Energy Bill [HL]

Lord Spicer Excerpts

Monday 19th October 2015 Lords Chamber

One of the great successes of the British economy has been our ability to harness the resources of the North Sea. It has always been difficult and because of that it has always been expensive. When the price of oil and gas is high, such investment is possible, but with the price of a barrel now being no more than $53 or $54, at least into 2016, we are talking about very high risks and therefore we need to have the best information. We need to have another voice, which can give reasonable forecasts and another opinion, not necessarily from within government but at arm’s length from government. We would be missing an opportunity were we not to take advantage of this creature we are dealing with at the moment—the OGA—and giving it better-defined functions with a greater degree of ambition, rather than the rather limited, retrospective function we are endowing it with in this clause, if we do not amend it along the lines my noble friend has suggested.

[Lord Spicer (Con)]

I have not spoken on this subject for 25 years. I do not intend to make up for it now—in fact, my intervention will be very short. The reason that I have not spoken for 25 years is that I have been rather too close to the industry for comfort. I was a Minister for Energy in the late 1980s and took through the Electricity Bill. Subsequently I have been chairman and president of Energy UK and of the Association of Electricity Producers. I have therefore been close to the industry. It is not until now, when I have been released from those happy burdens, that I feel that I can say at least a short work about energy matters.

In the present context, two things matter to the energy industry, particularly the petroleum industry in the North Sea. They are, first, certainty and stability, particularly in government policy, and, secondly, less rather than more regulation. On the question of certainty, we have to recognise that the petroleum industry in the North Sea is very fragile. My noble friend Lord Howell has mentioned that at the moment it is also very poor. There are questions as to how many more burdens it can bear.

I was thinking about the question of certainty just now when it comes for instance to the nuclear industry. We have now got the Chinese beginning to enter the fray. My mind goes back to when I talked to the Americans about flogging off bits of our privatised nuclear industry to them and got into terrible trouble with the Prime Minister at the time, Lady Thatcher. It is slightly ironic to me that we are now talking to the Chinese about the same subject.

Be that as it may, the question of certainty is terribly important. That brings me to the amendment. The noble Baroness fears the threat of privatisation. I do not see the point of setting something up for the purpose of privatisation. We have already been told that there are probably too many players in the industry in the North Sea at the moment and that they are too stretched. Therefore, my suspicion is that we are talking about more regulation. I cannot understand the argument of the noble Baroness at all on this point. I hope that it is not about more regulation and that the Minister will tell me that it is not. However, I think that it has to be about regulation. That is why I agree with my noble friend Lord Howell that if, as I think, it is about more regulation we have to be fearful about whether the industry can sustain the costs, particularly in the North Sea. Therefore, I have the opposite view to the noble Baroness and I hope that my noble friend will be able to reassure me on this point.

[Lord Teverson]

My Lords, I was pleased to add my name to this amendment. I agree with the noble Lord, Lord Spicer, that we do not want any more regulation than we need, but I do not see this as bringing forward greater regulation.

In my business career I learned three things in particular. The first was that you should concentrate and keep your mind on your core activity. I felt a certain resonance when the oil and gas industry wrote about this amendment that actually that was the imperative thing that needed to happen because—as I know from my extended family—at the moment that industry is under threat. There is great retrenchment and difficulty, so the OGA needs to concentrate strongly on its responsibilities for the oil and gas industry.

Having said that, the second thing that I learned from practice was that you can concentrate as much as you like on the business that you are in but the most important thing is to follow the market. That is not exactly what you can do here, but what is clearly true is that the future will be about carbon capture and storage. This is a core part of government policy and all of our policy on climate change and carbon emissions. Therefore there needs to be a real future for this sector and these facilities. That is why it is important that that element is brought into this part of the Bill and will be there for the future. I take perhaps the naive example of Beeching and the railways; now down in the south-west we are trying to reopen one or two of the lines that were closed back in the 1960s. If we thought more about future uses and what happens after our actions, we might moderate and think more about decisions for the longer-term future.

The third thing I learned from business was “right first time”, which is the best thing to remember as a principle for running any organisation. It seems to me that getting it “right first time” on this issue would be to make sure that we take into consideration carbon capture and storage, and what that offers in terms of solving our climate change issues, as well as to use the facilities, the network and the vital assets that are currently in the North Sea. We need to include that in legislation now rather than in the future.