Offshore Oil and Gas Industry

Mary Glindon Excerpts

Thursday 3rd March 2016 Westminster Hall

[Mary Glindon (North Tyneside) (Lab)]

It is an honour to speak under your chairmanship, Mr Walker. I apologise that, having left a Bill Committee to speak in this important debate, I will have to return to the Committee when I have spoken here. I hope that the Ministers and other hon. Members will excuse me.

It is difficult to speak after my friend the hon. Member for Waveney (Peter Aldous), who encompassed so much of what I want to say. I thank him for taking the lead at the Backbench Business Committee to help to secure this debate. My friend the hon. Member for Aberdeen North (Kirsty Blackman) and I were both pleased to support this timely application. The hon. Gentleman’s passion for oil and gas and his great knowledge of the subject were well demonstrated in his very thorough speech. He has left little for us to add, except to express our own passion for our regions and describe how we are affected by the downturn in oil and gas.

I am sure the Minister of State, Department of Energy and Climate Change, has heard, and indeed heeded, many times the points that are being raised today. I thank her for re-establishing the cross-party oil and gas group, which functioned so well in the last Parliament after being established by the then Secretary of State. It helped to promote fabrication in a way that brought jobs to Tyneside particularly, and that was very welcome. I reiterate the appreciation and relief that the group has been re-established. The Minister intends the group to focus on improving the competitiveness of the UK fabrication sector in this very hard climate. I am sure our next meeting with the fabrication forum will be fruitful. The way the hon. Lady chaired the first meeting shows that we will have a busy and productive time ahead.

Cheaper oil at the pumps is welcomed by the majority of people in this country, but the dramatic fall in oil prices is a disaster for industries in places like Tyneside. Twenty years ago, our shipbuilding industry finally closed with the loss of the great Swan Hunter on the Tyne. Many workers were left with no jobs, but others were able to secure a future by transferring their skills to the offshore oil and gas industry. Instead of the building of great oil tankers, we saw with awe the fantastic platforms that dominated the skyline, amazing all who saw them. It was a wonder they ever got off the river, but they did. That was a new era which we hoped would last a long time, but given the way things are, that does not seem likely. I hope there will be some reversal of that fortune.

In my Adjournment debate on this issue just over a year ago, I quoted the then chief executive of Oil & Gas UK, who said at the time of the organisation’s 2015 activity survey:

“This offshore oil and gas industry is a major national asset.”

More relevant than that is the fact that, for each of us taking part in this debate today, the industry has a special relevance to the economic prosperity of our communities. Over the past few years, I have followed the fortunes of the oil and gas industry via the success or otherwise of businesses on the Tyne—companies such as Barrier, W.D. Close, SMD, Shepherd Offshore Services, Wellstream and OGN, the last of which I have worked with most regularly. I will say more about OGN to show how its fortunes mirror those of the oil and gas industry generally.

In 2012, when I asked the Prime Minister to consider tax incentives in the Budget, the workforce at OGN stood at around 1,500. Last year, that workforce stood at 2,500, thanks to a contract for fitting the EnQuest producer FPSO—floating production, storage and offloading vessel. That contract, secured with the help of the cross-party oil and gas group, was completed last March, and sadly, in the last few months, despite valiant efforts by the company to find work, the yard has shed all those jobs. Men and women in my community of Wallsend are out of work, despite being highly skilled.

I take this opportunity to commend the Department for Work and Pensions on the helpfulness of its rapid resource team. The Department commended OGN for letting the team have access to workers long before the nail was in the coffin, with the result that many of the workers have been able to upskill or transfer skills to get different employment. That should be noted in these hard times.

In a letter to the Chancellor in December 2015 about the future of the UK continental shelf, Dennis Clark, the indomitable chairman of OGN—everyone in the business has probably met him at some point—stressed that the way forward was to improve the long-term investment potential of the North sea and that this had to be done by larger operators because smaller ones are struggling. As ever, Dennis believes that there needs to be an overhaul of the tax structure to help North sea operators. In his letter to the Chancellor, he highlighted the fact that in some mature fields like Forties and Beryl, in-field drilling supported by 3D and 4D seismics has resulted in identifying and exploiting new reservoirs. He believes that that could mean there is even more oil than we think in the North sea. He urged pursuing this course of action to be a focus of attention for the newly formed Oil and Gas Authority.

Announcements made by the Government in January will certainly help the industry in these hard times and are welcomed, but the importance of the Government’s support for the industry is strengthened not just by comments from people in the industry such as Dennis Clark, but because of the 2016 activity survey, which was published last week by Oil and Gas UK. I commend the industry’s efforts and success in reducing operating costs and increasing production, as set out in the report, but I am very concerned that the survey outlines the fact that exploration is at an all-time low, with little sign of improvement. According to the survey, this year only £l billion will be approved for investment in new projects compared with £8 billion per year in the previous five years. It can only be described as soul-destroying that, despite efficiencies and resulting successes, because the price of oil has fallen 70% since summer 2014, it is likely that 43% of UKCS fields will be operating at a loss, further deterring exploration and investment.

The UK still has up to 20 billion barrels of oil and, as my friend the hon. Member for Waveney said, can provide a secure source of energy for our country for years to come. That should not be forgotten. I agree with Oil & Gas UK that we must exploit to the full the advantages that come with having a mature province on our doorstep. That must be made known worldwide. Let us exploit our skills, technology and engineering. We cannot waste this resource—that would be a travesty.

The Minister will be aware that Oil & Gas UK has made Budget representations to the Treasury in a bid to help our industry to survive. I particularly note the idea of making loans to enable the industry to have money to invest. Fabricators like OGN in north Tyneside need to see that investment is taking place; otherwise, they will have no hope.

I started by speaking about how the fortunes of the industry are mirrored in OGN. In the last few days, OGN has sent a letter to the unions advising that it will have to market the site. It hopes that it may get a last-minute reprieve by going into the offshore wind industry, because it has the capacity, skills and ability to do that. I know that the Exchequer Secretary to the Treasury, who is here today, has promised to meet OGN to discuss some of the things that are causing it problems there.

It is great that the industry is looking forward; it is terrible that more than 2,000 jobs have been lost in recent months. We cannot even imagine what it is like for people who work in these industries, who were highly paid and usually able to enjoy quite a good lifestyle, being reduced to not having an income and perhaps having to work away from home. At the moment, people are able to work in their local communities, but if they lose that job and are fortunate enough to get another, it could be on the other side of the world. That is a loss socially as well as economically to our communities.

I ask the Minister of State to continue on the road that she has started on, to make the case for oil and gas and to plead with the Exchequer Secretary to listen to the recommendations that have been made by Oil & Gas UK and all the hon. Members who are representing the interests of their communities here today.