Future of the Oil and Gas Industry

Peter Aldous Excerpts

Thursday 14th March 2019 Westminster Hall

[Peter Aldous (Waveney) (Con)]

It is a pleasure to serve under your chairmanship, Mr Walker. I congratulate the Scottish Affairs Committee on producing this informative report and on securing the debate.

The oil and gas industry is extremely important in the north-east of Scotland, but it also has other clusters, although not quite as large, in the north-east of England and East Anglia, which I represent. I chair the British offshore oil and gas industry all-party parliamentary group. It is important to remember that the industry is a national one and that it has a supply chain that extends throughout the whole of the UK.

The industry has been, I would say, the British industrial success story of the past 55 years. The results of extracting hydrocarbons on the UK continental shelf have been the creation of thousands of well-paid good jobs, the generation of an enormous amount of money for Her Majesty’s Treasury, and the development of expertise that can be taken, and has been taken, all around the world. Go to Libya, the gulf of Mexico, Kazakhstan or China, and one hears Scottish, Geordie and East Anglian accents.

[David Duguid]

Following on from something the Chair of the Committee said in his opening remarks—I meant to say this in my speech—I have benefited from that skills transfer, having worked not in Libya but in some of those other places around the world where oil and gas are prevalent. Does the hon. Member for Waveney (Peter Aldous) agree that an important aspect of the sector deal, and the urgency of it, is to encourage the retention of those skills in this country in order to develop the technologies and innovations that we have discussed?

[Peter Aldous]

My hon. Friend is right. We have developed enormous expertise in the oil and gas sector which it is important to retain and build on. We are just beginning to see that in the offshore wind sector as well and, as I will come on to, the two are inextricably linked.

Yesterday was an important day for the industry. The APPG had its annual parliamentary reception, and those attending were in good heart and had a positive outlook for the future. We also had the Chancellor’s spring statement. Normally, the APPG lobbies Government hard coming up to annual Budgets and statements, but yesterday the Chancellor made no mention of the industry. I think that was mainly because he is keen for statements to be just that and not mini Budgets, but in many respects that was good news, because the industry wants a stable fiscal regime with no unforeseen, unpleasant or unhelpful surprises. That said, as we anticipate the autumn Budget, I suggest that we should all be back in top lobbying gear.

I acknowledge that we are now entering the second half of the contest—perhaps I should say challenge—of extracting oil and gas on the UKCS, but we should emphasise that this is not a sunset industry, as indeed colleagues in all parts of the Chamber have said. As in many matches, the best performances, goals and tries come in the second half. The industry has come through a great deal in recent years, but while challenges remain—in particular the low level of drilling activity and exploration—it is largely in a good place. Last year, significant final investment decisions were made on a number of major projects, production performance was strong, and unit operating costs had stabilised.

I shall highlight three areas in which the industry, the Oil and Gas Authority and the Government need to work together in the immediate future to maximise the sector’s potential for the benefit of all those who work in it and for the UK. First, attention needs to be given to strengthening the industry’s supply chain. Many companies’ revenues and margins are under extreme pressure, and increased collaboration and innovative contracting models are needed. If those are put in place, as a country we will be able to continue to compete for international investment, to provide security of energy supply, and to create and support highly skilled and fulfilling jobs.

Secondly, we need to build up expertise and create specialist hubs to carry out decommissioning. A good start has been made with the launch of the National Decommissioning Centre, but we must have it in mind that that is an enormous prize, not just on the UKCS—and, from my own perspective, most immediately in the southern North sea—but in basins all around the world.

Thirdly, the sector has made a good start in promoting and facilitating the transition to a low-carbon economy. Instead of the Danish oil and natural gas company and Statoil, we talk about Ørsted and Equinor. Gas has an important role to play in the transition to a low-carbon economy. In the southern North sea, the oil and gas and offshore wind sectors are collaborating on such innovative projects as gas to wire, which involves gas being generated into electricity offshore and transmitted to shore via spare capacity in the subsea cables that are used for the wind farms.

There are plenty of challenges, but my sense is that the industry is resurgent and brimful of ideas. With the right nurturing, promotion and collaboration, it can play a key role in the UK on the post-Brexit global stage.