Oil and Gas Authority (Offshore Petroleum) (Disclosure of Protected Material after Specified Period) Regulations 2018

Lord Henley Excerpts

Thursday 19th July 2018 Lords Chamber

Moved by

[Lord Henley]

That the draft Regulations laid before the House on 13 June be approved.

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

My Lords, the UK’s offshore oil and gas industry is one of the country’s great industrial successes, but it has faced numerous challenges, including ageing infra- structure and growing international competition. In this context, in 2013 the Government asked Sir Ian Wood to conduct a review of the sector, specifically looking at how the economic recovery of offshore petroleum could be maximised. One of the key recommendations from the Wood review was the need to ensure that industry has timely and transparent access to petroleum-related information and samples. These can include, for example, data about infrastructure or reservoirs, or pieces of strata acquired in the course of drilling a well.

The Government committed to implementing the Wood review and included various powers in the Energy Act 2016 covering information and samples related to the offshore exploration and production of petroleum. These included a requirement for relevant persons within industry to retain certain information and samples for a specified period, as set out in the Oil and Gas Authority (Offshore Petroleum) (Retention of Information and Samples) Regulations 2018. Information and samples plans were also introduced to safeguard information where licence events, such as termination, occur.

The Oil and Gas Authority was given powers to require relevant persons to provide it with petroleum-related information or samples which they hold and which the OGA might need to discharge its regulatory role and to deliver the objective of maximising the economic recovery of offshore petroleum. The regulations we are considering today form the final piece of the picture: once information or samples have been acquired by the OGA, the regulations enable it or a subsequent holder to make such material available after a specified period.

The Energy Act 2016 places a general prohibition on disclosure of protected material, subject to certain exemptions. One of those exemptions permits the OGA or a subsequent holder to make protected material available at such time as may be specified in regulations. The protected material to which these regulations apply includes information about geological surveys, wells drilled, petroleum production and other reports and computerised models of the subsurface or a reservoir. It also includes samples of petroleum, fluids or strata acquired or created when drilling or producing from a well. Other relevant categories include information about installations, infrastructure and pipelines associated with offshore petroleum development.

Following a recommendation of the Delegated Powers Committee, the Energy Act 2016 included a list of factors to which the Secretary of State must have regard when determining the appropriate period after which protected material may be made available under the regulations. In summary, the requirement is to consider: first, whether companies have had sufficient time to satisfy the main purpose for which they created or acquired the information or samples; secondly, the potential chilling effect of requiring disclosure on discouraging future activity; and, finally, the benefit to industry and the economy in making such information and samples more widely available.

Each of these factors has been taken into account when setting the period after which different types of information and samples can be disclosed. The periods vary from immediate disclosure of very basic information which is not deemed to be sensitive, such as the fact that a survey has been carried out of a particular area, to 15 years for raw information from such seismic surveys, reflecting the fact that they are carried out at significant cost for commercial purposes. While care has been taken to ensure that the specified time is set appropriately, there is no absolute requirement to publish the material, and the OGA could consider representations where there are particular justifications for keeping information confidential for a longer period. However, in doing so, the OGA would need to weigh up the impact on delivering the statutory objective of maximising economic recovery of the UK’s offshore petroleum.

These are very technical regulations and the proposals they are based upon were subject to consultation with industry and other interested parties by the Oil and Gas Authority. The OGA has published a consultation response detailing how feedback received had been reflected through making appropriate adjustments to certain proposals; for example, excluding more subjective information from immediate release. The OGA will provide guidance on its application of these regulations before they come into force.

As petroleum licence conditions permit publication of certain information and samples after set periods, the additional impact of disclosure under these regulations is expected to be marginal. As such, a full impact assessment is not required. Other costs on industry will be due to familiarisation with the new regulations.

In conclusion, the Oil and Gas Authority considers that improvements to information retention, reporting and disclosure processes, including through these regulations, are critical to achieving the statutory objective of maximising economic recovery of the UK’s offshore petroleum reserves. The changes are expected to make an important contribution to the OGA’s vision for the industry, which indicates that maximising economic recovery can create £140 billion of additional gross value for the UK. In addition, they could potentially facilitate the reuse of reservoirs and infrastructure for other purposes, including carbon capture, utilisation and storage. I commend the draft regulations to the House.

[Baroness Featherstone (LD)]

My Lords, the legal obligation to retain specified classes of information and samples and specifying when such obligation ends is important, and these regulations will deliver that obligation clearly. What it also indicates, I hope, is that it is important to make the samples and analysis public, as opposed to keeping them hidden. That means that the exemptions such as commercial sensitivity should be very few and should be monitored to check that they are not used inappropriately.

The principal objective for timely and transparent access to petroleum-related information and samples was, as the Minister said, one of the recommendations in the 2014 Wood review. Making access to information a better process—I have a very similar speech to the Minister’s—can only help the industry. It is estimated that a potential £140 million in additional revenue may result from the more timely management of samples and analysis. Is it million?

[Lord Henley]

Billion.

[Baroness Featherstone]

I was not sure; I have written “billion”, but I thought that was an awful lot.

[Lord Henley]

Someone said, “A billion here, a billion there, and pretty soon we will be talking about real money”.

[Baroness Featherstone]

It is an industry that probably works in billions—way above my pay grade. We have no particular comments on the regulations per se. They seem fit for purpose and the consultation responses appear to have been taken note of.

[Lord Grantchester (Lab)]

I am grateful to the Minister for his explanation of the statutory instrument before the House today. I understand that it is among the last necessary to commence the provisions of the Energy Act 2016, and I am happy to approve it. As the Minister said, the Act set up the Oil and Gas Authority following the 2014 Wood review into the future of the UK’s offshore petroleum industry with the objective of maximising economic recovery—MER—of offshore petroleum reserves. With powers to offer necessary information, the OGA, through these regulations will now be able to make this information public after a specified period.

I am grateful that, through this MER, the Minister can confirm—with the noble Baroness—that the petroleum industry could create £140 billion of gross value added for the UK and create many thousands of jobs. Most notably, information disclosure could facilitate the reuse of reservoirs and infrastructure most necessary for the development of carbon capture and storage, previously damaged through the Government’s cancellation of CCS projects. Remarks from the Minister in his reply confirming the Government’s commitment to help economically viable ways to develop CCS would be most welcome.

The success of these regulations is very much dependent on the OGA’s ability to assess the commercial sustainability and confidentiality of any pertinent information that it proposes to disclose. The memorandum gives confidence that the Government and the regulator have worked extensively together through consultations and reviews to reach a satisfactory point whereby companies can share and the OGA can publish information sensitively, in a balance between the objective of maximising economic activities and the company’s economic interests. I understand that the appeal mechanisms are included in further provisions of the Energy Act and, if the OGA and the industry can develop a modus operandi to the satisfaction of both parties, that is to be applauded. Will the Minister commit to reviewing and making a statement on this in due course as the success of MER is transparently demonstrated?

One aspect of this was not highlighted by the memorandum. Some information revealed—for example, in relation to seismic survey results—could be sensitive and relate to national security. Are provisions in place for the Government to instruct and advise against the disclosure of certain information by the OGA? In its objective to maximise economic recovery, the OGA will certainly make information available that is of much use and interest to academics, researchers and companies generally in the sector. How does the OGA propose to make this information available? Will it have one preferred method? Will the Government work with the OGA not only to ensure that the information is made easily accessible and well publicised, but that it is effective? Will this be on an international basis? I would be grateful if the Minister could outline how Parliament will be kept updated on the progress of MER.

With that, I am happy to endorse the remarks of my honourable friend and shadow Minister in the other place, Alan Whitehead, that,

“this is a well-crafted set of regulations that should greatly enhance the ability of the industry and the general public to understand what is happening in the North sea, and, where appropriate, to be supplied with that material in a reasonably timely fashion”.—[Official Report, Commons, Eighth Delegated Legislation Committee, 17/7/18; col. 6.]

[Lord Henley]

I thank the noble Baroness, Lady Featherstone, and the noble Lord, Lord Grantchester, for their comments, and in particular the noble Lord, Lord Grantchester, for repeating what his colleague said in another place. He made it clear that these are, as he put it, well-crafted regulations. It is always gratifying to those of us who move these instruments in either House to hear that, but it is equally gratifying for our officials, draftsmen and others. I will make sure that those remarks are brought to the attention of those who are responsible for producing these regulations.

I am also grateful to the noble Lord for stressing that the aim behind these regulations is to reinforce the aim of the 2016 Act of maximising economic recovery. I shall therefore repeat the figure: we think that there is the chance of creating some £140 billion of additional gross value for the UK, which is very important to us all. It is also important for the oil industry in the north-east of Scotland, as we discussed only the other day when a noble Lord on the Liberal Democrat Benches asked a Question about the oil industry in Scotland. Maximising economic recovery is important.

I shall deal with the points made about carbon capture and storage. The noble Lord will understand that this has great potential in terms of helping to decarbonise the economy and maximising economic opportunities for the UK. Obviously we want the UK to become a global technology leader in this area by working with global partners to reduce costs and accelerate deployment. We set out in the clean growth strategy a range of actions in both the domestic and the international arenas to unlock the potential for CCS. Again, we are investing quite large figures—£100 million; I stress that it is £100 million, not billion—in innovation in this area. We should do what we can in this area.

The noble Lord also asked about a review. I should remind him that the Energy Act put an obligation on the Government to review the performance of the OGA every three years, and obviously that will include the disclosure provisions. On whether the Government can stop the publication of certain things, the OGA can advise against disclosure using powers under the Energy Act if national security requirements come into play. On how information and samples will be made available when published, the OGA is progressing plans to set up a national data repository for digital data in 2019, which will enable this type of data to be stored securely and sustainably. It will allow access and disclosure to be controlled by the OGA with information becoming accessible to the public once published. Other summary information and production information will be made available on the OGA’s open data pages on its website. Again, that will be available to academics at the proper time.

I think that those comments deal with all the questions that were put to me. I can confirm that, as I made clear in my opening remarks, this is the last piece of the jigsaw in relation to these matters following the Energy Act. I think that this is also the last occasion before the Summer Recess on which those of us who either speak for BEIS or respond to energy or BEIS questions from the Opposition Benches will be likely to perform. I therefore wish the noble Baroness and the noble Lord a happy holiday, and beg to move.

Motion agreed.