thorough, and it is only right that he and his constituents have answers to every question.
We are now moving forward with Thurrock and taking a lead on the taskforce. Through the Department for Business, Innovation and Skills, we will do everything possible to bring new jobs and prosperity to the area. My hon. Friend has fought a diligent battle, and I am profoundly saddened—
Oral Answers to Questions
Debate between Ian Lavery and Charles Hendry
Ian Lavery (Wansbeck) (Lab)
Coal will continue to provide between 27% and 50% of electricity in the UK for the foreseeable future. Can the Minister explain what Government support will be given to the British deep-mined coal industry to prevent it from extinction in the next few years?
Charles Hendry
The most important thing that we can do for the coal mine industry is to show that there is a continuing role for coal in the generating mix. We are all clear that we cannot have unabated coal in the mix in the future, and new plants will need to be equipped with carbon capture and storage technology. That is why the competition that we are launching here to put the United Kingdom at the forefront of the development of CCS technologies offers the best possible future for coal to have a long-term role in the energy mix going forward.
Oral Answers to Questions
Debate between Ian Lavery and Charles Hendry(13 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text
Charles Hendry
There is evidence, which Ofgem is gathering, that people on prepayment meters are paying less now than they were in the past. One reason we have been keen to take forward the smart meter programme is to ensure that people get absolute accuracy in their billing. That programme is furthest advanced in Northern Ireland, and people on prepayment meters there pay less than people on normal tariffs.
Ian Lavery (Wansbeck) (Lab)
T1. If he will make a statement on his departmental responsibilities.
Oral Answers to Questions
Debate between Ian Lavery and Charles Hendry
Ian Lavery (Wansbeck) (Lab)
T5. Will the Minister confirm his support for the pioneering plans for underground coal gasification off the Northumberland coast, as described earlier by my hon. Friend the Member for Newcastle upon Tyne Central (Chi Onwurah), and agree to meet representatives from the Opposition, from Newcastle university and from Five-Quarter to seek support on the issue?
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
That is exactly the offer I made to the hon. Member for Newcastle upon Tyne Central (Chi Onwurah). I am keen for that meeting to be as wide as possible, and indeed happy for it to include the entire parliamentary Labour party. This is an important technology and we are keen to understand the expertise that the university has.
Oral Answers to Questions
Debate between Ian Lavery and Charles Hendry(13 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text
Ian Lavery (Wansbeck) (Lab)
The Committee on Climate Change has recommended that the carbon intensity of electricity should be reduced from today’s 500 grams of CO2 per kWh to the highly challenging figure of 50 grams of CO2 per kWh by 2030. The Energy and Climate Change Committee suggests that the target should be about 100 grams of CO2 per kWh. Will the Minister or the Secretary of State explain how difficult it would be to achieve the recommendation of the Committee on Climate Change?
Oral Answers to Questions
Debate between Ian Lavery and Charles Hendry(13 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text
Ian Lavery (Wansbeck) (Lab)
The Secretary of State will be aware that the Hatfield colliery in South Yorkshire is in administration. It has more than 100 million tonnes of coal. Has he had meetings with the owners or their representatives to try to resolve the situation, and will he agree to meet me and other representatives to discuss it?
The Minister of State, Department of Energy and Climate Change (Charles Hendry)
We had regular contact with the owners prior to the administration. We have not had direct face-to-face contact with them subsequently, because we believe that this is a matter for them to sort out with the administrators. However, we recognise the great potential of that location and of the technology that is being developed there for carbon capture and storage, and as we take forward our plans for CCS, we hope that the plant will still be able to bid into the process.
National Policy Statements
Debate between Ian Lavery and Charles Hendry(13 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Charles Hendry
The Government have committed £1 billion to the green investment bank, with additional funding to follow in due course. I am extremely pleased that the Environmental Audit Committee is to examine how the bank might work. Infrastructure banks in other countries—for example, the one in Holland, which was funded with €2 billion of initial capital, but brought in €100 billion of additional finance—can play a critical role, particularly in getting business through the so-called valley of death.
Returning to the technology-specific NPSs, we have revised the fossil fuels policy statement—document No. 2—to clarify the requirements for carbon capture readiness in terms of technical and economic feasibility in line with the request made by the Energy and Climate Change Committee.
Ian Lavery (Wansbeck) (Lab)
On carbon capture and storage, will new applications for gas-fired power stations be treated the same as applications for new coal-fired power stations in that they will have to be carbon capture-ready before they can be accepted at the planning stage?
Charles Hendry
A new coal plant will have to be equipped with some degree of carbon capture and storage capability—we have made it clear that there will be no role for unabated coal in the future—whereas a new gas plant will have to be carbon capture-ready, because of the much lower levels of emissions associated with modern gas plants. Emissions from the most efficient coal plant are perhaps 750 grams per kWh, whereas the figure for the most sophisticated gas plant is perhaps 350 grams per kWh. Given the significant difference in emission levels, we are looking at requiring CCS to be part of the programme. That is why we have allocated £1 billion, which is more than any Government anywhere in the world have allocated to a single plant. We are keen to take forward the development, but we have also said that as part of the subsequent pilot projects 2 to 4, we are keen to see whether that can be applied to gas.
Ian Lavery
The Minister said that £1 billion had been invested in the carbon capture and storage programme. There were four initial demonstration plants, the first of which is to be a coal-fired demonstration plant. The contract will be awarded, I believe, in December 2011. Will that not take most of the £1 billion? If so, is he confident that moneys will be available to secure the phase 2, 3 and 4 carbon capture and storage projects?
Charles Hendry
The hon. Gentleman makes an important point. The £1 billion is specifically and only for that project. As I said, that is more than any Government anywhere in the world have allocated to a single project. The additional plants will be funded either by the levy introduced in the Energy Act 2010, or from general taxation. We are looking at the best way forward in terms of deliverability and the Treasury is examining the issue. The funding of projects 2 to 4 is separate from the funding of project 1, which has the £1 billion available to it.
The revised renewables NPS has taken particular account of comments on biomass sustainability for generating stations using biomass as fuel. We have also revised the text regarding noise from onshore wind farms, which is different from general industrial noise, so a specific assessment methodology is used to take that into account.
The method of assessing noise from a wind farm is described in “The Assessment and Rating of Noise from Wind Farms”, known as ETSU-R-97. The report recommends noise limits that seek to protect the amenity of those living close to wind farms. The recommended noise levels are determined by a combination of absolute noise limits and noise limits relative to the existing background noise levels around the site at different wind speeds.
Policy document 4 relates to gas supply and oil pipelines. We have clarified that the gas supply infrastructure and gas and oil pipelines NPS covers only oil and natural gas pipelines and not CO2 pipelines, which will be an important matter in relation to carbon capture and storage development. We have also added a new section describing the impacts on gas emissions due to the flaring or venting of gas.
Policy paper 5 relates to electricity networks. We have tried to make sure that Government policy on undergrounding and the need to treat each application case by case is expressed more clearly. I welcome the decision by the Institute of Engineering and Technology to make an authoritative investigation of the costs of undergrounding, particularly in relation to the issues that the hon. Member for Wells (Tessa Munt) has raised, so that we can have a clear fact-based assessment of the different costs involved.
Oral Answers to Questions
Debate between Ian Lavery and Charles Hendry
Charles Hendry
We have asked the Committee on Climate Change to look at whether that level of ambition should be raised. We are also examining whether we can do more through international co-operation: have some areas of renewable energy been locked out because they cannot be used for other countries’ domestic markets, so can we go further by looking at a “whole islands” approach around the British isles to maximise the resources that are available?
Ian Lavery (Wansbeck) (Lab)
Will the Minister update the House on the progress, or otherwise, being made in the development of the carbon capture and storage projects involving clean coal technology here in the UK?
Charles Hendry
As I have said, the spending review settlement allocated £1 billion to project 1. We will then take forward three further projects, and we have now announced that that could be open to gas as well. We are looking at three further projects because we believe Britain should be leading the world in this technology, and we are absolutely determined that it will.