UK Oil and Gas Industry

Kirsty Blackman Excerpts

Thursday 19th April 2018 Westminster Hall

[Colin Clark]

Yes, but many parts of the country feel they are underinvested in. The engine room of the Scottish economy is taxed that much more than other areas—if we do not invest in it, we risk killing the golden goose. That is the important thing. I am not saying that other areas are not deserving; I am saying that if we do not invest in the north-east of Scotland and the surrounding area, it will not be an attractive place to live, and it will be very difficult to attract people to work there.

[Kirsty Blackman (Aberdeen North) (SNP)]

Does the hon. Gentleman agree that the same concepts apply to the £330 billion of oil revenues that came to the Westminster Parliament?

[Colin Clark]

I will not disagree, save that the principle is that that £330 billion was to the UK Treasury, which invested for many years throughout the United Kingdom. As the hon. Member for Stockton North will remind me, not only the original Scottish sector has oil, but the islands, the rest of the UK east coast and now the west coast of Scotland as well.

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[Kirsty Blackman (Aberdeen North) (SNP)]

It is a delight to have the opportunity to speak in this debate. It is always good to have a debate focused on oil and gas; we have not had enough of them recently. I am also delighted to be in Westminster Hall—I feel like I have not been here for some time—and I am thankful for the air conditioning, which is incredibly useful today.

I will not spend an awful lot of time disagreeing with my constituency neighbour, the hon. Member for Gordon (Colin Clark), because I agree with most of what he said, but I will start with a slight disagreement about helicopters. I agree with what the hon. Member for Stockton North (Alex Cunningham) said about people’s nervousness. We and the companies involved ask people to undertake dangerous helicopter journeys just to go to work. In conversations with Airbus and other organisations involved with the helicopters, I have said, “It is not me you have to convince that the aircraft are safe; it is the people who are asked to fly on them.” To do that, those organisations need to have as many conversations and answer as many questions as possible. That is the only way they will possibly regain the confidence of people in the industry.

[Alex Cunningham]

On that basis, does the hon. Lady support my call for a public inquiry so that we have full transparency about exactly what happened and what is being done to rebuild confidence in particular models, which are still yet to come back into service?

[Kirsty Blackman]

I appreciate the hon. Gentleman’s question. To be perfectly honest, I am not clear that an inquiry is widely called for; an awful lot of information has been published. If lots of individuals from my constituency and from the industry more widely asked me for such an inquiry, I absolutely would look at that. I am not saying no, but that is not something that people generally have asked me for. They have looked at the evidence that has been published so far and taken decisions on that basis.

I will talk first about the oil and gas industry in general, although obviously I will speak particularly from the perspective of the north-east of Scotland, as Members would expect of an Aberdonian. I will talk about where we have come from, where we are and where we will go with the industry, and about how to get to those places. As I said, some of my asks are not dissimilar to those of the hon. Member for Gordon.

We were in a situation where the industry was overspending significantly. When it was told that it could have a widget today for £400 or tomorrow for £4, it chose to have it today for £400. There was an awful lot of fat in the system. Now the industry is able to make more profit at $60 a barrel than it was at $120 a barrel, just because it has slimmed down a lot of those costs. One of the most important things for us to do is to capture that—to ensure that, whatever we do, we do not lose the gains we have made.

We have undoubtedly been through an incredibly painful period. We have had an awful lot of pain and suffering in the north-east of Scotland. I get that. A number of people have found alternative jobs—they have been supported in that by various organisations; the Scottish Government have put a lot of effort into that—but some have not. We do not want to forget that there are people who still have not got through the pain of having to go through a redundancy process. We need to remember that and ensure that, whatever we do, we do not set ourselves up for another fall like the one we had. That is really important.

We had a very competitive system, in which companies were unable to work together or point in the same direction. Local authorities were not particularly good at that, either. What really brought local authorities, the business society and civic society in all of Aberdeen city, Aberdeenshire and the north-east of Scotland together was the bidding process for the city deal. Working together on that was really important. I am pleased that we got a city deal. Anyone who has read anything I have said about the deal will know that I was unhappy about how low level it was—I would have liked significantly more money for my city, and I am not sure that many people in the north-east of Scotland would disagree—but the process was very beneficial, as was the direction that the city and the shire took. I hope that we keep hold of that.

[Colin Clark]

The hon. Lady is gracious in giving way. Does she worry that there is a perception that the north-east of Scotland is relatively wealthy and therefore will take care of itself, and that sometimes that affects investment in the region?

[Kirsty Blackman]

I certainly worry that the city deal that was signed was looked at on a different basis from some other city deals. The Scottish Government have put in significant additional funding to the city deal, particularly recognising the issues with infrastructure. I was pleased to hear the hon. Gentleman talk about looking at additional infrastructure projects and so on. The Aberdeen western peripheral route will make incredibly positive changes. No one can wait for it to come—I think we are expecting it in the autumn. It will be hugely positive and will make a big difference, and I think that it will help encourage people to come to the north-east.

Let me turn to where we are now. Companies are working together like never before. I was at the forefront of calling for changes to transferable tax history, but other parties supported them; the Conservative party was behind the call, too. I very much appreciated the Chancellor making those changes in last year’s Budget. I would have preferred them to happen more quickly, but we cannot have everything. We are looking forward to their implementation later this year. I could not be clearer about how important they are, and I am sure the Government recognise that.

Just for a bit of information, if a big company owns a number of rigs and one of them is nearing the end of its life, the company has a choice: it could put a lot of work, capacity and people into that installation to try to get the maximum recovery from it, or it could say, “Look, this is not a priority for us. We are focusing on other things.” That is completely understandable, but the transferable tax history allows a new company—a new player in the market—to take over that asset to ensure that the maximum recovery is made from it. That is really positive, and I am pleased that it has happened. That is a helpful measure in terms of maximum economic recovery, which we are fully behind.

Where are we going? I was pleased to hear the hon. Member for Gordon mention Vision 2035, because it is incredibly important and people do not talk about it enough. It is the vision for the future of the Oil and Gas Authority, which so far seems to be doing a good job. It focuses in particular on the north-east of Scotland, but also on the wider industry across the whole of the United Kingdom. Vision 2035 is about ensuring that we get maximum economic recovery, extract oil and gas from the small pools and have a supply chain that is anchored—particularly in the north-east of Scotland—so that once we get to the stage when no oil and gas is coming out of the North sea, everyone will know that the very best supply-chain companies for oil and gas are in the north-east of Scotland and parts of the wider United Kingdom. Then, rather than seeing those companies lifted and based in the US or other countries, they could continue to sell their expertise, with a tax take continuing to come in and be spent here—preferably in Scotland.

We must anchor the supply chain now for the future, and there are a few ways to do that. In relation to small businesses, all too often such businesses in oil and gas come up with a great concept, start working on it, grow the business to a point and then they are sold. I get that that is a way forward for some, but both the Scottish and UK Governments are beginning to ensure that if such companies have the potential to grow, they do not get sold and their concept lost within a bigger international company but can access the finance they need to anchor themselves and have that next step of growth, whether that is through beginning to export or ensuring that their intellectual property is turned into something real that can be sold. That is really important for the supply chain, rather than seeing companies sold on to somebody else who may not pay as much tax here because they are not a wholly owned United Kingdom company.

On maximising economic recovery and exploration, even though we have a super-mature basin we should still be doing exploration; there is more that we can do. I think someone from Statoil said to me, “You’re most likely to find oil and gas somewhere you have already found oil and gas.” We should do exploration in those areas. We have better ways of surveying now than ever before, and of trawling through and understanding the data from that surveying, which will be important going forward. Anything the UK Government can do to ensure that exploration continues, even in a super-mature basin, would be welcome.

[Claire Perry]

I am really enjoying hearing another perspective from the hon. Lady’s fine city. Could I put on record that I am a little mystified about the Scottish Government’s decision to refuse to allow exploration for gas onshore when we know it is there because it is a geologically identical strata? Ultimately, the same operators would be looking to extract it. We can do it safely and in an environmentally secure manner, because that is what we do in Britain, as we have done demonstrably in the North sea basin. I find that an ideological rather than a practical decision.

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[Kirsty Blackman]

What Governments do in any decision is look for best value—the good things and bad things that would come out of it. The Scottish Government and Scottish Parliament decided that fracking will not happen onshore in Scotland, and it is within that Parliament’s rights to take that decision.

[Claire Perry]

Will the hon. Lady give way?

[Kirsty Blackman]

In a moment.

[Mr Virendra Sharma (in the Chair)]

Order. The Minister will get a chance to respond to the debate, and I would appreciate it if she would—

[Mr Virendra Sharma (in the Chair)]

I will send you another bottle of water.

[Kirsty Blackman]

Thank you, Mr Sharma. In terms of ideological decisions, the onshore wind decision, taken on a blanket basis across the whole United Kingdom, could be applied flexibly to Scotland, and we would very much like that. There would still need to be a planning process, but it would be great if the blanket ban was not there.

[Colin Clark]

Almost 50% of turbine applications called into Holyrood to the reporter are then given permission. The hon. Lady just said that the Scottish Government have decided not to allow fracking—as I said in my speech, I think it is nimbyism, frankly, but fair enough, because that is their right—but if local communities and local councils say—

[Colin Clark]

Thank you, Mr Sharma. I will keep my question to the hon. Lady. Does she agree that there is a contrast between the two positions? Can one give permission for turbines that people do not necessarily want in their local community when one may not believe in having fracking in Scotland? Perhaps she does believe in having fracking onshore.

[Kirsty Blackman]

I do not believe in having fracking onshore in Scotland, and I am sure the hon. Gentleman would not expect that. The benefits of fracking are not as big as they are made out to be. Were it to be allowed, it would bring very little in the way of jobs or tax take, and the loss to our communities and the upheaval caused in them would be so significant that it would not balance out those jobs and tax take.

I am incredibly pleased to hear the Minister talk so positively about carbon capture and storage. What happened previously in relation to that was a train wreck—it was horrendous. It was awful how the rug was pulled from under it; I could not be clearer in my condemnation. I recognise that it was not the Minister’s responsibility at the time and I do not blame her in any way for that. I am pleased that she is being so positive.

We need to ensure that, whatever we do on decommissioning decisions and changes to allowances made by the OGA, we do not prejudice future carbon capture and storage opportunities. For example, we should not prematurely decommission a pipeline that could be useful for carbon capture and storage. As we do not yet have a full grasp of what carbon capture and storage technology will look like, it is very difficult for such decisions to be made. However, I ask that whatever is looked at is considered carefully in those terms and that carbon capture and storage is considered when any decommissioning decision is made. Any decision on any of that needs to be made very carefully.

I am also of the opinion that decommissioning, if done right, can bring some jobs and some revenue. However, I do not think it will be the biggest windfall in the entire world. I appreciate the action that the UK Government have taken on decommissioning through the OGA, and I also appreciate what the Scottish Government are doing through the decommissioning challenge fund. All those things are positive.

When I spoke to the Oil and Gas Technology Centre, which I will move on to in a moment, it said something interesting about decommissioning. On some rigs, there is an ability to do enhanced extraction techniques, but it is not possible to do them because of all the stuff on the rig that is doing the current extraction techniques. There is a need for a level of enabling decommissioning; taking off some of the widgets currently on the platform in order to put on new widgets so that the platform can be used to do things, but with different technology on it. There are smart things we can do on decommissioning that will ensure that we have jobs, but also that we have a positive way forward and get the maximum economic recovery out of the North sea.

The issue of STEM, which the hon. Member for Gordon mentioned, is important. I have been concerned as an Aberdonian, feeling the pain and seeing the changes and the negative atmosphere in the city, that we would have a situation in which young people would come through school saying, “No, I don’t want to go into oil and gas,” exactly as he said. The Oil and Gas Technology Centre is encouraging young people to get into STEM. Aberdeen Science Centre is doing similarly cool things to encourage STEM, and so is TechFest, which takes place every autumn. Those are all positive things that are supporting young people into STEM.

We do not have the same problems with the numbers of engineers that the north-east of England does—I have previously been told that it is much more difficult in the north-east of England to find some of the engineering skills that are required, but I could be wrong. That is something we could probably work together on quite positively, sharing the information and the positive things we have been doing on that, to ensure that best practice is shared and lots of people are encouraged into engineering.

As the hon. Member for Gordon said, some of the digitisation skills are important. One of the things I talked about with the Oil and Gas Technology Centre was the transferable skills that people get from studying something such as gaming, with the advanced interfaces they use, and how the virtual reality that can be created from that is incredibly positive and useful.

I have a couple more things to say—I am probably beginning to try your patience, Mr Sharma—and a couple of specific asks for the Minister. First, there is the oil and gas sector deal. I know that she is probably being heavily lobbied on that, but it could not be more important for the industry. We recognise that the Government have been working with the industry on that, and we look forward to that coming through.

Secondly, on the industrial strategy challenge fund, I understand that the bids for wave 3 closed at some point this week. Concern has been raised with me about the length of time the decision-making process will take. That is not so much the time in which funding will come through, but the decision-making process. If no shortlist is created until November, and we are looking at having a shortlist at some point late this year, no decision will be taken until a bit later than that. In reality, the chance that people can employ people and get up and running at the beginning of April next year becomes slimmer and slimmer. The quicker the decision can be taken—not necessarily the quicker the funding can come through—the better for projects being ready to go as soon as possible.

There are a couple more challenges. It is the case that Brexit is a challenge for the industry and that varying suggestions have come out about how much Brexit could cost the industry. I am still concerned about how visas are operating. I do not think the current situation works particularly well. I make a plea for post-study work visas to be brought back for the University of Aberdeen and Robert Gordon University. That would be a huge positive change for us. I know that the pilot took place in three universities in England and has been broadened out slightly, but it still has not come to the two universities in my city, and it would be incredibly positive for our industry.

On another specific offshore industry-type issue, I had a constituent come to me recently who is an EU citizen, but is not eligible to apply for the right to remain because he has spent so much time out of the country working for his oil and gas job that he cannot fulfil the residence requirements. He is a high earner, he pays tax and he is a good contributor to our city, and I am concerned that in these individual cases the Home Office’s policies are obstructive to ensuring that those highly skilled people are able to stay in our city. That is a specific plea.

I have one last specific plea for the oil and gas industry. I have requested a meeting with the Financial Secretary of the Treasury and I hope that will happen in the near future. There is a major issue brewing around customs, because there is something called the shipwork end-use relief that is heavily used by oil and gas operators. Basically, it is a customs relief that occurs for stuff that is going offshore; the stuff is not eligible for the same customs fees that it currently would be, because it is going offshore. I received reassurance from the Financial Secretary that that would continue to be applied post-Brexit, but the action that Her Majesty’s Revenue and Customs is taking contradicts that.

There is a similar issue on manifests. Currently, paper manifests are okay for making a customs declaration, but we are looking at moving to a situation where electronic manifests are required. I understand that is because of changes in EU rules, but post-Brexit, the Taxation (Cross-Border Trade) Bill is not the same as the EU customs code, so they will possibly be able to revert to paper manifests, but we are not clear. There is an awful lack of clarity around that, and I am concerned that what the Financial Secretary is saying and what HMRC is saying are not the same.

That is becoming really important, because the changes have to be made in the early summer of this year. Companies are gearing up to make changes on the basis of HMRC guidance that is being contradicted by the Financial Secretary. Any assistance that can be given to ensure that those meetings take place and that clarity is given to companies would be incredibly useful.

The industry is in a good place, which is surprising after everything it has been through. There is a positive future. One of the amazing things it is doing is focusing on decarbonisation. That seems a bizarre thing for the oil and gas industry to do, but it has more of a need to do it, and more of a responsibility to do it, because it is the oil and gas industry. I am pleased that that has been written into what the Oil and Gas Technology Centre is doing, and that all the oil and gas companies, working together in ways they never have before, are positive about looking toward decarbonisation.

There is a positive future for the oil and gas industry. We must get it right. We must continue to encourage companies, we must continue to support and work with organisations such as the Oil and Gas Technology Centre and, when industry bodies and companies come to us and say, “This specific issue is a blockage,” we must look at those specific blockages and ensure that we do what we can to get rid of them, listen to industry and make the changes that are required.

[Peter Aldous (Waveney) (Con)]

It is a pleasure to serve under your chairmanship, Mr Sharma. I congratulate my hon. Friend the Member for Gordon (Colin Clark) on securing the debate, and it is an honour and a privilege to follow the hon. Member for Aberdeen North (Kirsty Blackman).

In the last four years, the oil and gas industry in the North sea has come under considerable pressure, and tens of thousands of jobs have been lost. The industry has adapted and, while challenges remain, it continues to be a vital component part of the UK’s economic base. It still supports hundreds of thousands of jobs and delivers more than half the nation’s oil and gas. There are up to 20 billion barrels of oil and gas still to recover, and the UK supply chain continues to be a world leader, with unrivalled experience in maximising economic recovery from a mature base. The industry makes a consistent contribution of around £1 billion per annum in tax revenues, and the wider tax contribution from across the supply chain is immense.

The Vision 2035 document confirms that the extraction of oil and gas on the UKCS is not a sunset industry. It has a vital role to play in adding to the UK’s energy security, ensuring a smooth transition to a low-carbon economy and creating highly skilled jobs that we can take around the world.

I will first provide a short overview on the national outlook, its successes in the face of adversity and the immediate challenges that need to be addressed. I shall then focus on the southern North sea off the East Anglian coast, where there are specific and exciting opportunities, although work is required if their potential is to be fully realised for the benefit of both the local and national economies.

I am mindful that, in the southern North sea, different energy sectors operate side by side, cheek by jowl—particularly gas, offshore wind and electricity transmission. I pose the question: should they come together and work as one? I am perhaps running before I can walk in saying that, but I will outline a scenario for how those sectors can work more collaboratively for the benefit of industry, people and the places from which those people come.

Notwithstanding the considerable pressures that the industry has faced in recent years, and while in many respects it is still battered and bruised, it is generally in a good place and there is exciting potential ahead of us. In 2017, UK upstream deals exceeded £8 billion. The UKCS production remains stable, despite some start-up delays and unplanned outages. Average unit operating costs have halved, from around $30 per barrel equivalent in 2014 to $15 in 2017. There were at least five exploration successes last year, with a combined discovery of 350 billion barrels equivalent. Around £5.5 billion of post-tax cash flow was generated on the UKCS—more than in any other year since 2011.

There is considerable potential to build on those successes this year, with at least 12 new developments, worth around £5 billion of capital investment, expected to be sanctioned, and with production forecast to increase by 5%. Set against that backdrop, 62% of supply chain companies surveyed by Oil and Gas UK have a positive outlook for 2018. That said, considerable challenges must be addressed if that potential is to be realised. Just 94 wells were opened up on the UKCS in 2017—the smallest number since 1973. Development drilling has fallen by around 45% in the past two years, with supply chain revenues falling by more than £10 billion from 2014. Despite the cost improvements for the supply chain, average EBITDA—earnings before interest, taxes, depreciation and amortisation—fell by £1.7 billion from 2014-16. Moreover, cash flow continues to be a major concern.

Even if all the fields discovered last year were developed, the reserve replacement ratio of 0.6 is not enough to sustain production. The fall in investment from 2014-17 means that production decline is likely to increase in the early 2020s. Sustaining efficiency gains is vital if the basin is to continue to attract investment. Moreover, it is important to improve exploration success and the commercial viability of existing discoveries.

A particular challenge that the industry faces, which we have heard about quite a lot today, is to reinvigorate the supply chain and to make it more resilient. It is important that we tackle this task; not to do so would be irresponsible. A strong supply chain will help sustain the industry and will open up significant export opportunities. Operators need to work more collaboratively with their supply chain businesses—sharing information, encouraging innovation and looking at new working practices. Addressing this challenge should be part of the sector deal, and the Oil and Gas Authority and the Government should work with the industry to help promote a new approach to collaborative supply chain working. Much can be learned from other industries, such as car manufacturing in the north-east and the west midlands.

Since 2012, the Government have generally worked well and closely with the sector, improving the fiscal regime and thereby helping to attract inward investment. That will continue as the driving investment programme is delivered. However, while Government policy is supportive, a number of decisions by HMRC—as the hon. Member for Aberdeen North touched on—have been taken without full and proper consideration of the impact on the oil and gas industry.

A particular example, as the hon. Lady mentioned, is HMRC’s decision in January to end long-standing exemptions for shipwork end-use relief from July of this year. For the oil and gas sector, this exemption—known as CIP33—provides relief from customs duties for equipment that is destined to be used in offshore installations, such as spare parts. The decision was taken at short notice, with no consultation with the industry.

[Kirsty Blackman]

The other thing that particularly concerned me about this was that I received a letter from the Financial Secretary to the Treasury that directly contradicts the decision taken by HMRC, which confused the issue further. The two appear to be giving totally different guidelines on this. It would be great to have clarity.

[Peter Aldous]

I thank the hon. Lady for reinforcing that point. It is difficult to attract investment, and the Government have worked very hard to make this basin one of the most attractive in the world to invest in, but these sort of noises coming out of HMRC reverberate around the world. A solution needs to be found very quickly.

While much of the industry’s focus in recent decades has been on Scotland, when exploration started on the UKCS in 1960s it did so in the southern North sea. That area is now on the verge of a renaissance, with the opportunity of reinventing itself as an all-energy basin, which, with the right policies in place, can play a significant role in the UK’s future energy strategy.

The southern North sea is at a critical juncture. For more than 50 years, the basin has developed and delivered strong gas production through a diverse network of offshore platforms, pipelines and onshore terminals. The basin has been well exploited, and the opportunity to identify and develop large, landmark discoveries is increasingly limited. There is potential with both marginal pools and tight gas, but they are increasingly expensive and complex to access, the technical and commercial risks are high and opportunities can often be quickly disregarded as uneconomic.

The challenge for the southern North sea is now to search for innovative business and technical solutions. This challenge is made more difficult by depressed commodity prices, aging infrastructure and increasing unit transportation costs, as production from existing developments continues to decline. The selection of projects is based on their ability to have a big impact, their prospect of success and the potential to achieve it within a reasonable timescale.

There are currently five priorities in the southern North sea. The first is to realise the full potential of decommissioning opportunities for the benefit of the East Anglian region, which I will come on to in more detail in a moment. The second is to unlock potential tight gas developments. The third is to realise the full potential of the synergies between renewables and oil and gas. The fourth, in the light of Brexit, is to find the best way to work across borders with the Dutch sector. The final one is to minimise production losses due to salting.

It is estimated that 40 platforms in the southern North sea are to be decommissioned by 2022; as I said, it is the oldest part of the basin. That business is worth several billion pounds, with significant job safeguarding and enormous earnings potential for the East Anglian region. However, there is a real and present danger that we will lose much of that work to our European neighbours, where port infrastructures have received investment from their Governments.

East Anglia does not have a level playing field on which to compete with our main competitors in the southern North sea—as I said, on the other side of the sea. Locally, the councils, the New Anglia local enterprise partnership and other supporting agencies, such as the East of England Energy Group, stand ready to support the industry, but there is a need for central Government to get involved and back them if we are to realise for the region the full potential of that significant opportunity.

We need a decommissioning challenge fund similar to that in Scotland, to help to establish a cluster of expertise, as is happening in Dundee with the Tay cities deal. We need to have an aspirational UK local content policy, as already happens with offshore wind. That would help to ensure a return to UK plc, as the Government are already funding between 50% and 75% of UK decommissioning. It would focus operators’ attention on using the local supply chain and would help to support the supply chain action plans that have recently been introduced for decommissioning projects. As I said, EEEGR is willing—it is indeed eager—to lead and to host a taskforce to spearhead that initiative. It would be match-funded by other local agencies, although it would need funding from central Government to establish and then help to maintain it.

The other opportunity in the southern North sea with exciting potential is closer collaboration and working between the oil and gas, offshore wind and offshore transmission sectors. If that can be achieved, a significant contribution can be made to addressing the UK’s ongoing energy trilemma of keeping costs to consumers affordable, ensuring security of supply and smoothing the transition to a low-carbon economy. We need to integrate energy production activities—for example, in respect of oil, gas and electricity—and share common infrastructure for distributing energy. Doing that will achieve significant economic benefits. The co-location of gas-powered electricity generation with gas production hubs would help to maximise the economic recovery from gas fields. The better utilisation of common infrastructure would improve the economic value of both the associated renewable and the hydrocarbon production assets. Collaboration between those sectors is slowly improving and could be accelerated by facilitating and enabling Government policies.

Two main issues are inhibiting more effective collaboration between the sectors. First, the regulatory regimes are quite separate; some of the regulators are not used to working together and they have different policy objectives. Secondly, cross-sector collaboration is not incentivised, as Government policy is highly sectorised.

A possible starting point for improving the situation and promoting cross-sector collaboration would be consideration of the UKCS as an energy basin, rather than a series of separate energy sectors. That integration could be the specific responsibility of the Department for Business, Energy and Industrial Strategy, albeit delivered through parties such as the OGA, National Grid, Ofgem and the Planning Inspectorate.

The three sectors would also benefit from incentives to work more collaboratively. Sector deals provide an opportunity to make it more attractive for the different sectors to work together, at both the developmental and the operational stages. That could include financial support for cross-sector innovation, improved regulatory cohesion, facilitating the movement of workforce skills between the sectors, and research and development. It may well be that a pilot could be set up for such innovative cross-sector working in the North sea. I would welcome the opportunity to discuss that with my right hon. Friend the Minister, along with industry representatives.

During the past 50 years, oil and gas extraction on the UKCS has brought enormous benefits to the UK. It has created hundreds of thousands of well-paid, highly skilled jobs, attracted significant inward investment from all over the globe and provided a huge annual dividend to the Exchequer. The past four years have probably been the most difficult in the basin’s life, yet notwithstanding a great deal of pain and personal anguish, it has come through this tough period in better shape than could reasonably have been hoped for and is ready to continue to play a full and leading role in the post-Brexit economy.

Since 2012, the Government have given the industry a very fair hearing and backed it, both fiscally and with the creation of the Oil and Gas Authority. Exciting opportunities lie ahead. It is important that the spirit of co-operation in the oil and gas supply chain continues, improves and, as I have outlined, extends to cross-sector working. It is said that if you go to any oil and gas basin around the world, you will hear Scottish, Geordie, Suffolk and Norfolk accents. We must ensure that that continues for at least 50 or—dare I say it?—100 more years.