Onshore Oil and Gas

Kirsty Blackman Excerpts

Tuesday 26th January 2016 Westminster Hall

[David Mowat]

All that is true—and it is much more tactical, quicker and goes on from one to another. It does not have the big up-front development costs of, for example, North sea platforms. That is true, but it is also true that the wells do not last as long. The fact is that in the US, the shale industry is a $50-a-barrel industry, and at $28 dollars, that industry is in trouble. That is the whole strategy that the Saudis are taking and is what they are trying to achieve. They are going to be successful unless other things make them stop.

The title of the debate, however, is “Onshore Oil and Gas”—not shale. I say that because it is worth remembering that we have an onshore oil and gas industry. We have drilling and have had it for the past 30 years in places such as the New Forest, without the level of controversy that appears to surround this industry.

Other Members have talked about this, but let us examine briefly what has happened in the US shale industry. The industry has reduced the cost of gas by two thirds and has been converting—unfortunately, this also might stop—liquefied natural gas import ports to become LNG export ports. Equally important, the US has met any climate change target that anyone has given it. It did not sign up to Kyoto, but it would have met it by miles because of the displacement of coal by gas in its carbon emissions.

I want the House fully to understand that if the world were capable of taking out all coal and replacing it with gas, which is a big ask, it would be equivalent to increasing the amount of renewables in the world by a factor of six. That would be real progress in emissions. When political parties talk about carbon emissions—we heard about that earlier—without giving cognisance to that fact, it is frankly disingenuous at best.

[Kirsty Blackman (Aberdeen North) (SNP)]

On emissions and greenhouse gas, it is relevant to think about methane emissions when natural gas is used instead of coal. We need to consider that, and not just the carbon emissions.

[David Mowat]

That is a strong point and I agree with it. It is extremely important that, as in the US, there are no methane emissions. We have seen over and again in places such as Pennsylvania that methane is not emitted and that some of the scare stories are not true. I am sure that when the Scottish Government conduct their pragmatic and responsible review of the industry they will find that out for themselves.

In the US—I will not repeat my points—there are two elements in what cheap energy can do in manufacturing. The US has created around 200,000 jobs in that industry but, more important, the estimate is 1 million jobs in the onshoring chemicals industry in the US eastern seaboard. The transformation is extraordinary. It is re-shoring industry from Asia, China, Europe and, frankly, the UK.

Organisations make marginal decisions—this is not about closing Teesside and moving it to the US. When it comes to the marginal decision of where to open the next production unit, it will not be in Grangemouth, Teesside or Runcorn, but in Pennsylvania or Cleveland because that is where energy prices and feedstock prices are so competitive that more money can be made. We need to be cognisant of that. We sometimes talk in this House as though it is a new industry, but it is not.

The question arises—it is a fair one—of whether that applies to the UK. I have heard it said many times that things are different in the UK. It is true that we have a smaller manufacturing base and a much smaller chemicals industry, so perhaps it will not be so dramatic. People sometimes say, “Well, US gas prices have reduced by 70%, but that can’t happen here because we are on a European grid.” Generally speaking, when there is more of a commodity, the price falls. It is true that we have a European gas price and a European hub, but we had a global market for oil and look at what shale eventually did to the oil price. We are still living with that.

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[Kirsty Blackman (Aberdeen North) (SNP)]

It is an honour to serve under your chairmanship, Mr Howarth. I thank the hon. Member for Thirsk and Malton (Kevin Hollinrake) for bringing this debate to the House; that is very much appreciated. I am delighted to follow the hon. Member for Warrington South (David Mowat), because he picked up on a few points from the SNP and this is a good time to discuss those. I am also pleased that my hon. Friend the Member for West Aberdeenshire and Kincardine (Stuart Blair Donaldson) said some of what I was planning to say, because that means that I can get through my speech a bit faster.

My hon. Friend laid out the SNP position. We are looking at a comprehensive programme of research, and the consultation is due to end in spring 2017. Mary Church, head of campaigns for Friends of the Earth Scotland, said:

“This framework for reviewing shale gas fracking and coalbed methane looks like a well designed process, over a sensible timescale…undertaking a thorough review of unconventional gas cannot be rushed.”

If we are to exercise leadership and take the public along with us on this issue, a comprehensive review and a moratorium in the meantime is a sensible approach.

[Graham Evans]

The hon. Lady quotes Friends of the Earth. Is that the same Friends of the Earth that distributes misleading information to the general public by direct mail?

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[Kirsty Blackman]

I have never received any misleading information from Friends of the Earth, so I cannot answer that point.

I want to make a few points about fracking. I do not understand what the hurry is. As the hon. Member for Warrington South mentioned, the gas price is pretty low at this point. The risks are not that well known yet. Fracking has been undertaken on an industrial scale really only since the very late 1990s and early 2000s. It does not have a body of evidence behind it. In terms of the rush to do this, the UK Government are trying to paint this as a gas versus coal debate—looking at our energy needs in terms of gas versus coal—but we have been shouting about other things. We have been making the case for things such as renewables and putting them front and centre. I do not think that this is a gas versus coal debate, no matter how much the UK Government try to paint it as such.

[Angela Smith]

For the record, the term “fracking” is not that helpful to the debate, but surely the key point of today’s debate is the importance to the future of UK manufacturing of giving this industry the support that it needs to get going. On that basis, there is surely a sense of urgency around all this. UK manufacturing needs new industries and new activity in order to grow.

[Kirsty Blackman]

I appreciate that point and I will come on to manufacturing; I just wanted to answer first a few of the points that had been brought up throughout the debate. “Fracking” is the term that my constituents use and the term that is recognised throughout the UK. That is why I was using it.

It has been mentioned a lot that we should ensure that controls are in place and there is proper regulation. The Scottish Government’s point of view and the direction that we are taking is that we want to prove the safety first and, if we do decide to do this, ensure that the controls are in place after that.

[Kevin Hollinrake]

During the moratorium, what evidence has been collated about the safety or otherwise of shale gas?

[Kirsty Blackman]

We are still in the process of researching this. The research does not finish until later this year, and then in 2017 the public consultation will finish, so we are not at the point in time at which we will be publishing the evidence. I think that that is reasonable. It is reasonable to look at the research properly before we bring it all together—

[Tom Blenkinsop]

Will the hon. Lady give way?

[Kirsty Blackman]

Not now. I want to make some progress because I do not have long.

I want to talk briefly about carbon capture and storage, which is very important for reducing carbon emissions; that is not just about moving from coal to gas. I have mentioned already the issue in relation to methane emissions. I understand that there is some evidence that methane emissions are relatively low, but I would like to see the body of evidence brought together in a report on unconventional oil and gas.

I also want to talk briefly about the supply chain and the benefits in that respect. I represent Aberdeen, where we have been feeling the effects of the oil crash for much longer than a few weeks or months. For the past year, contractors have been finding it very difficult to get jobs and redundancies have been being made. In terms of the supply chain and supporting jobs in the UK, particularly in manufacturing around the supply chain, renewables would be very helpful. Also helpful would be looking at supporting the oil industry as it is now. I understand that the unconventional onshore oil and gas industry would bring jobs, but we need to protect the jobs that people currently have and are currently losing.

[Tom Blenkinsop]

I thank the hon. Lady for giving way; she is being generous with her time. The argument that I have certainly tried to make is that to have the industry that provides the solutions for renewables, which we still need to keep pushing hard for, we need the cheaper energy in order to retain the industry—so that we onshore that industry. For a steelworks to go forward and development to become cheaper and more efficient, it needs cheaper energy; and it is only the steel industry that provides the slab that is then rolled into tubes for monopiles that go into wind turbines, for example. It is the only onshore solution and it needs that cheaper energy.

[Kirsty Blackman]

I appreciate that. I am not sure how much the onshore oil and gas industry will affect the price of energy. I did not know a huge amount about the chemicals industry and things like that; a point was made about feed. However, we do have the lowest oil price for a long time, and natural gas is at a 10-year low as well, so energy prices should be cheaper as things stand, without the need for fracking.

[Tom Blenkinsop]

rose—

[Angela Smith]

rose—

[Kirsty Blackman]

I do not want to give way again.

I am concerned about the rush to fracking. The UK Government will not get a major tax take from it, because of the current position with the prices. We should not be rushing to do it. In terms of my constituency and protecting jobs in the north-east of Scotland, we need to be looking at supporting the conventional, established offshore oil and gas industry, as well as supporting renewables. The Government need to rethink their renewables obligation changes.

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[Nick Boles]

The hon. Gentleman tempts me. No doubt if he secures a similar debate on that subject, I will have that opportunity. I am sure he is right that we can help to reinforce the competitive advantage of our existing chemical and steel industries, and others, through all sorts of innovative ways of securing energy supplies that are more environmentally sensitive than previous ones.

On the vital question of environmental protection, my hon. Friend the Member for Warrington South made the powerful point that, if all the world’s coal were replaced by gas, it would contribute the equivalent of a sixfold multiplication of the world’s renewables industries. Gas is a fossil fuel and, in the long run, we all hope not to be reliant on fossil fuels. Nevertheless, the transition from coal to gas is probably the most dramatic thing we can do to enable us to cut carbon emissions and prevent further climate change. That is why the Government are so keen to see the development of shale gas in the UK. There are substantial reserves, which will assist us in achieving our environmental objectives and providing economic security.

[Kirsty Blackman]

What about the possibility of supporting offshore oil and gas companies to extract gas from more difficult high-pressure, high-temperature wells, for instance, rather than putting the efforts into shale gas?

[Nick Boles]

In this constructive and responsible debate, I do not want to enter into partisan criticism. The hon. Lady and the hon. Member for West Aberdeenshire and Kincardine (Stuart Blair Donaldson) represent seats in Aberdeenshire, which, of all places in the United Kingdom, has a great understanding of and reliance on the oil and gas industries. It was extraordinary that they did not mention the Scottish election that is coming up in the spring, as that was perhaps one consideration that informed the timetable of the SNP’s no doubt responsible and serious moratorium on the development of the industry.

It was extraordinary that the hon. Member for Aberdeen North (Kirsty Blackman) said that the industry has not been in existence for very long and therefore we do not know whether it is safe, when she also mentioned that it started in a serious way in the 1990s. I wish that the 1990s were not as long ago as they are, but they are 20-odd years ago. The failures of the previous Government mean that we have lost a huge opportunity by being slow. We do not want to continue that irresponsibility.

I thought the most interesting part of the debate was the discussion about the vital interplay between the potential of unconventional oil and gas and coal gasification, and the competitiveness of industries that are fundamental to the UK’s prosperity and employment in the north-east and elsewhere, which face a challenging time. We have heard, in interventions by the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) and in the excellent speech by the hon. Member for Penistone and Stocksbridge (Angela Smith), about the dramatic effect that access to much cheaper and more local gas supplies has had on the chemical industry in the United States, and how vital it could be here. We have also heard about the opportunity that it would create for our hard-pressed steel industry if it were able to supply the dramatic needs estimated in the Ernst and Young report—£2.4 billion of steel tubing, and drilling rigs worth an estimated £1.65 billion. If the steel industry were able to take part in that and the chemical industry were able to benefit from the cheaper costs, we could benefit dramatically. Thanks to my hon. Friend the Member for Thirsk and Malton, we have heard a powerful case for a responsible, regulated and measured approach, but not for a moratorium. I congratulate him on securing the debate.