Offshore Petroleum Licensing Bill

Lord Moynihan Excerpts

2nd reading
Tuesday 26th March 2024 Lords Chamber

[Lord Moynihan (Con)]

My Lords, it is a pleasure and an honour to follow the right reverend Prelate the Bishop of Norwich, although I humbly reflect that I see nothing in the Bill that detracts from the energy transition. I will try to set out the arguments why.

I am in agreement with the noble Lord, Lord Bruce. It reminds me of the time many years ago when I had the privilege of being Minister for Energy, back in 1990. He set out a very reasoned case about how difficult this Bill is in many respects in trying to balance the importance of energy transition with recognising the truism that this is not a zero-sum game with oil and gas production in the North Sea.

I declare my interests as set out in the register. I welcome the Bill, although I share the views of noble Lords on both sides of the House in that I am uncertain that it is needed. We call on the Minister a great deal to do admirable work in this House; I think this might have been an opportunity when we did not require his presence. The reason why I think it may not be needed is that it just confirms the policy framework to which existing legislation, licensing rounds, customs and practices in the North Sea already apply.

Why this Bill may prove to be important is that it can underpin a prioritisation of the security of supply as we move towards the sustainable energy policy structured on the net-zero ambitions we all share. I mentioned 1990, when I was Minister for Energy when Margaret Thatcher’s Government first introduced a renewable energy programme into the UK, as has been mentioned, following the seminal speech she gave in 1989, and we launched the non-fossil fuel obligation to provide a market framework to help accelerate the move to renewables and nuclear power. We now measure our trajectory towards net zero by using 1990 as our baseline and my noble friend the Minister is right that we lead the world in the journey to net zero and should retain energy transition as our major priority.

Some 34 years on, we are now half way to net zero. However, we should be under no illusion that this has been, to a large degree, a function of the imposition of measures, with only marginal consumer sensitivity, knowledge or reaction. Changes from oil- and coal-fired power generation to renewables and gas are key policy developments in power generation and have been significant in the build of the combined-cycle gas turbine market and the declining use of coal for power generation in the UK. But to achieve the next 50% of the reductions to get to net zero, we will be asking consumers for something far greater, to go far further in changing their lifestyle—what cars they drive, how they travel, how they heat and insulate their houses and, ultimately, what they eat. We have only 26 years left to achieve that important social and behavioural revolution. I share my noble friend Lord Lilley’s view that there is considerable doubt as to whether we will be carbon-neutral by 2050, but, if we are, it will a private-sector driven change which helps us reach that goal. There is nothing in the Bill that would negatively impact on the vital energy transition measures.

Additionally, a holistic approach to the environmental impact of everything we do offshore must be a priority—being as clean as possible, improving efficiency, significantly reducing all forms of pollution and substantially mitigating carbon emissions. By employing these measures, it will not be difficult to demonstrate as central to the Bill that improved environmental practice will ensure that gas production in the UK will meet one of the Government’s key criteria; namely, that the carbon intensity of natural gas is lower than that of liquefied natural gas imported into the UK. The baseload demand—to which add the demand for firm power, as mentioned by the noble Lord, Lord Bruce, as opposed to the intermittent power generated by renewables when the wind blows—will ensure that the UK is projected to remain an importer of both oil and gas for many decades to come.

This is a function—it is so important—of both the need for firm power and the actions of a responsible Government to recognise that security of supply is achieved by diversity of supply, and nothing is more secure than the production of energy at home rather than an increasing dependence on imported oil and gas, whether in the form of LNG or interconnectors. I prefer to think that the Bill was not the product of a good lunch but what my noble friend the Minister referred to as the “energy shock” created at the time of Putin’s invasion of Ukraine, which supports the critical importance of maximising domestic production.

Philip Lambert, one of the foremost energy specialists in the UK, has noted:

“The starting point is that the offshore oil and gas sector in the UK is an existentially important foundation stone of the UK industrial base and UK energy security future—the maturing but still prolifically producing UK North Sea oil and gas province, still incredibly producing just over 1.3 million barrels of oil a day, or, to put it another way, 50% of our needs, 50 years on from first production”.


The key point of this and the hoped-for outcome of the Bill is to emphasise that what the UK industrial sector now needs is greater help from the Government, both to build up renewables and to maximise oil and gas production from the 1.3 million barrels of oil today, resulting in a postponement of decommissioning across the UKCS and genuine maximisation of tax proceeds, while preserving hundreds of thousands of oil and gas-related jobs as they migrate across through energy transition to renewables.

We should not pander to those who welcome the fact that we would, unforgivably, be leaving stranded under the seabed over 10 billion barrels and upwards of $700 billion-worth of UK national wealth by revenue, notably in the prolific and still highly prospective west of Shetlands region but also in the central and southern North Sea, where new seismic and technical breakthroughs are facilitating renewed hydrocarbon promise, with enhanced and improved carbon reduction techniques, services and systems.

Of course, the noble Baroness, Lady Willis, and the right reverend Prelate are right that it is vital that the industry focuses on its impact on special marine environments. I am pleased that that will be debated in Committee as it is an exceptionally important point. It should be a major factor in determining where licences are issued and under what conditions. But the ideologically enforced stranding of the North Sea’s responsible hydrocarbon reserves, which I think is a misplaced tenet of net-zero ideology, will, paradoxically, be highly damaging to the UK’s decarbonisation efforts, which, as I have mentioned, I fully support.

The ironic and perverse outlook is based on the estimate of UK oil and gas demand. Increased demand is a reality, despite the very welcome transition measures which will support the development of renewables and the early green shoots of a functioning and growing nuclear programme, which, I might add, nobody believes is going to have a significant impact on the UK economy until 2035 and later—sadly; I wish it was much sooner. That is the reality and we have to look at the energy balance now and recognise that there is a balance between growing renewables and the need for firm power which comes principally through our own gas reserves but also imported gas.

The moves to diminish oil and gas production will inevitably cause a rapid increase in imports of higher carbon per barrel oil and gas from countries with much less responsible adherence to best practices, as well as causing an unnecessary reduction in home-grown production. If you combine that with the possible shutdown of the aged Rough storage field due to well integrity problems, we risk either energy and power shortages in the UK or an emergency fall back to coal. Genuine decarbonisation efforts by facilitating the seminally important UK/European coal to gas switch continue to be essential and I am sorry that that is not more clearly stated as an objective in the legislation we are considering.

This policy, based on the tenet that we proactively maximise our gas reserves to demonstrate irrefutably and boldly to Putin and his henchmen that not only will he never win the military war but he is comprehensively losing his westward-facing, gas-driven energy war on Europe, is welcome. Upholding national and global energy security has therefore now become an even more integral and vital part of the wider struggle against regimes determined to destabilise western Europe.

Failure to combine the Bill with a supportive tax regime merely disincentivises new investment, accelerates oil and gas production declines, accelerates the economic need to abandon maturing fields and thereby, paradoxically, reduces the net tax receipts for the Government. It costs potentially hundreds of thousands of skilled jobs and denies the UK tens of billions of dollars of badly needed inward investment into the economy. My noble friend Lord Lilley mentioned the key point: it stunts the supply but does not address the demand.

The still prolific and prosperous UK North Sea sector, with 3.5 billion barrels of already discovered but still to be developed reserves, could have a similar bright future to underpin the necessary transition to renewables by supplying us with firm power in the interim period. Rapidly increasing renewables without gas means intermittency in the energy system, which, in effect, leads to more energy insecurity, not less. Just look at California’s woes if you want to underpin this point.

In very few countries is oil and gas so important and coal so unimportant to the energy security and economic well-being of a nation than in the UK today. Oil and gas represents 75% of the energy lifeblood of the UK, a percentage which will remain robust over the new two decades, with gas gaining and oil failing. As I said at the outset, energy transition remains the most important point—focused on mitigating carbon emissions in the exploration, appraisal and production of oil and gas remaining paramount and new technologies and new renewables coming on stream.