Oil and Gas Industry

Kirsty Blackman Excerpts

Tuesday 9th October 2018 Westminster Hall

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for Falkirk (John Mc Nally) for obtaining the debate. The timing is good, as other Members have mentioned, given that we are in the run-up to the Budget.

I want to talk first about Brexit, which several colleagues from throughout the House have mentioned. The economic report put out by Oil & Gas UK makes the point that 7% of the offshore workforce are from EU countries and refers to the fact that before Bulgaria joined the EU it took four days for goods to come from there to Aberdeen to be used in the oil and gas industry, but that they were routinely held up for an additional week because of customs controls. If we do not have a customs union deal that allows for those goods to come through the border without being held up for a week, it will cause problems for our supply chain companies and for the wider industry. A fifth of people living in Aberdeen were not born in the UK. We have done immensely well at attracting immigration, which has been good for our industry. It is a huge concern that that might be less easy after Brexit, particularly if the immigration plans mentioned at the Conservative party conference go through and we end up in a situation where very few immigrants are allowed to come to the UK. That would cause a real problem for my city and for the oil and gas industry as a whole.

The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) set out particularly clearly the requirement for a stable taxation regime for the oil and gas industry. One of the points most often raised with me is that if there is a story in the Financial Times about the possibility of the Treasury increasing, or massively changing, tax in relation to oil and gas, that story alone causes a problem for the industry—it makes a dent. We need a clear commitment from the Chancellor in the Budget to stability and predictability in the taxation regime.

[Colin Clark]

We were both at the same meeting when the Exchequer Secretary to the Treasury came up. I think it was the myth being peddled that did the damage—he clarified it from the Treasury. Does the hon. Lady agree?

[Kirsty Blackman]

I do not disagree at all. I understood that that was a private meeting, so I did not want to talk about what that Minister said during it, but it would be good if the Chancellor could make a clear statement in the Budget. I agree that it was the myth, rather than any statement by the Treasury, that caused the problem. I am sorry; I thought I had been clear on that point.

There are other asks for the Budget. I have not heard anyone on the Opposition Benches being negative about transferable tax history. I apologise to the hon. Member for Gordon (Colin Clark), but I was calling for that in March 2016, which was more than a year before he was elected. We have consistently called for changes in the taxation regime for late-life assets. I have made the case for that on many occasions, and I am pleased that it may be coming through—we hope it will. It is a good example of the industry working together. Things have happened a bit more slowly than I would have liked, but the industry worked well with Government, and the conversation went well about trying to make the tax regime work from the point of view of both the Government and the industry.

The importance of transferable tax history is because of what happens when assets at the end of their life are transferred to another company. Something that belongs to a big company with many different onshore installations will probably not be its No. 1 priority, but if it belongs to a new entrant and is all that it is concentrating on, it will be a priority. That is why transferable tax history is so important for maximising economic recovery.

The point about end-use relief is a good one. My hon. Friend the Member for Falkirk and the hon. Member for Waveney (Peter Aldous) both mentioned it. Whatever happens, it is vital that the Government should speak to the industry about the best way to make the change work, if there is to be a change, and that as much notice as possible should be given of changes to end-use relief. We nearly had a big disaster in July, with the pulling of end-use relief. It is clear that that cannot happen. The industry and the Government need to continue to speak to each other to make it work better.

The final Budget matter I want to speak about is the sector deal. If the Chancellor could announce progress on that it would be phenomenal—excellent. I would be really pleased. If not, it would be good to know when a commitment is likely. My impression from speaking to those in the industry who worked on the deal is that they feel they worked together incredibly well on it. They feel that the proposal that has been put forward to the Government reflects the industry’s needs and requirements, so it would be positive if the Government brought it forward sooner rather than later.

I want to talk about “Vision 2035” and focus on the subject of the debate—the future of the oil and gas industry. I will not talk much about the industry downstream—I apologise to anyone involved in it—because I represent Aberdeen and because my hon. Friend the Member for Falkirk, who represents Grangemouth, and the hon. Member for Waveney have spoken about that important aspect of the industry. “Vision 2035” is the Oil & Gas Authority’s vision for securing the supply chain and the oil and gas industry in the north-east of Scotland to ensure that, in 2035, it still makes money for the Treasury, supports our local economy and provides jobs in the local area. That will happen only if the Government provide support now, including the stable fiscal regime that we spoke about earlier and support for the supply chain. They must talk positively about the industry, consider its asks, and make changes if need be.

The North sea field is a late-life asset—it is incredibly mature. It was one of the first fields in the world to reach that level of maturity, so our engineers who go out there are doing incredibly innovative things. They are working on enhanced oil recovery, bringing in tech in the supply chain, and using longer tiebacks so that small pools can be exploited. It is groundbreaking, world-leading stuff; this is the first time some of it has been done. If we get the technology right, we will be able to export it around the world even when there is no oil and gas in the North sea, but we must ensure that those companies stay anchored in the north-east of Scotland and the wider area.

The hon. Member for Gordon mentioned how many oil and gas companies he has in his constituency. I am sure he has more than I do, but I have the services that support those companies—two local authorities, the hospital and all the other vital things that the industry requires. As the hon. Member for West Aberdeenshire and Kincardine said, it is hon. Members from the north-east of Scotland and those who represent constituencies with oil and gas industries who come to speak in debates like this. I have taken part in many such debates in my time as a parliamentarian, and it is interesting that we and Conservative Members are largely asking for the same things: transferable tax history, the sector deal and support for the Oil & Gas Technology Centre, which is doing absolutely phenomenal work. Previously, we were asking for the Aberdeen city deal. We are calling for the same things because we all go out there and speak to people who work in the oil and gas industry, and the companies involved in it. We ask them what they need, and they say pretty consistently that the most important things are stability and predictability.

Support for exploration is also hugely important just now. Anything that can be done to encourage exploration and help big projects be signed off will be incredibly important. More big projects have been signed off in the past year than in the previous couple of years, which is hugely welcome news, but we need them to keep coming through the pipeline so that we can secure the future economic benefit.

Hon. Members in the Chamber largely speak with one voice and have the same asks for the oil and gas industry, but I sometimes feel like we do not make as much headway with Ministers in the Department for Business, Energy and Industrial Strategy and the Treasury as we could. I hope that the Minister hears everything we are asking for. We are all calling for the same things, because we are reflecting the voice of the industry. I would very much appreciate it if he would ask the Chancellor to make a clear commitment to a stable fiscal regime in the Budget.