UK Oil and Gas Industry

Kirsty Blackman Excerpts

Tuesday 25th February 2020 Westminster Hall

[John Howell]

In just a second, I will tackle an issue that I hope will help with the hon. Gentleman’s concerns.

The figures have already been quoted for the number of people employed in the oil and gas sector in the UK. Just over 30,000 are employed full time, but in the supply chain, which is the most important part and which I want to concentrate on, the number is close to 150,000. That is a phenomenal number of people to have to deal with.

I have been, and still am, the Prime Minister’s trade envoy to Nigeria. The link here is in the Aberdeen sector of the supply chain, which I have been involved with, to try to get people to go to Nigeria. Why should they be interested in Nigeria? The skills that we have in Aberdeen are just the sort required to set the Nigerian oil and gas sector on the right course. Historically, a huge amount of the income from that sector has not even reached the Ministry of Finance; it has got nowhere near—it has simply been diverted. When so much of the industry is essentially black market, it is difficult to get efficiency, but we have all the expertise in Aberdeen and other places throughout the UK to be able to bring that.

[Kirsty Blackman (Aberdeen North) (SNP)]

I have been told that Aberdeen has the highest percentage of Nigerians of any place in the world outside Africa, but we have a real problem in Aberdeen with the visa system. When people come over for university and things like that, actually staying afterwards is very difficult for them. I find the visa system incredibly obstructive for my Nigerian constituents. Does the hon. Gentleman think that the flow of information and expertise would work better if the visa system was a bit more flexible, allowing people to develop their expertise in Aberdeen before going back to Nigeria?

[John Howell]

I like to think that it is something to do with the activities I have been conducting on behalf of the Government that there are so many Nigerians in Aberdeen. I suspect I cannot claim full credit for that, although I have tried to encourage companies in Aberdeen to go out to Nigeria and encourage people to come back. Nigerians can learn a tremendous amount from companies in Aberdeen, and I think they recognise that. The commitment to the oil and gas sector shown by President Buhari is a good indication that he takes it seriously. I hope we will be able to do something with that—something much better than we have done in the past—in order to take things forward.

This is all about getting better control, including over the net zero target set in not only the UK but globally as well, and our ability to see that target gain traction through what we do and the investments that we make. For somewhere like Nigeria, the ability to get to a net zero approach in the oil and gas sector at the moment is quite low. Again, the expertise that we have here is crucial to getting to that. My hon. Friend the Member for West Aberdeenshire and Kincardine mentioned two elements of that—carbon capture and storage and hydrogen production. The relevance of this to my constituency, which may seem a long way from Aberdeen and the companies I am talking about, is that Invesco, in my constituency, has a great interest in helping to fund hydrogen production as part of the energy mix here.

The other link to my constituency is a former Member and Minister, Tim Eggar, the chairman of the Oil and Gas Authority. I draw the House’s attention to a recent speech in which he made important comments on how the industry could move towards a much better net zero target. This man knows the industry extremely well and has worked in it for much of his life, and I hold his comments in full.

If we keep in mind those remarks about how we are helping the oil and gas sector to stay profitable and to get out and sell its expertise around the world, that will keep us in good stead for the future.

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[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) on securing this debate. I was shocked to hear we have not debated this subject since April 2018—quite some time ago. I was present at that debate, and I was one of the few people the hon. Gentleman did not mention—perhaps because I am a constant in these oil and gas debates. I am afraid I will make the same, or a pretty similar, speech to the one I made last time, but the Minister was not here then, so it will all be new to him.

Previous debates on this issue have generally come in the run-up to a Budget, to try to make clear the asks of the oil and gas sector in the Budget. We were particularly successful around transferable tax history where we all worked together to push the Government to ensure that it was put in place so that new players could come into the oil and gas fields. That was incredibly useful and a good opportunity for us to work together.

We do not agree on everything, but we all feel strongly—I think everybody in this room feels strongly—that we should move towards a sector deal. If the Minister cannot give us full details of the sector deal, it would be helpful if he could at least let us know the timeline for announcements on it. The issue has been hanging around for a long time, and the industry has been waiting quite some time to hear what will happen. The more certainty the industry has on the timeline, the better.

In the last debate on this issue, I mentioned Vision 2035, which has been followed by Roadmap 2035, both of which are about ensuring we move towards net zero while continuing to have a successful oil and gas sector in the UK for many years. We spoke about the importing of oil and gas to the UK to meet our energy needs, and that is a concern for a number of reasons. There is a carbon cost to importing oil and gas, because of the ships or however it gets here. There is also an additional carbon cost in its extraction. If we are moving to net zero extraction under Vision 2035 in the UK, we will ensure that as little carbon as possible is expended in the extraction process, but other countries that extract oil and gas may not be so far along that route, so there may be a differential in the carbon costs of extraction. If the Government intend to import more oil and gas in the future, I ask that they look closely at where we are getting it from and at the related carbon cost. We cannot say it is not our problem because it is being extracted somewhere else, so it is somebody else’s problem; that is not how this works. If we are using that oil and gas, we need to own up to the carbon created in its extraction. That is incredibly important.

Vision 2035 and Roadmap 2035 also focus on the supply chain. Our supply chain is phenomenal. It is recognised as the gold standard across the world in several areas, but particularly safety. On safety, the UK continental shelf is absolutely up there—it is tip-top. Everybody does everything they can to ensure the highest possible levels of safety. If our supply chain is going to continue exporting around the world, we need to export that safety culture too. That relates not only to any oil and gas we import, but to ensuring that we lead the way on improving safety around the world.

We can also export our capability to move towards net zero extraction to ensure that we level up places around the world that extract oil and gas, and reduce the amount of carbon they create during the extraction process. We can be real world leaders not only, as I mentioned last time, in working in a super-mature basin, which we already are, but in exporting our safety culture and net zero culture in the extraction process.

Carbon capture and storage has been spoken about a number of times. Like many others, I am still sore about the previous Government’s pulling of carbon capture and storage. While that was not done by this Government, there is a concern, and it is difficult for the Government to build trust in this place. I am pleased the Government have moved forward with commitments to carbon capture and storage. It is incredibly important that the UK Government support a number of carbon capture and storage clusters, as mentioned by my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown), and ensure they get off the ground as quickly as possible, with real projects that work, so that we can be world leaders in exporting our expertise in carbon capture and storage to the world and assisting the world by storing its carbon.

If we have surplus capacity in, for example, the Acorn system, once it is up and running, we should store carbon from countries around the world and charge them to do so. That is a great way for us to make additional revenue. I hope that we will do what we can, and the Government will do what they can, to ensure that CCS gets off the ground and gets working as quickly as possible, and that the Government make it unequivocally clear that they support CCS and will not pull the rug out from under it again. We cannot afford to do that; we cannot afford to look at a net zero future without carbon capture and storage. We must make those moves.

Moving away from oil and gas at some point in the future means that we will need a transition in place. It means we will have to utilise the expertise in our industry to better harness our renewable capability. Those who work in subsea technologies, mostly in the constituency of the hon. Member for West Aberdeenshire and Kincardine, have a massive amount of expertise that can be utilised for tidal, wave and offshore wind power. We must ensure that we utilise those skills and transfer them to these emerging industries, and that those industries are made viable in the UK. If it requires Government support to kick-start them, that is fine with me. We will get to the stage where are exporting that expertise as well—we are good at exporting things.

In Scotland, we have the capacity to have lots more floating offshore wind and lots more offshore wind in general, but also lots more onshore wind. Again, we can utilise the skills we have. I urge the Government to reconsider whether they will have contract for difference support rounds for onshore wind and solar. We strongly feel that we can do more in that space in Scotland. About 75% of our electricity in 2018 was generated from renewable sources. We want to do better than that, but we can only do better if the Government reconsider their position on CfD support. We will continue to push strongly on that.

As I mentioned, there is a significant issue with visas for my constituents. In Aberdeen, we have people from the UK. The next nationality is Polish. I understand that the next is Romanian, and the next one after that is Nigerian. We have a significant percentage of Nigerians living in Aberdeen, and it is incredibly difficult for them to get visas, whether that is to work, to come as contractors or just to get their mum to come over to see their graduation. The knock-back in visitor visa numbers is significant. When the Government look at their new visa system, I urge them to think carefully about ensuring that we can access the expertise we need and that Nigeria and other Commonwealth countries, in particular, can access the expertise they need by having a flow of people between the two countries.

Brexit is also an issue in relation to visas. A significant number of people in the oil and gas industry are from the EU, and we need to ensure they can continue to move freely between the EU and Scotland. For example, Total has a presence in Aberdeen, and many people move between there and France. That movement needs to continue.

Lastly, on a just transition and net zero, my hon. Friend the Member for Aberdeen South (Stephen Flynn) mentioned that we want to ring-fence oil and gas revenues to ensure that we are moving towards net zero. That is not about changing the tax regime, but about hypothecating that tax. During the Budget process, we do not have the opportunity to make amendments to say that that is what we want. During the estimates process, there is not the opportunity to make amendments to ask for hypothecation to happen. However, we can press strongly and say that that is what we want to happen. We want the money to be ring-fenced so that we can move towards net zero. We ask that 12% of the revenue is ring-fenced for places such as Aberdeen, Falkirk and Shetland, which rely heavily on oil and gas and will need assistance to make a just transition.

My constituency has one of the highest numbers of public sector workers of any constituency in the UK. There are two council headquarters, a major teaching hospital and a university in my constituency. For people working in the public sector, providing support in order that we have a successful oil and gas industry, issues such as housing costs have been significant. When we move towards the transition period and there is a reduction in oil and gas, I do not want the people who have not worked in that industry, and who have found it incredibly difficult to scrape by living in such an expensive city, to be hit again.

I want the entire city to be assisted in the transition process, and all the people in Aberdeen and Aberdeenshire, not just those who work in oil and gas, to be helped to access the services they need and housing they can afford. That goes for Moray, Banffshire and other places. The just transition needs to happen for people working in oil and gas, but also for our city and region as a whole.

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[Kwasi Kwarteng]

With permission, Mr Robertson, I will address carbon capture later in my speech. There is plenty of food for thought and actual policy that I would like to address, but I want to talk about the transition. It is important, as the hon. Member for Southampton Test suggested, that we get the message out that we do not see the end of the oil and gas industry in this energy transition. Oil and gas has a crucial part to play in that transition, not least because of some of the carbon capture issues I want to address later.

Let us be clear where we are today. Currently, 70% of primary energy demand in the UK is met by oil or gas. Some 85% of houses—I suspect this includes the houses, apartments and dwellings of most people in this room—rely on gas central heating. The Committee on Climate Change has said that there will be a continued need for oil and gas as we make our transition to net zero emissions. That is extremely important, and on that basis I would like to talk about some of the announcements we have made, particularly in regard to carbon capture, usage and storage.

We made a public commitment in the Conservative manifesto to invest £800 million in carbon capture, usage and storage. It could not be clearer than that. I am very hopeful that we will be able to make a significant announcement along those lines in the Budget, to honour our manifesto commitment. It is important for my Department. However, Members will appreciate that I am not the Chancellor of the Exchequer, and that the Budget is a matter for him and the Treasury. In a former capacity, I served as the parliamentary private secretary to the Chancellor of the Exchequer for 18 months, which in the context of the political climate was a very long time.

[Kirsty Blackman]

I congratulate the Minister on his speech. A number of Ministers have had responsibility for this portfolio in recent times. Claire Perry was a very big supporter of CCUS and did what she could to push it forward. I know that the Minister cannot commit to money in the Budget, because that is not his role, but will he commit to personally championing CCUS and doing everything he can to retain the £800 million commitment or to increase it if possible?

[Kwasi Kwarteng]

I give the hon. Lady an absolute assurance that I have been totally committed to CCUS. In fact, one of the first conversations I had when appointed was with a leading industry figure, who called me to say, “I hope you will deliver on CCUS.” I was very pleased to say, “I will absolutely champion this. It is central to our strategy.” We have legislated for a net zero carbon emissions target by 2050. How we reach that without CCUS is a mystery to me. CCUS should be at the centre of any strategy to hit net zero carbon emissions by 2050. The Government are absolutely committed to that.

I assure the hon. Lady that I am as committed, if not more so, than my predecessor to landing the technology, because it is crucial. The net zero carbon legislation was passed in June 2019, and within three weeks I was the Energy Minister, so it has really shaped my entire experience of the portfolio. For most of my predecessor’s tenure, we still had the 80% reduction target. It is now a much more serious and pressing concern, and I hope that we will be able to deliver on that commitment. In our next debate on oil and gas, I hope we will be able to say that we have CCUS investment and potential clusters.

On the point made by the hon. Member for Kilmarnock and Loudoun (Alan Brown), it seems to me that if we are going to commit large amounts of capital to CCUS, there will be more than one cluster. There is a debate about where those clusters and that deployment of capital will take place, but my understanding is that if we are going to commit that capital, it will not be in just one area.

It is not just about CCUS. The net zero strategy encompasses a wide range of technologies. We committed in the manifesto to 40 GW of offshore wind capacity, which is a huge step from our previous 30 GW commitment. It is a very ambitious commitment, and there will be challenges in meeting it, but I am convinced that the industry, in co-operation with Government, will be able to do so. We have also committed to £9.2 billion to improve the energy efficiency of homes. We are particularly concerned about fuel poverty.

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[Stephen Flynn]

rose—

[Kirsty Blackman]

rose—

[Kwasi Kwarteng]

I see a forest of hands. I give way to the hon. Lady.

[Kirsty Blackman]

I appreciate that the Minister just said “in the course of this Parliament”, but the next five years is not the best timeline. Could he be a little more specific? Will the deal come in the next year or in the next year and a half? Alternatively, perhaps he could let us know when he will be able to tell us when it will come. That would be really helpful.

[Kwasi Kwarteng]

I am not going to play the game of saying some arbitrary date. It is a serious, ongoing discussion. As I said, we will have a sector deal in the course of this Parliament. I will not be drawn any more on the timings.