Russian Oil and Gas Imports

Lord Callanan Excerpts

Monday 7th March 2022 Lords Chamber

[Lord Forsyth of Drumlean]

To ask Her Majesty’s Government what plans they have (1) to impose sanctions on the import of gas and oil from Russia, and (2) to encourage (a) coal-fired power generation, and (b) investment in (i) shale gas fracking, and (ii) offshore energy sources.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, we have imposed the most severe package of sanctions that Russia has ever seen. Although there is currently no ban on Russian oil and gas imports, this is under urgent review. However, the UK is in no way dependent on Russian gas. In 2021, it made up less than 4% of our supply. Most of our gas came from domestic production and reliable suppliers such as Norway. To boost energy security, we need to generate more domestic renewable power.

[Lord Forsyth of Drumlean (Con)]

My Lords, although we all want a cleaner, greener future, surely we have a duty to put the maximum pressure on President Putin when the situation in Ukraine is beyond grim. Should we not therefore develop our own resources—in the North Sea, through fracking and through nuclear power—to guarantee security of supply, which surely must be the first duty of any Government?

[Lord Callanan (Con)]

I agree with a number of the points my noble friend made. Of course we should put the maximum pressure on Putin because of his appalling actions, and continue to invest in the North Sea for our domestic production. We should also continue to invest in nuclear power and renewables. One point I differ with him on slightly is fracking, which I am afraid does not offer the silver bullet many people think it does.

[Lord Anderson of Swansea (Lab)]

My Lords, is it the Government’s view that the current and proposed increases in energy prices fundamentally alter the economic and security case for tidal barrages, such as that proposed for Swansea Bay?

[Lord Callanan (Con)]

Not directly. The cheapest and most effective renewable source in the UK is offshore wind, which is why we are continuing to develop that at pace. We already have one of the largest offshore wind sectors in the world. We have a target of considerable extra capacity, moving up to 30 gigawatts by 2030.

[Lord Stirrup (CB)]

My Lords, Russia is clearly the immediate focus, but will the Government take a wider strategic view and set urgent work in hand to reduce our dependence on the supply of resources, goods and services from all autocracies, most particularly China?

[Lord Callanan (Con)]

Of course we need a diverse mix of energy, which this Question is about, and to generate as much of our own power as possible. The noble and gallant Lord makes a good point about reducing our dependence on autocracies.

[Lord Oates (LD)]

Does the Minister agree that, if we think we can solve the current fossil fuel crisis by pretending that the clear and present danger of climate change does not exist, we will simply call down a far greater catastrophe on the world? Does he agree that the answer to the fossil fuel crisis is to invest to get off them as soon as possible, not to burn more of them?

[Lord Callanan (Con)]

The answer to the high price of oil, gas and fossil fuels is to use less of them. To that extent I agree with the noble Lord. That is why we are generating as much as we possibly can from renewables. That is why we accelerated the contracts for difference round, why we have one of the largest capacities in the world, and why we need to expand it even further.

[Lord Howell of Guildford (Con)]

Is my noble friend Lord Forsyth not entirely right that some very tough short-term measures will have to be taken to help break the Russian monopoly—one part of the measures we need to put pressure on them? Should we not take this opportunity to develop a solid future energy security strategy? Should not a central part of that be to seize the moment to recommit ourselves to rebuilding a strong, low-carbon nuclear sector, as we once had in this country, to meet all contingencies, particularly when disruptions occur, such as Ukraine, or when the wind does not blow?

[Lord Callanan (Con)]

Indeed. I agree very much with my noble friend, who makes some extremely good points. We need to bear in mind that a relatively small percentage of our supply is from Russia, of both oil and gas; it makes up less than 4%. I totally agree with him regarding nuclear. Indeed, for those noble Lords who are interested, the Nuclear Energy (Financing) Bill is in Grand Committee tomorrow.

[Lord Bassam of Brighton (Lab)]

My Lords, I have heard the Minister’s response, taking on board in part the point from the noble Lord, Lord Forsyth, and recognise that we live in uncertain times. For clarity, can the Minister reconfirm the Government’s commitment to prioritising the development of renewables and that Ministers are looking to speed this programme up, and further commit to ensuring that the Government will renew measures to protect the poorest in our communities from the worsening impacts of rising energy prices?

[Lord Callanan (Con)]

I agree in large part with what the noble Lord said. Of course we need to expand our renewable capacity as quickly as possible. We already have record amounts and we need to pursue that. We are introducing contracts for difference rounds every year to maintain the ongoing flow of supply. As the noble Lord is aware, we introduced a £9.1 billion package of support for the poorest households.

[Lord Wigley (PC)]

My Lords, we need to maintain the maximum possible pressure on Putin, obviously. The biggest problem facing mankind is global warming, which could wipe out humanity within a couple of centuries. That being so, would it not be totally irresponsible to restart coal burning in order to generate electricity when that generates 30 times more units of carbon than renewable and offshore generation?

[Lord Callanan (Con)]

That is a very wide-ranging question. I think I would disagree with the noble Lord: I think Putin is a bigger threat at the moment to worldwide peace and stability. The important thing to bear in mind with regard to climate change, which is of course an important subject, is the tiny percentage of global warming caused by our emissions in the UK, which are rapidly decreasing. It is something that we need to work on, on a global basis; just eliminating our emissions on our own is really not going to make any difference.

[Baroness Meacher (CB)]

My Lords, I very much agree with the various points already made, but in the light of the Ukrainian crisis, have the Government got serious plans to bring forward and radically increase investment in green hydrogen development? If they do have such plans, will the Minister write to me with the details and put a copy of the letter in the Library?

[Lord Callanan (Con)]

We have a very ambitious hydrogen strategy and it is perfectly possible that hydrogen will be one element of our campaign to decarbonise the UK economy. We will shortly be moving towards a hydrogen business model and we will attempt to roll out hydrogen production. However, again, no decisions are imminent, and it will be a few years before we know the full potential that hydrogen can offer.

[Baroness Sheehan (LD)]

My Lords, Germany has announced a £222 billion plan to transform its economy between now and 2026. Central to that is to wean itself off fossil fuels fast. Where is our big plan for immediate climate-compatible action?

[Lord Callanan (Con)]

I do not think the noble Baroness is quoting a very good example. The Germans have made a singular mess of much of their policies by phasing out nuclear power, which has resulted in the burning of much more coal. I am not sure that that is an example of what the noble Baroness wants us to follow. We have an excellent plan in this country. We have a much bigger renewable sector than Germany, which puts far too much reliance on gas from Russia and now may well be paying the consequences.

[Lord Naseby]

Going back to Ukraine, is it not a fact that Russian gas is coming to this country by ship, in LNG tankers? In that case, why do we as a country not refuse entry to any of those tankers from this day forward?

--- Later in debate ---

[Lord Callanan (Con)]

We have already banned all Russian oil and gas tankers entering UK ports and we are looking to go further to ban cargoes from Russia as well.

[Lord Eatwell (Lab)]

My Lords, the market for oil and gas is global, and therefore the figure that the Minister has cited twice about our dependence being only 4% is entirely irrelevant to what happens to the price of energy in the UK. If there is a shortage of gas in Germany, the gas price goes up globally. The only answer to this is to reduce hydrocarbon use throughout Europe, and therefore reduce the market which the Russians are exploiting.

[Lord Callanan (Con)]

The noble Lord makes a sensible point. Of course it is an international market. It is usually operated by private companies, and any shortages in Russia will feed through into the UK. It will not affect the price, but it will affect our energy security, which is why I used the fact that only 4% of our gas is Russian. Most of our supply comes from our resources in the North Sea or from Norway. Security of supply is not affected, but the noble Lord is right about international pricing.

[Baroness O'Loan (CB)]

Given that the increase in fuel prices for both domestic and commercial use has been very significant—the consequence of which is that the Government are taking hugely increased revenues from the taxes applicable to that fuel—do the Government have any plans to cap or reduce the level of tax charged on fuel in those circumstances, and to redistribute that money for the benefit not just of people at the extreme end of the poverty line but of those seeking to be involved commercially?

[Lord Callanan (Con)]

I will leave the setting of taxation policies to the Chancellor, but the noble Baroness makes a good point. Of course, we have already announced a record-breaking £9.1 billion package to alleviate some of the worst excesses of the current increases in fuel prices, but I do not want to mislead anyone: this will not solve all of the problem. This is a global crisis and we cannot insulate ourselves completely from international pricing.

[Lord Cormack (Con)]

My Lords, as the Question put by my noble friend Lord Forsyth of Drumlean indicates, this is an urgent crisis. We do not have time to develop many things but we do have time to stop Russian imports full stop and, although it may be painful, the sooner that is done, the better.

[Lord Callanan (Con)]

We are looking at this seriously and decisions will be announced shortly but it is important to bear in mind that, while we would all love there to be quick and easy solutions, the building, construction and implementation of energy infrastructure takes many years, sometimes even decades. I am afraid there are no quick solutions to any of this.

[Lord Fox (LD)]

My Lords, the remarkable spike in gas prices today indicates a real challenge ahead for gas distribution in this country. To date, the big companies have absorbed the customers of the smaller companies that have gone bankrupt. As things stand, those big companies will themselves come under huge pressure with forward contracts that they cannot cover. What is the department doing, in consultation with the gas companies in this country, to maintain security of supply for the consumers of Great Britain?

[Lord Callanan (Con)]

A number of companies are indeed under pressure and, unfortunately, we have seen a number exiting the market. I assure the noble Lord that we are in regular contact with all the gas and electricity supply companies; my right honourable friend the Secretary of State meets them regularly. This is indeed an unprecedented crisis but we are closely following events and I can say that, while there is obviously a problem with the price, there is no problem with security of supply.

[Lord Hunt of Kings Heath (Lab)]

My Lords, the Minister referred to the German decision to discontinue nuclear energy but is he satisfied with the progress that we are making in developing new nuclear?

[Lord Callanan (Con)]

Yes, I am satisfied with the progress that this Government are making. It is disappointing that previous Governments did not take action on new nuclear urgently; should the noble Lord wish to follow the debate tomorrow, we will be in Grand Committee on the Nuclear Energy (Financing) Bill.

[Baroness Butler-Sloss (CB)]

My Lords, the Minister referred to sanctions against oil coming in through Russian tankers but I understand that oil is coming in through other tankers owned by other companies. What are the Government going to do about that?

[Lord Callanan (Con)]

That was indeed the point I made in response to the Question. We have banned Russian vessels but, at the moment, cargo can still be imported, in relatively small quantities, from other vessels. We are in urgent consultation with our allies on whether we can go further.

[Lord Lancaster of Kimbolton (Con)]

My Lords, I have listened carefully to this debate. While I accept that it is no silver bullet, is the real question in the short term not if the Government will start fracking but when?

[Lord Callanan (Con)]

I understand the attraction of this option but I am afraid that, having looked closely at this, there are some severe environmental problems—we cannot hide this fact—with original fracking operations. Lancashire is not Texas; it is much more heavily populated. Fracking is a relatively unproven technology in the UK. The reality is that it would be many years, if not decades, before we got meaningful quantities of gas out of the ground, even if we could resolve all the environmental problems—and none of that would affect the current price. We would not be producing anywhere near enough gas to affect the high prices in an international market so I am afraid, much as I would love it to be the case, it really is not the silver bullet that people think it is.