Infrastructure Bill [HL]

Lord Skelmersdale Excerpts

Monday 9th February 2015 Lords Chamber

[Lord Truscott]

What tends to happen is that in the United States, for example, a shale oil rig—a well—may cost $1 million to develop. You then drill in that well for a couple of years, and then you have to invest further in the next well in the same field. A number of shale oil companies in the United States at the moment face not getting the funding to invest in the next well, because it is very cash-flow intense. Therefore if you want energy security, shale oil and gas is not the way to achieve it. It is a very expensive short-term hit, and it adds to the volatility of the price of oil and gas. In a way, the success we are seeing in the United States is already unravelling. I therefore wonder whether it is worth the cost as regards the overall benefit.

We are also seeing the impact on businesses, both large and small, in the hydrocarbon sector. Ask any of the majors at the moment whether they are happy about where they are as regards medium to long-term planning, or go to Saudi Arabia and ask people what they think about the impact of shale oil and gas development in the United States and on the global market. You can say that they are game-playing, but nevertheless, it is destabilising. Is that the way we want to go? Is that a great success story? I am not so sure that when we look back on the development of shale in the United States it will look as successful as we all initially thought it would be. Therefore from that point of view, is what happened in the United States the right way for the United Kingdom to go? I am not so sure.

[Lord Skelmersdale (Con)]

My Lords, before the noble Lord sits down, can he tell me whether he knows of any company of any size, in any part of the world, which invests to not make a profit?

[Lord Truscott]

That is exactly the reason. The noble Lord may know that that is why some companies are going bust—today Max Petroleum, which develops oil and gas in Kazakhstan, said that it was facing insolvency because it can no longer raise the funds to develop new fields. When the price of oil is under $50 a barrel—and we are already seeing the effect on companies such as BP, which is laying off people in Aberdeen because the price of a barrel of oil makes it uneconomic to continue to develop mature fields in the North Sea—we are facing a problem, are we not?