Arctic Committee Report

Lord Moynihan Excerpts

Tuesday 3rd November 2015 Lords Chamber

[Lord Moynihan (Con)]

My Lords, I begin by thanking four individuals, without whose contributions we could not have produced the report we are debating today: the noble Lord, Lord Teverson, who was an outstanding chair; Susannah Street, senior clerk to the committee; Matthew Smith, who ably assisted her; and Professor Klaus Dodds, who defied many a Select Committee precedent by proving the committee right in appointing him from a strong list of original candidates. The work undertaken by this quartet was exceptional.

For the committee’s formal work, I supplemented my interests by travelling, in a personal capacity, to meet a wide range of experts in Oslo and St Petersburg on a number of occasions. My interest lay in the way in which Norway manages its relationship with Russia, what we could learn from that and, particularly, how both countries approach the development of their substantial oil and gas reserves in the Arctic. No consideration of the importance of the Arctic, seen through the prism of environmental change, global warming, scientific, political, strategic or defence policies, can be complete without a full appreciation of Russia and its objectives for the region. The current permanent secretary of the oil and gas ministry in Oslo, Elisabeth Berge, highlighted the truism that you can never sweepingly describe the Arctic in general terms—the noble Lord, Lord Oxburgh, has just made the same point. The Arctic is exceptionally diverse: although parts are covered by ice, other Arctic oil and gas developments, such as the huge 193 billion cubic metre Snøvhit field in the Barents Sea, where the Gulf Stream keeps the hostile conditions free of ice all year round, pose very different challenges. These challenges are similar to the hostile water conditions which impact our own oil and gas activities in the northern North Sea.

In St Petersburg, I was indebted to Artur Chilingarov, the doyen of the Russian Arctic community, whose planting of a titanium flag in 2007, from one of the two Mir submersibles on the seabed 13,980 feet below the North Pole, gained widespread international coverage, not least in strengthening Russian territorial claims—as the Russian Government saw it—and reinforcing the importance of the Arctic in the consciousness of the Russian people. I would also like to place on record my thanks to Professor Litvinenko, rector of the university of mines in St Petersburg, and to rector and academician Alexander Zapesotsky from the St Petersburg University of the Humanities and Social Sciences, for the access to experts which they facilitated; and to Victor Boyarsky, director of the museum of the Arctic and Antarctic, with whom I had lengthy discussions.

I will come back to some reflections on Russia. During my work on the Select Committee, I declared my interest as a director of Rowan Companies, a major international offshore drilling company, which has gained an enviable reputation for technical excellence and the strongest emphasis on safety. After 19 years, I have now retired. Today, Rowan’s CEO, Dr Thomas Burke, has few equals in the sector. He is vice-chair of a very important body in the context of the Arctic: the International Association of Drilling Contractors. The IADC is on record as having a task force responsible for delivering a safe working environment in the Arctic. Its work supplements the work on oil spill response in the Arctic undertaken by the International Petroleum Industry Environmental Conservation Association, which is working on the critical area of spill response in the Arctic offshore.

IPIECA has highlighted considerations to ensure responsible future drilling operations in the Arctic. In 2014, the Arctic Council’s task force on oil pollution prevention announced its HSE case guidelines and activities related to well control and training. Day by day, I believe, this work makes the Arctic an increasingly safe environment for oil and gas activity. Why? It is because the key to future safe operations in the Arctic lies in the ability to evaluate and to seek continuously to improve spill prevention technology, well control, containment and response infrastructure specific to drilling in the Arctic environment. Hardly any of this work needs to be proprietary. We should continue to share oil spill prevention commitment and response technology advances on a global and international basis.

As the noble Lord, Lord Teverson, was right in stating, our report focused on the fact that the current downturn in world oil prices provided an opportunity for allowing operators and supply and service companies to focus yet further on the key areas of safety, environmental protection, regulation, oil spill prevention and response preparedness. In doing so, I believe that the committee was right to recognise the sheer scale of the Arctic in global hydrocarbon activity, where around 10% of global oil production and 25% of gas production takes place, with 97% of this oil and gas production coming from onshore fields in Russia and Alaska, the clear majority of which are in Russia. Oil prices are cyclical and will come back. When they reach the levels we witnessed in 2008, the Arctic will represent a return of frontier exploration, which is what upstream oil companies do best, but they must use this opportunity to focus on safety and the environmental challenges, which are essential if that is to be sanctioned and licensed.

In the mean time, climate change in the Arctic is predicted to have two decisive outcomes: the economic exploitation of 25% of the world’s remaining natural resources; and the gradual opening up of the northern sea route, which, while far from commercial today, was still projected by some to become a global trade route, shortening sea transport times around the globe by as much as a third in some cases. In this context—I am glad that this has already been mentioned in the debate—we should not underestimate the directional change and the high importance that China attaches to the surfacing benefits of engaging with Russia in the Arctic for shipping, energy resources and, especially, Russian gas. Withdrawal from Alaskan drilling by Shell does not strengthen the case for a moratorium in the Arctic. It simply highlights that this is a business and, at current and near-term foreseeable prices, the cost involved did not match the benefit.

I believe that the Arctic Council should be seen as centrally important and unique. It should be nurtured and strongly supported by government. We should contribute more to the core business of the council and offer our services and financial support to the many vital environmental, scientific and strategic initiatives that it undertakes. We should continue to strive to be respected supporters. We should always respect the fact that we are not an Arctic nation, but as a near neighbour we have as much at stake as we did during the Second World War, when the Arctic and specifically the Norwegian and Barents Seas became significant strategic theatres.

Having focused on hydrocarbon development and the Arctic Council, I finally turn to Russia. Regional security co-operation and the security architecture lag behind political, environmental, scientific and economic co-operation in the Arctic. Duncan Depledge from Royal Holloway, University of London, told us:

“The biggest challenge facing international governance in the region concerns how relations are managed between Russia and the other Arctic states”.

The Arctic is an intrinsic part of the Russian soul, history and identity. Any plausible policy for the Arctic should start by fully engaging with Russia in the region. This can be best achieved by our Government through a foreign policy towards Russia that is built on compartmentalisation.

Russia has the longest Arctic coastline and an extensive exclusive economic zone. It would be surprising if it did not claim a legitimate right to expand its military presence in the Arctic maritime region. I do not believe that current developments are an attempt to regain the influence that Russia once held in the Soviet era. I do not see the Russians as pushing a “sphere of influence” policy in a way that could threaten neighbouring states. Understandably, current bilateral and multilateral relations impede progress on this front and colour our thinking, yet collaboration with Russia is essential to the UK as a near neighbour state to the Arctic. Through a policy of compartmentalisation, we can collaborate with Russia if we are to see essential progress on a broader front, including in our relations with Iran, the future of Syria, the resultant refugee crisis, and the success or otherwise of ISIL in the region.

In the summer of 2012 Russia re-established a permanent military presence in the Arctic, and evidence provided to us by Dr Andrew Foxall says that it has,

“increased the Northern Fleet’s forces, including commissioning a new icebreaker fleet and developing new nuclear attack submarines; modernised its forces in the three military districts that border the Arctic … including creating new Arctic brigades; begun constructing a missile early-warning radar in the Arctic, and re-opened Soviet-era military bases in the Arctic”.

Some witnesses saw these developments as instances of military restoration rather than expansion, arguing that Russia was investing in renewing its military presence to a far lesser extent that it had done during the Cold War, at a time when countries such as Canada, Denmark and Norway have also invested in their Arctic military capabilities and upgraded command structures in recent years. I interpret the build-up as “securitisation”. Throughout the region, tasks such as aerial surveillance, anti-smuggling inspections, fisheries monitoring, patrolling, search and rescue, and assistance with oil spill response efforts, fall to the armed forces because they have a near monopoly on the training, equipment and capabilities necessary to operate in Arctic conditions. Russia aims to make the Arctic its,

“foremost strategic base for natural resources”,

by 2020. To do so it must invest in both economic infrastructure and the military means to police an enormous region being restored to national economic centrality.

One perverse consequence of the current round of sanctions is that, if people want the safest technology in place to protect those who work on the oil and gas rigs and the environment in which they work, the best way to achieve this objective is collaboration with the West. The oil service technology at the disposal of Houston and Aberdeen-based companies ranks among the safest in the world. It is in our mutual interest to co-operate on this front and not impose sanctions in the oil and gas sector, where they impact on increasing safe and environmentally sensitive operations. The Government’s response to our report that,

“Despite Russian actions in Crimea and eastern Ukraine, the Government remains committed to cooperating with Russia on Arctic issues”,

is therefore welcome, and I look forward to the Minister expanding on that point.

Finally, I believe that the work of the Arctic Council would be strengthened by our recommendation to appoint a British ambassador responsible for closer co-ordination and a raised profile for the area, and for the issues we have covered—possibly for both poles. That would bring more financial support and prove more effective in drawing together the myriad lines of communication—scientific, academic, trade and political—which tie us, as the Arctic’s nearest neighbour, to this important part of the world. The UK has a hub of Arctic expertise—a fact that we learnt more about every week that we met—and a focus on significant information and expertise, which should be put to good use and offered for the benefit of the Arctic Council, the relevant Governments and the indigenous people. An ambassador would mean the need for a policy, for priority, for urgency, for commitment and for adequate resources. That should be the first and most positive step forward towards closer engagement with all members of the Arctic Council and all interested parties.