PARLIAMENTARY DEBATE
UK Oil and Gas Industry - 25 February 2020 (Commons/Westminster Hall)

I beg to move,

That this House has considered the UK oil and gas industry.

It is a pleasure to have you in the Chair, Mr Robertson, for this important and timely debate. It is important because the oil and gas industry is a major employer and a major contributor to the Exchequer, and its success is vital to the economic growth of not just my constituency but all those represented in the Chamber and indeed the entire country. It is timely because never before has an industry—indeed, a country—faced such challenges, had to react to such quick-changing expectations and move at such speed alongside an ever-evolving debate about our future energy needs and how we address the UK’s contribution to anthropogenic climate change.

It was nearly two years ago, in April 2018, that the last debate on the UK’s oil and gas industry was held in this place, led by my former colleague and constituency neighbour, the former MP for Gordon, Colin Clark, and responded to by the then Minister for Energy and Clean Growth, the former MP for Devizes, the right hon. Claire Perry—how times change! When I read that debate in Hansard at the weekend, what really struck me was how little reference there was to climate change: in fact, the phrase was used just four times. There was little comment from anyone on how the UK and indeed the world needed firm, ambitious action to reduce our climate emissions.

That is remarkable, given that but a year later, in May 2019, the UK Committee on Climate Change recommended a target of net zero carbon emissions by 2050. A month after that, the then Prime Minister Theresa May committed the UK to that target and, a month after that, on 27 June, the United Kingdom passed legislation committing us to net zero by 2050, making us the first, and as yet only, major economy to do that. I bet that no one in the Chamber for that debate two years ago—or here for this one—foresaw the speed of that change. No one could have envisaged Her Majesty’s Government committing to such an ambitious and challenging target. Likewise, I bet that nobody could have ever imagined the chief executive officer of BP saying, as Bernard Looney did last week, that

“The world’s carbon budget is finite and running out fast; we need a rapid transition to net zero. We all want energy that is reliable and affordable, but that is no longer enough. It must also be cleaner.”

He went on to say:

“This will certainly be a challenge, but also a tremendous opportunity. It is clear to me, and to our stakeholders, that for BP to play our part and serve our purpose, we have to change. And we want to change—this is the right thing for the world”.

He did that as he unveiled BP’s commitment to be a net zero company by 2050.

Perhaps we should have foreseen such a speech from one of the world’s largest and the UK’s most successful companies, engaged in the extraction of fossil fuels and with a long history in the North sea; the UK oil and gas industry has, throughout its history, had to battle for its success, be that through economic slumps, environmental challenges, tragedy offshore or simply the difficulties that arise from extracting oil and gas from under the North sea. The industry has had to fight, develop, innovate, experiment and persevere to maintain its continued success. I know, from talking with men and women across the industry at all levels, that it stands ready to do all that again as it plays its part in our future energy mix, leading the way as we transition to net zero.

The hon. Member is making a knowledgeable and impassioned speech about a subject equally dear to my own heart. I would not have settled in Easter Ross and brought up three children if it had not been for the UK oil and gas industry; I owe it everything, as does my family.

More recently, we have assembled wind turbines in the Nigg yard in Easter Ross, which now make up the Beatrice field. The hon. Member talks of reaching targets—surely offshore wind farms such as the Beatrice farm off the coast of Caithness and Sutherland are the way forward.

I thank the hon. Gentleman for his intervention and I could not agree more. The importance to the wider Scottish economy, and indeed the UK economy, is demonstrated by what we see going on in Caithness, Aberdeenshire and further south. Offshore wind is vital to our wider energy mix and meeting our target of net zero by 2050. We have seen such advances in that field over the last few years in terms of reducing the cost of producing energy through offshore wind, so it is incredibly promising and very good to see as part of a wider energy mix.

I represent a constituency in the north-east of Scotland: West Aberdeenshire and Kincardine—a part of the world synonymous with the oil and gas industry. According to the House of Commons Library, some 151,000 people are employed directly by the oil and gas industry across the UK. Of course, in reality, the number is much higher than that: Oil & Gas UK puts the figure at about 270,000, with many support, engineering, technology and even legal recruitment and accounting companies involved, engaged and reliant on a thriving oil and gas sector. Nowhere is that more apparent than in the north-east of Scotland. More than 68% of all direct employment in UK oil and gas is in Scotland and more than 80% of that is in the north-east of Scotland, in and around Aberdeen.

In Westhill, I have the privilege to represent the subsea capital of the world, with more subsea engineering companies per square mile than any other place on the planet. At Badentoy business park in Portlethen, at Blackburn, in the neighbouring constituencies of Aberdeen North, Aberdeen South, Angus and Gordon, and further north along the Banff and Buchan coastline—and even further north than that, in Caithness—there are hundreds of companies employing thousands of people engaged in every imaginable aspect of work in and for the oil and gas industry.

I congratulate the hon. Member on securing the debate, which is important for Teesside as well. I join him in paying tribute to the people who ensure that we keep oil and gas flowing and support our economy. Does he share my concern about helicopter safety? The Civil Aviation Authority recently published CAP 1877, its review of measures after the fatal crash in 2013. Is he surprised that 14 of the CAA’s 20-odd recommendations from 2014 are still considered to be ongoing? The CAA really needs to get on with that so we can further reassure offshore workers about their safety.

I thank the hon. Gentleman for his intervention. I am not surprised because I was aware of that, but it is regrettable. The CAA should, first, do much more to complete its findings and, secondly, move to reassure all of those who rely on helicopter transport out to the offshore rigs in the North sea.

It would be wrong to think of this solely as a north-east of Scotland industry; that has been demonstrated by the hon. Member for Stockton North (Alex Cunningham), whose constituency is in Teesside. This is a UK industry—indeed, a global one—that has contributed over £330 billion to the British economy, supports hundreds of thousands of jobs across the United Kingdom and has a supply chain worth nearly £30 billion, stretching into every nation, region and community across our islands, servicing both domestic activities and exporting almost £12 billion of goods and services to other basins around the world.

Globally, we see British energy companies engaged in work in Mozambique, where, with UK Government support, we are exploiting one of the largest and most recently discovered natural gas fields in the world. In the gulf of Mexico, in the Persian Gulf across the middle east and into the Mediterranean, from Vietnam to Australia, western Africa and the south Atlantic—all those places and more, we find people trained in using technology invented in and working for companies with bases in the United Kingdom.

However, the industry is not without its challenges. It is still emerging from one of the deepest and most sustained downturns in its history. The oil price crash of 2014 to 2016 saw an oil price drop of 70%, which had a huge effect on the industry, particularly in the north-east of Scotland, with many people retraining and leaving the industry altogether. Many of the smaller support companies struggled to survive; some did not. Some, particularly in the supply chain, are not out of the woods yet, but, as I said, resilience, inventiveness and ingenuity are bywords for the oil and gas industry in the United Kingdom and, alongside UK Government support to the tune of £2.3 billion, including investment in the Oil & Gas Technology Centre and the global underwater hub, the industry is confident about its future. We need it to be, for it is from this industry that the skills, technology and investment will come if we are to maximise economic recovery from the basin and reach our target of net zero carbon emissions by 2050.

Many people who do not know the industry—or, indeed, the people in it—might expect it to be averse, even hostile, to the Government’s climate change targets, but nothing could be further from the truth. One need only speak, as I have in recent weeks, to companies such as Total, BP or Equinor, the people at the Oil & Gas Innovation Centre, the technologists and engineers of the Oil & Gas Technology Centre, and the industry body itself, Oil and Gas UK, to learn that the industry is not only not averse to the challenge, but actively embracing it. I recommend the ambitious industry plan Roadmap 2035 to anyone who doubts the industry’s commitment to leading the way, embracing the change and engaging with the challenge as we strive towards net zero, committing the UK continental shelf to be a net zero basin by 2050.

That will, of course, require significant investment and new technology, but it cannot happen in a vacuum and the industry cannot do it by itself. It is committed to developing carbon capture and storage, making it work and making it affordable. That needs to happen. According to the Committee on Climate change, some 175 million tonnes of CO₂ a year will have to be stored and captured in the UK alone by 2050 if we are even to come close to meeting our targets.

Teesside is one of the preferred sites for carbon capture and storage, and we hope that the project will go ahead. I wonder what role the hon. Gentleman thinks the industry could play in making sure that the project comes together. To my knowledge, none of the major oil companies is actually involved in the project on Teesside.

I was not aware that no major companies were involved in the project; I think it is important that they should be. If we are to try to engage Government and get governmental support, the industry must lead the way, to show that it has confidence in the technology first.

Far be it from me to override what the hon. Member for Stockton North (Alex Cunningham) says, but I have just come from a breakfast briefing on carbon capture and storage, and BP is involved in the Teesside cluster. Hopefully that addresses that concern.

On the vital need to develop carbon capture and storage, does the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) agree that the UK Government cannot pick just one project? At least a few clusters must be given the go-ahead in the forthcoming couple of years.

I thank the hon. Gentleman for his intervention and for enlightening Members about BP’s involvement in the Teesside carbon capture and storage project. I agree with him. He has foresight, because what he said was exactly where I was going next in my speech. We need at least five projects across the UK if we are going to come anywhere near reaching our target in the next few years.

Will the hon. Gentleman indulge me?

I will, of course.

I am grateful. I am always happy to be corrected on such matters, and I had forgotten that BP is involved, but of course there are many other companies—international companies—that could play a far greater role.

I feel as if I am working as an interlocutor between the two hon. Gentlemen. The hon. Member for Stockton North is right. We need every company to be involved at every level to ensure that the projects are a success, but we also need Government.

Having come from the same breakfast briefing as the hon. Member for Kilmarnock and Loudoun (Alan Brown), I was going to confirm that BP is involved in Teesside. Of course, Shell is involved in the so-called Scottish cluster, between Saint Fergus and Grangemouth. I just wanted to make the point that other clusters are available.

I am glad that everyone enjoyed the breakfast and, yes, I was aware of Shell’s involvement in what is known as the Acorn project, between Saint Fergus and Grangemouth. It is a really promising project and I hope it gets the support that it needs to move forward. However, we also need Government, and that is why I ask the Minister to commit to increasing Government support for the five current carbon capture and storage projects at work across the UK, one of which is the Acorn project in north-east Scotland, and to look to future investment in, and the creation of regulatory and commercial frameworks to support, the future transport and storage of CO₂.

We also need the Government to commit to supporting the industry as it exploits the opportunities that it has through the expansion of hydrogen as a key element in the energy mix. According to research, 30% of the UK’s gas supply can be replaced with hydrogen without any modification of domestic appliances, which is quite incredible. Scaling up investment in the creation of hydrogen from natural gas is crucial and shows the importance of natural gas to our future energy requirements as we move forward. I am sure that the Minister will confirm later that all those commitments and more will be outlined in the Government’s forthcoming, soon to be unveiled and long-awaited oil and gas sector deal.

All those advances, however, and all the optimism for the future—embracing the challenge of net zero, investment in new technologies, maintenance of an indigenous energy production sector here in the United Kingdom, investing in British talent and maintaining and creating British jobs—are dependent on one thing: fiscal stability in the North sea.

Teesside, of course, is the centre of the hydrogen production industry in this country. More hydrogen is produced there than anywhere else in the UK, so I thank the hon. Gentleman for encouraging the Government to recognise that they need to play a huge part not just in hydrogen but in carbon capture and storage. After all, the Government removed £1 billion of funding just a few years ago. We really need that to be reinvested, so that such projects can drive places such as Teesside and, of course, large parts of Scotland as well.

I suspect it will come as no surprise to the hon. Gentleman that I could not agree more with what he said: we need Government investment to drive technology in relation to hydrogen. It is great to see Teesside following the north-east of Scotland in developing that technology.

As I was saying, to do any of what I have been describing, we need fiscal stability in the North sea. The North sea is at present one of the most attractive mature basins in the world in which to invest. That is largely because of the long-term and fiscally sensible approach that the Treasury has taken to the industry in recent years. With a Budget but days away, I urge the Government to avoid any abrupt action—any change in the tax regime—that would undermine investment in an industry that is not only embarking on its biggest and most challenging transition in history but still recovering from the shock of the downturn of 2014 to 2016.

We need the oil and gas industry to be a success. We need to maximise economic recovery and support the companies that are investing in our low-carbon future. We need to maintain a local supply chain, local capability and, ultimately, local jobs. The message from this Chamber and this Parliament, and, indeed, from Government, should be that we support the oil and gas industry in the United Kingdom—that it is an industry that we should champion and be proud of, that we understand, and will invest in and work with, as we ensure the North sea’s attractiveness to investors through the maintenance of a steady and sensible fiscal regime for many years to come. It is the industry and the sector from which will come the talent, the ideas and the investment in technologies that are key to addressing the real issues of our age. It is up to us as legislators to support it.

It may help Members if I say that I want to call the first Front-Bench speaker just before 10.30 and to leave two minutes for Mr Bowie to wind up at the end.

It is a pleasure to speak in this debate, and I thank the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) for bringing it forward. He has obtained other debates on this issue in Westminster Hall, and I have been here to support him in them because, as he says, it is not—with great respect—just Teesside and Scotland but the whole United Kingdom of Great Britain and Northern Ireland that benefits from the jobs that are created and from the spin-off to the economy.

We may not get the direct effect of having oilfields or rigs off the coast of Northern Ireland, but people from my constituency and from across Northern Ireland are involved in the work in the North sea. I am always mindful of that, which is why I want to make a contribution to the debate. The industry is important to the economy and to the future of the entire United Kingdom of Great Britain and Northern Ireland, so I am pleased we are discussing it today. It is always better when we have the four regions together working as one for the benefit of all. Quite clearly that can happen in this case.

Things have massively changed in the United Kingdom in past years. Having been a net exporter of oil and gas, we are now a net importer. As always, I thank the Library for its succinct briefing, which makes it clear where we stand. Oil and gas made up 75% of the energy supplied in the United Kingdom in 2018. Net imports made up 13% of the oil that the UK used, with the remainder coming from domestic production. Net imports of natural gas were 50% of UK supply. The majority of oil—77% of final consumption—is refined for use in transport. Just over one third of the UK’s total gas is used for domestic heating, and just under one third for electricity generation. The UK is also a net importer of petroleum products, such as petrol, diesel and heating oils.

The oil and gas industry, both onshore and offshore, employs 31,000 people directly and a further 121,000 in relevant supply chains in the United Kingdom. Right across the United Kingdom of Great Britain and Northern Ireland, we all benefit from the oil and gas industry, and we have constituents who make a contribution to this very important sector and industry.

According to estimates from the industry body Oil & Gas UK, overall employment in the industry has fallen by 35% since 2013. In 2016-17, Government revenues from oil and gas production were £1.2 billion, which was a slight increase on previous years, but overall tax revenue from oil and gas has declined sharply over the past decade. Again, we look forward to the Minister’s response on that point.

We have a massive need for oil and gas to meet our energy and transport needs, and we must future-proof how we meet them, to be less reliant on other nations and to be self-sufficient. How do we do that? That is what the hon. Gentleman referred to. I often point to the energy that is all around us, which, if harnessed correctly, can meet our needs. I know it is not oil and gas, but it is energy. I think specifically of the SeaGen current turbine that was in Strangford lough in my constituency. At one stage, it had the capacity to supply one of my major towns with electricity. There were issues with SeaGen as it came to the end of its life, but the fact remains that there is potential there for us to become less reliant on overseas production and more reliant on what God has given us: a reliable, twice-daily tide and strong undersea currents.

My hon. Friend talks about potential; does he agree that the proposed oil and gas sector deal that we hear about from the Government gives them an opportunity to achieve the levelling up they have talked about, and that it should transcend north-east Scotland and cover the entire United Kingdom, so that companies and people involved in the energy sector can benefit from that new deal?

That is exactly what we need to do. Many of the debates we now have, as we are leaving the EU and looking towards a better and more prosperous future for the United Kingdom of Great Britain and Northern Ireland, are about levelling out. How can we all benefit? It is absolutely right that we should be trying to do that in every way we can. There are opportunities for economic boosts, for employment, for a better society and for people’s quality of living to be increased.

While none of us advocates for endless money’s being poured into research project after research project, the fact is that, for us to understand how best to meet energy needs, we must do the research. That leads me to the issue of exploratory fracking. There are obvious concerns about the impact that that has on the surroundings, and it is clear that we need to know what the impact would be before we could even consider implementing fracking. I remain unconvinced of its safety. People are divided on whether fracking is good for the economy, the rural community or people, and there are concerns.

Back in 2016 I asked a question of the Minister then in place—not the Minister who is here today, by the way:

“To ask the Secretary of State for Communities and Local Government, if he will update national and planning policies to (a) account for shale operations and (b) introduce buffer zones between shale developments and local communities.”

At the time, I was not entirely convinced by the ministerial reply:

“The National Planning Policy Framework and supporting guidance sets out a comprehensive approach to planning for shale gas extraction in England.”

We had a potential shale exploration outside Larne in East Antrim. That did not go anywhere, because the opposition from people close by was very clear, but we need to find a balance in the process. The reply continued:

“Planning guidance includes the use of buffer zones in the determination of planning applications for hydrocarbon extraction, including from shale. This states that above ground separation distances are acceptable in specific circumstances where it is clear that, based on site specific assessments and other forms of mitigation measures (such as working scheme design and landscaping), a certain distance is required between the boundary of the minerals site and the adjacent development.”

We must try to develop a balance between meeting our constituents’ high demand for energy and the need to address climate change, which the hon. Member for West Aberdeenshire and Kincardine referred to in his contribution—we cannot ignore that either. We are committed to the target of net zero carbon by 2045, and many organisations have signed up to it; the National Farmers Union has signed up to it and has come up with some great ideas on how to achieve it. We must ensure that we can deliver our own energy needs in a way that means we are not dependent on others.

I close with this point: it is clear that we have a duty of care to our constituents to protect their environment, but also to secure future energy provision. That is a very delicate balance, which needs to be carefully considered. I look forward to understanding more from the Government and the Minister about their plans for finding and sustaining that delicate balance.

It is a pleasure to serve under your chairmanship, Mr Robertson.

Earlier in my career I was involved with the oil and gas sector as a taxation expert, dealing with the taxation of oil and gas companies. I echo the point made by my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) that, in the Budget that is coming up, there should be no changes that rock the oil and gas industry. We do not need to throw bricks at an industry that is already doing so much to help with the net zero carbon targets that we are trying to achieve.

The context is the enormous decline in revenues from the oil and gas sector. Back in 2008-09, revenues were at something like £13 billion; they are now down to just over £1 billion. That is a colossal collapse, and we need to do something to encourage the oil and gas sector and to help it survive.

The sector also needs more capital investment. Capital investment has fallen to one of the lowest levels in history and is now down to about £5 billion a year. That is coupled with a decline in drilling and an increase in the rate of decommissioning costs to almost £2 billion, which is quite a large increase—I see that the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) is about to intervene on me.

The hon. Gentleman read my body language extremely accurately. Contingent on what he has rightly said about how the industry is changing, thinking about the UK’s future in what—whichever side of the argument we are on—is going to be a period of change, and having been in the industry myself, what worries me is that we do see a slight deskilling in terms of welding techniques and working in stainless steel. Those skills could be pertinent to the hydrogen industry, and they are very hard to replace. I am not saying there should be a fiscal change, but we must be aware of those skills and safeguard them for the future, whichever way this country goes.

In just a second, I will tackle an issue that I hope will help with the hon. Gentleman’s concerns.

The figures have already been quoted for the number of people employed in the oil and gas sector in the UK. Just over 30,000 are employed full time, but in the supply chain, which is the most important part and which I want to concentrate on, the number is close to 150,000. That is a phenomenal number of people to have to deal with.

I have been, and still am, the Prime Minister’s trade envoy to Nigeria. The link here is in the Aberdeen sector of the supply chain, which I have been involved with, to try to get people to go to Nigeria. Why should they be interested in Nigeria? The skills that we have in Aberdeen are just the sort required to set the Nigerian oil and gas sector on the right course. Historically, a huge amount of the income from that sector has not even reached the Ministry of Finance; it has got nowhere near—it has simply been diverted. When so much of the industry is essentially black market, it is difficult to get efficiency, but we have all the expertise in Aberdeen and other places throughout the UK to be able to bring that.

I have been told that Aberdeen has the highest percentage of Nigerians of any place in the world outside Africa, but we have a real problem in Aberdeen with the visa system. When people come over for university and things like that, actually staying afterwards is very difficult for them. I find the visa system incredibly obstructive for my Nigerian constituents. Does the hon. Gentleman think that the flow of information and expertise would work better if the visa system was a bit more flexible, allowing people to develop their expertise in Aberdeen before going back to Nigeria?

I like to think that it is something to do with the activities I have been conducting on behalf of the Government that there are so many Nigerians in Aberdeen. I suspect I cannot claim full credit for that, although I have tried to encourage companies in Aberdeen to go out to Nigeria and encourage people to come back. Nigerians can learn a tremendous amount from companies in Aberdeen, and I think they recognise that. The commitment to the oil and gas sector shown by President Buhari is a good indication that he takes it seriously. I hope we will be able to do something with that—something much better than we have done in the past—in order to take things forward.

This is all about getting better control, including over the net zero target set in not only the UK but globally as well, and our ability to see that target gain traction through what we do and the investments that we make. For somewhere like Nigeria, the ability to get to a net zero approach in the oil and gas sector at the moment is quite low. Again, the expertise that we have here is crucial to getting to that. My hon. Friend the Member for West Aberdeenshire and Kincardine mentioned two elements of that—carbon capture and storage and hydrogen production. The relevance of this to my constituency, which may seem a long way from Aberdeen and the companies I am talking about, is that Invesco, in my constituency, has a great interest in helping to fund hydrogen production as part of the energy mix here.

The other link to my constituency is a former Member and Minister, Tim Eggar, the chairman of the Oil and Gas Authority. I draw the House’s attention to a recent speech in which he made important comments on how the industry could move towards a much better net zero target. This man knows the industry extremely well and has worked in it for much of his life, and I hold his comments in full.

If we keep in mind those remarks about how we are helping the oil and gas sector to stay profitable and to get out and sell its expertise around the world, that will keep us in good stead for the future.

It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) on securing the debate. Two weeks ago, I was privileged to be re-elected chair of the British offshore oil and gas industry all-party parliamentary group; one of the first tasks that I was assigned was to secure a Backbench Business debate on this subject—my hon. Friend has eased my workload considerably.

The oil and gas industry has been an integral part of the East Anglian economy for more than 50 years. Until recently, the industry’s sole focus was on maximising recovery from the UK continental shelf. That has changed as we set about decarbonising the economy and delivering on our legally binding target to reach net zero greenhouse gas emissions by 2050. Oil & Gas UK has published “Roadmap 2035: A blueprint for net-zero”, which outlines the role that the industry will play in a net zero future. It is very welcome that the industry recognises the difficult and enormous challenge that we face, not just in the UK but all around the world. It is important that the industry steps up to the plate and plays a lead role in delivering the transformation. It should continually ask itself, “Can we do more? Can we do better?”

At the same time, it is important for the Government and policy makers to work with the industry, acknowledging the key role that oil and gas played in the UK economy in the second part of the 20th century and continues to play in the 21st century. We must not unfairly stigmatise the industry and those who work in it, but should recognise that they are part of the solution and not the problem.

I congratulate the hon. Gentleman on being re-elected chair of the APPG. He has had one burden taken off him; may I provide him with another by asking that the APPG start to look at some of the safety issues? He knows that I bang on about that. I hope that he will join me in welcoming the proposed wider review of the helicopter elements of the basic offshore and emergency training, given the distances that people have to travel offshore. Will he join me in encouraging the Minister to engage, like the RMT, Unite and the other unions, in that review, so that the recommendations we get out at the end actually enhance safety rather than diminishing it?

I welcome the hon. Gentleman’s intervention and wholeheartedly endorse the point that safety is paramount. There have been some horrific accidents while we have been working on the UKCS; Piper Alpha comes immediately to mind. Post Piper Alpha, following Lord Justice Cullen’s report, we did put in place a very good safety system, but we must never forget the vital importance of the responsibility that we owe to all those people who work in the industry.

Both hon. Members have made the excellent point that, like our environmental performance, health and safety in the oil and gas sector across the UK has been world class—in fact, world envied for a number of years—so that it is one of our exportable commodities as well. Does my hon. Friend agree that we and the Government need to continue looking at the export opportunities of not just the technology but the expertise?

My hon. Friend is spot on; I will make this point in the little time that I have. Extracting oil and gas from the UKCS has not been straightforward, but as a result this country has developed expertise and specialisations that we have been able to take all around the world. As we transform to zero carbon, to renewables, we must not lose sight of that: we must continue to play that world-leading role in energy production.

I shall briefly highlight what I see as the future features of the UK oil and gas industry. First, it has an ongoing key role to play in the country’s energy security. The demand for petrochemicals will be with us for some time. It makes sense for that to be supplied, as much as possible, from our own resources, in as carbon neutral a manner as possible.

Secondly, the industry must be a bridge to a low-carbon future, promoting the use of gas, hydrogen and carbon capture, utilisation and storage. As the Committee on Climate Change has highlighted, the latter has a pivotal role to play if we are to achieve—and hopefully better—the 2050 zero carbon target. It is welcome that the Government recognise that, have published the CCUS action plan and have committed £50 million of innovation funding to drive down the costs.

Thirdly, the oil and gas industry has an important role to play in collaborating and working with its counterparts in offshore renewables. The skills required are in many respects transferable. Such work is already taking place, with both oil and gas and offshore wind learning from each other and with opportunities emerging to pioneer inter-sector training and currency certifications. Gas-to-wire technology and gas platform electrification, powered by offshore wind, are emerging as new advances that provide additional resilience in supply, while assisting in decarbonising traditional methods of generation.

Fourthly and finally, it is vital that we do not forget the enormous amount of work that needs to be done in decommissioning oil and gas assets on the UKCS. In the southern North sea—that is what I am interested in, but it is a very small part of the basin—late-life and decommissioning expenditure is forecast at about £4.4 billion for the period up to 2027. That amounts to an average spend of about £445 million. It is important that we have a policy framework and investment strategy that ensures we secure as much of that work as possible for the UK and for East Anglian businesses.

For the oil and gas industry to deliver on those opportunities, Government and industry must work together. That will be done best through an oil and gas sector deal, which was included in the Conservative manifesto in the general election. I look forward to the Minister updating us on its preparation. I request, as have others, an assurance that the Government recognise the need for ongoing fiscal stability in the forthcoming Budget.

I conclude with a point that I have made during many debates on the oil and gas industry, in Westminster Hall and the main Chamber. One of the best features of the industry is the UK’s ability to export skills and expertise, learnt on the UKCS, all around the world. In any oil and gas basin around the world, one can hear Scottish, Geordie, Norfolk and Suffolk accents. We must ensure that that remains the case, with the UK leading the world in the transition to and delivery of low-carbon energy.

It is a pleasure to serve under your chairmanship, Mr Robertson. I congratulate the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) on securing this debate. I was shocked to hear we have not debated this subject since April 2018—quite some time ago. I was present at that debate, and I was one of the few people the hon. Gentleman did not mention—perhaps because I am a constant in these oil and gas debates. I am afraid I will make the same, or a pretty similar, speech to the one I made last time, but the Minister was not here then, so it will all be new to him.

Previous debates on this issue have generally come in the run-up to a Budget, to try to make clear the asks of the oil and gas sector in the Budget. We were particularly successful around transferable tax history where we all worked together to push the Government to ensure that it was put in place so that new players could come into the oil and gas fields. That was incredibly useful and a good opportunity for us to work together.

We do not agree on everything, but we all feel strongly—I think everybody in this room feels strongly—that we should move towards a sector deal. If the Minister cannot give us full details of the sector deal, it would be helpful if he could at least let us know the timeline for announcements on it. The issue has been hanging around for a long time, and the industry has been waiting quite some time to hear what will happen. The more certainty the industry has on the timeline, the better.

In the last debate on this issue, I mentioned Vision 2035, which has been followed by Roadmap 2035, both of which are about ensuring we move towards net zero while continuing to have a successful oil and gas sector in the UK for many years. We spoke about the importing of oil and gas to the UK to meet our energy needs, and that is a concern for a number of reasons. There is a carbon cost to importing oil and gas, because of the ships or however it gets here. There is also an additional carbon cost in its extraction. If we are moving to net zero extraction under Vision 2035 in the UK, we will ensure that as little carbon as possible is expended in the extraction process, but other countries that extract oil and gas may not be so far along that route, so there may be a differential in the carbon costs of extraction. If the Government intend to import more oil and gas in the future, I ask that they look closely at where we are getting it from and at the related carbon cost. We cannot say it is not our problem because it is being extracted somewhere else, so it is somebody else’s problem; that is not how this works. If we are using that oil and gas, we need to own up to the carbon created in its extraction. That is incredibly important.

Vision 2035 and Roadmap 2035 also focus on the supply chain. Our supply chain is phenomenal. It is recognised as the gold standard across the world in several areas, but particularly safety. On safety, the UK continental shelf is absolutely up there—it is tip-top. Everybody does everything they can to ensure the highest possible levels of safety. If our supply chain is going to continue exporting around the world, we need to export that safety culture too. That relates not only to any oil and gas we import, but to ensuring that we lead the way on improving safety around the world.

We can also export our capability to move towards net zero extraction to ensure that we level up places around the world that extract oil and gas, and reduce the amount of carbon they create during the extraction process. We can be real world leaders not only, as I mentioned last time, in working in a super-mature basin, which we already are, but in exporting our safety culture and net zero culture in the extraction process.

Carbon capture and storage has been spoken about a number of times. Like many others, I am still sore about the previous Government’s pulling of carbon capture and storage. While that was not done by this Government, there is a concern, and it is difficult for the Government to build trust in this place. I am pleased the Government have moved forward with commitments to carbon capture and storage. It is incredibly important that the UK Government support a number of carbon capture and storage clusters, as mentioned by my hon. Friend the Member for Kilmarnock and Loudoun (Alan Brown), and ensure they get off the ground as quickly as possible, with real projects that work, so that we can be world leaders in exporting our expertise in carbon capture and storage to the world and assisting the world by storing its carbon.

If we have surplus capacity in, for example, the Acorn system, once it is up and running, we should store carbon from countries around the world and charge them to do so. That is a great way for us to make additional revenue. I hope that we will do what we can, and the Government will do what they can, to ensure that CCS gets off the ground and gets working as quickly as possible, and that the Government make it unequivocally clear that they support CCS and will not pull the rug out from under it again. We cannot afford to do that; we cannot afford to look at a net zero future without carbon capture and storage. We must make those moves.

Moving away from oil and gas at some point in the future means that we will need a transition in place. It means we will have to utilise the expertise in our industry to better harness our renewable capability. Those who work in subsea technologies, mostly in the constituency of the hon. Member for West Aberdeenshire and Kincardine, have a massive amount of expertise that can be utilised for tidal, wave and offshore wind power. We must ensure that we utilise those skills and transfer them to these emerging industries, and that those industries are made viable in the UK. If it requires Government support to kick-start them, that is fine with me. We will get to the stage where are exporting that expertise as well—we are good at exporting things.

In Scotland, we have the capacity to have lots more floating offshore wind and lots more offshore wind in general, but also lots more onshore wind. Again, we can utilise the skills we have. I urge the Government to reconsider whether they will have contract for difference support rounds for onshore wind and solar. We strongly feel that we can do more in that space in Scotland. About 75% of our electricity in 2018 was generated from renewable sources. We want to do better than that, but we can only do better if the Government reconsider their position on CfD support. We will continue to push strongly on that.

As I mentioned, there is a significant issue with visas for my constituents. In Aberdeen, we have people from the UK. The next nationality is Polish. I understand that the next is Romanian, and the next one after that is Nigerian. We have a significant percentage of Nigerians living in Aberdeen, and it is incredibly difficult for them to get visas, whether that is to work, to come as contractors or just to get their mum to come over to see their graduation. The knock-back in visitor visa numbers is significant. When the Government look at their new visa system, I urge them to think carefully about ensuring that we can access the expertise we need and that Nigeria and other Commonwealth countries, in particular, can access the expertise they need by having a flow of people between the two countries.

Brexit is also an issue in relation to visas. A significant number of people in the oil and gas industry are from the EU, and we need to ensure they can continue to move freely between the EU and Scotland. For example, Total has a presence in Aberdeen, and many people move between there and France. That movement needs to continue.

Lastly, on a just transition and net zero, my hon. Friend the Member for Aberdeen South (Stephen Flynn) mentioned that we want to ring-fence oil and gas revenues to ensure that we are moving towards net zero. That is not about changing the tax regime, but about hypothecating that tax. During the Budget process, we do not have the opportunity to make amendments to say that that is what we want. During the estimates process, there is not the opportunity to make amendments to ask for hypothecation to happen. However, we can press strongly and say that that is what we want to happen. We want the money to be ring-fenced so that we can move towards net zero. We ask that 12% of the revenue is ring-fenced for places such as Aberdeen, Falkirk and Shetland, which rely heavily on oil and gas and will need assistance to make a just transition.

My constituency has one of the highest numbers of public sector workers of any constituency in the UK. There are two council headquarters, a major teaching hospital and a university in my constituency. For people working in the public sector, providing support in order that we have a successful oil and gas industry, issues such as housing costs have been significant. When we move towards the transition period and there is a reduction in oil and gas, I do not want the people who have not worked in that industry, and who have found it incredibly difficult to scrape by living in such an expensive city, to be hit again.

I want the entire city to be assisted in the transition process, and all the people in Aberdeen and Aberdeenshire, not just those who work in oil and gas, to be helped to access the services they need and housing they can afford. That goes for Moray, Banffshire and other places. The just transition needs to happen for people working in oil and gas, but also for our city and region as a whole.

I congratulate the hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) on securing the debate. I follow the hon. Member for Aberdeen North (Kirsty Blackman), and I am also somewhat of a veteran in debates on this subject.

Cynics have mentioned that such debates are called on the cusp of a Budget to talk about why the oil and gas industry should have lots more support from Government. However, it is significant that the hon. Member for West Aberdeenshire and Kincardine did not talk just about that. I concur with the sentiment expressed around the Chamber that the Government should not continue to treat the oil and gas industry as a cash cow, as has happened on previous occasions. The industry has come out of a difficult period and is recovering, but it still has enormous challenges ahead and needs considerable support in the next phase of its development. That support will be of a different nature from that needed hitherto, because of the context mentioned by the hon. Gentleman: climate emergency, climate change and the challenge of net zero. Those issues suffuse our considerations of the future of the oil and gas industry.

Our considerations therefore need to be sober and varied in reach. For example, the North sea basin is a highly mature basin from which 43 billion barrels of oil have been extracted, and it is estimated that there are about 10 billion barrels left. There will probably not be any new oilfield discoveries in the North sea. However, a large number of small pools have been found. They remain unexploited and have not been developed for various economic reasons. The sector should perhaps concentrate on those in the future. The gains in efficiency in the industry in recent years, and the net reduction in carbon intensity of production, suggests that small pool extraction could be a viable proposition in the not-too-distant future. The infrastructure already in the North sea needs to be available for small pool extraction, rather than being taken away and decommissioned, and then having to be recommissioned for those small pools to be developed.

Decommissioning is another enormous industry that the North sea oil and gas community can benefit from, not just in the North sea but worldwide. We can export the decommissioning expertise we have in the UK to projects elsewhere in the world. In the North sea, some 250 platforms, 10,000 km of pipelines and 50,000 wells are to be decommissioned. That is an enormous industry that needs to be taken forward solidly over the next period, notwithstanding the need to retain some structure for small pools and the other major potential industry, which is carbon capture and storage.

A number of hon. Members, including my hon. Friend the Member for Stockton North (Alex Cunningham), mentioned the possibility—indeed, I think, the absolute necessity—of developing not just carbon capture and storage capacity, but carbon capture and storage nodes. That would mean we could develop entire chain arrangements of CCS, from inland to nodes and out to the North sea, and that we could get involved in the production of hydrogen. All those exciting developments could provide an enormous and bright future for the North sea oil and gas industry. There should be better collaboration between the oil and gas industry and the offshore wind industry to look at the necessary skills, infrastructure and supply chains, so that the similar technologies involved can be better developed, which would be in the UK’s interests.

In the context of climate change, we need to recognise not only that there is going to be a different future for North sea oil and gas, but that oil and gas will be needed in different forms in the UK over a long period. We are not simply going to dispense with oil and gas. All sorts of applications need oil and gas. For example, the production of hydrogen over the next period will conceivably substantially involve steam-methane reformation from gas. Even if we are bringing hydrogen forward with CCS, that will be a substantial part of the process.

We therefore cannot say that there will be no oil and gas in the future in the UK, but the projections by the Department for Business, Energy and Industrial Strategy on the amount of oil and gas we are going to use show a substantial decline up to 2035. That is the period of Oil & Gas UK’s Vision 2035. I very much commend to hon. Members its approach to changing the nature of the oil and gas industry to be climate change-facing, as far as developments are concerned. We then have the prospect, as the hon. Member for Strangford (Jim Shannon) mentioned, of seeking self-sufficiency in a declining market for UK oil and gas products. That would be centred on those different uses for oil and gas, and it seems to me to be an essential part of the future of the oil and gas industry. That is what a bright future looks like.

My final thought is that the sooner we get a sector deal for the industry that recognises those imperatives and those particular ways forward, and that produces stability for the sector in the context of those changes, the better off we will be.

The question of a windfall tax depends to a considerable extent on the health of the industry as a whole. Members have mentioned what revenues may arise for development purposes, and that is essentially what we are talking about. I emphasise that the ability to provide revenue very much depends on whether the industry reshapes itself in the way I have described, and that is why a sector deal is imperative.

As a veteran of these debates—I am sure the hon. Member for Aberdeen North will recall this—I remember Richard Harrington, the then Minister, saying in October 2018 that we were at

“the final stage of the process”.—[Official Report, 9 October 2018; Vol. 647, c. 22WH.]

He said that we would be at the end of the process soon. In the debate in March 2019 on sector deals, he said:

“I am very much looking forward to advancing these proposals.”—[Official Report, 14 March 2019; Vol. 656, c. 222WH.]

We received a knock-back shortly after that, when the Government said they did not think it was such a good idea to have a sector deal after the Select Committee had produced its report. Then, the Conservative manifesto stated that there would be a sector deal after all.

I look forward to hearing from the Minister whether there is a sector deal in the pipeline, so to speak, in the way we are talking about this morning. If there is, when will that sector deal come out of the end of the pipeline and secure the industry for the future, in the way that every Member in this Chamber would want? The Minister could greatly advance our discussion—I am sure he will—by putting those points on the table today.

It is a real pleasure to take part in this debate under your chairmanship, Mr Robertson. I thank my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) for securing it. I was surprised to hear that we had not debated these issues since April 2018.

Far be it from me to try to correct the record again, but there was a debate in this Chamber in October 2018, which was secured by my hon. Friend the Member for Falkirk (John Mc Nally). I spoke in that debate as well.

I am glad to hear we have debated these issues more recently. Certainly in my recollection, we have discussed this issue many times in this forum and in the main Chamber. The sector is vitally important. It has been for many decades now, and the Government take it extremely seriously.

My hon. Friend the Member for West Aberdeenshire and Kincardine used a phrase that struck me: “quick-changing expectations”. That is clearly what has happened. Where we are today is very different from where we were when we had the debate in April 2018 and where we were even last year. Some people have kindly observed that we have a new Government. We had a general election at the end of 2019, and we now have a new Government with a new mandate who are very much concerned with this issue.

Oil and gas is an important sector not only for energy security but, crucially, for the economy and jobs. It has contributed something like £340 billion in production taxes over the past six decades, and it has added £570 billion of gross value added to the economy since 1990. Many speakers in the debate observed that in excess of 250,000 jobs across the UK are dependent on the sector, so there is no question but that the oil and gas sector is vital.

However, we have to deal with the conditions that we find ourselves in. As the hon. Member for Southampton, Test (Dr Whitehead) pointed out, the UK continental shelf is now a highly mature basin. We are looking to reduce our fossil fuel use, which is inevitable, given that in June 2019 we made the very significant commitment to achieve net zero carbon by 2050. It is important to stress that, as of today, we are the only nation in the world—certainly among the advanced economies—that has enshrined that aspiration in law, meaning that it is no longer an aspiration but the law of the land to reach that target by 2050.

One very useful phrase that came out of the debate and that we need to think about was from my hon. Friend the Member for Waveney (Peter Aldous), who suggested that the oil and gas industry could act as “a bridge” to a low-carbon future. That is exactly the right sentiment and expresses succinctly how the Government think about the sector and our future as a low-carbon economy.

One of the key themes in the Just Transition Commission and the moves towards net zero has been carbon capture development. There have been requests that the Government support far more than one cluster. The suggestion from the Member for West Aberdeenshire and Kincardine (Andrew Bowie) was for five clusters. Can the Minister outline where the Government are going on that issue?

With permission, Mr Robertson, I will address carbon capture later in my speech. There is plenty of food for thought and actual policy that I would like to address, but I want to talk about the transition. It is important, as the hon. Member for Southampton Test suggested, that we get the message out that we do not see the end of the oil and gas industry in this energy transition. Oil and gas has a crucial part to play in that transition, not least because of some of the carbon capture issues I want to address later.

Let us be clear where we are today. Currently, 70% of primary energy demand in the UK is met by oil or gas. Some 85% of houses—I suspect this includes the houses, apartments and dwellings of most people in this room—rely on gas central heating. The Committee on Climate Change has said that there will be a continued need for oil and gas as we make our transition to net zero emissions. That is extremely important, and on that basis I would like to talk about some of the announcements we have made, particularly in regard to carbon capture, usage and storage.

We made a public commitment in the Conservative manifesto to invest £800 million in carbon capture, usage and storage. It could not be clearer than that. I am very hopeful that we will be able to make a significant announcement along those lines in the Budget, to honour our manifesto commitment. It is important for my Department. However, Members will appreciate that I am not the Chancellor of the Exchequer, and that the Budget is a matter for him and the Treasury. In a former capacity, I served as the parliamentary private secretary to the Chancellor of the Exchequer for 18 months, which in the context of the political climate was a very long time.

I congratulate the Minister on his speech. A number of Ministers have had responsibility for this portfolio in recent times. Claire Perry was a very big supporter of CCUS and did what she could to push it forward. I know that the Minister cannot commit to money in the Budget, because that is not his role, but will he commit to personally championing CCUS and doing everything he can to retain the £800 million commitment or to increase it if possible?

I give the hon. Lady an absolute assurance that I have been totally committed to CCUS. In fact, one of the first conversations I had when appointed was with a leading industry figure, who called me to say, “I hope you will deliver on CCUS.” I was very pleased to say, “I will absolutely champion this. It is central to our strategy.” We have legislated for a net zero carbon emissions target by 2050. How we reach that without CCUS is a mystery to me. CCUS should be at the centre of any strategy to hit net zero carbon emissions by 2050. The Government are absolutely committed to that.

I assure the hon. Lady that I am as committed, if not more so, than my predecessor to landing the technology, because it is crucial. The net zero carbon legislation was passed in June 2019, and within three weeks I was the Energy Minister, so it has really shaped my entire experience of the portfolio. For most of my predecessor’s tenure, we still had the 80% reduction target. It is now a much more serious and pressing concern, and I hope that we will be able to deliver on that commitment. In our next debate on oil and gas, I hope we will be able to say that we have CCUS investment and potential clusters.

On the point made by the hon. Member for Kilmarnock and Loudoun (Alan Brown), it seems to me that if we are going to commit large amounts of capital to CCUS, there will be more than one cluster. There is a debate about where those clusters and that deployment of capital will take place, but my understanding is that if we are going to commit that capital, it will not be in just one area.

It is not just about CCUS. The net zero strategy encompasses a wide range of technologies. We committed in the manifesto to 40 GW of offshore wind capacity, which is a huge step from our previous 30 GW commitment. It is a very ambitious commitment, and there will be challenges in meeting it, but I am convinced that the industry, in co-operation with Government, will be able to do so. We have also committed to £9.2 billion to improve the energy efficiency of homes. We are particularly concerned about fuel poverty.

The hon. Gentleman is making a successful bid to lure me away from the path of the debate. We are going down rabbit holes regarding the Budget and that sort of thing. He will be as interested as I am to find out what is in the Budget next month, and I am sure that we can resume such discussions then. On VAT, to draw on my previous experience, we are obviously still in the transition period, which means that even though we are out of the EU we will be bound in some ways by its VAT regime for the rest of the year. I therefore do not think that it is likely that there will be significant announcements on VAT in the Budget, but who knows? We wait with bated breath, as they say.

The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) made some interesting remarks regarding the hydrogen economy. For experts and people like ourselves who are interested in such subjects, it is difficult to see how we can have CCUS without hydrogen production, as they are linked. The chemical processes that lead to carbon capture also produce hydrogen, so any movement in the development of CCUS—any investment in improving capacity—will, I think, be a boon to the nascent hydrogen industry. That is one of the most exciting areas of my job. We are potentially at the beginning of a new industry in this country, and hydrogen generates a great deal of interest, debate and excitement in the sector.

On the different technologies for which carbon capture and storage is a critical factor, will the Minister consider talking to colleagues in the Department for Transport about alternative aviation fuel, some of which will also require carbon capture and storage for its creation?

Naturally—my hon. Friend appreciates that reaching the net zero carbon target is a cross-Government endeavour. The Department for Business, Energy and Industrial Strategy, for which I am responsible, and other Departments, including the Treasury, the Ministry of Housing, Communities and Local Government and the Department for Transport, must all be engaged to reach those targets. I am therefore happy to engage in such conversations; they are crucial to our ability to reach the target.

A lot has been said about the oil and gas sector deal. I am not bound by any promises made by previous Governments, but I assure Members that we are committed to an oil and gas sector deal in the course of this Parliament. It would be premature of me to go into details, because those are precisely what we are negotiating. I look forward, hopefully as Energy Minister, to being able to celebrate and launch the deal.

I see a forest of hands. I give way to the hon. Lady.

I appreciate that the Minister just said “in the course of this Parliament”, but the next five years is not the best timeline. Could he be a little more specific? Will the deal come in the next year or in the next year and a half? Alternatively, perhaps he could let us know when he will be able to tell us when it will come. That would be really helpful.

I am not going to play the game of saying some arbitrary date. It is a serious, ongoing discussion. As I said, we will have a sector deal in the course of this Parliament. I will not be drawn any more on the timings.

Time is short; I am afraid that I have to wrap up my remarks. I sincerely thank my hon. Friend the Member for West Aberdeenshire and Kincardine for raising this important issue for our economy. It was a full and comprehensive debate. I am sorry that we did not have time to deal with every point raised, but the debate was very constructive.

I thank the Minister for his remarks. Indeed, I thank everybody for coming along and contributing to an important and timely debate. What has been demonstrated is that, although we are very proud of being home to the subsea capital of the world, and to the oil and gas and energy capital of the world, in Aberdeen and Aberdeenshire, it is a UK-wide industry. We have heard contributions from Strangford to Strathdon, and everywhere in between, down to Suffolk, Teesside and elsewhere.

The industry obviously faces challenges, but it is embracing the challenge of reaching net zero by 2050. Its commitment to being a net zero basin is world leading; we have not heard that from any other industry around the world. The Government must work with the industry to face its challenges, not least on visa issues. The hon. Member for Aberdeen North (Kirsty Blackman) talked about the visa problems in Aberdeen, but in Aberdeenshire, and especially in Portlethen, where we have a large Nigerian diaspora, I too have seen issues occur because of visas.

I am delighted to hear that the Government are committed to CCUS. I would have been even more delighted to hear a more detailed timeline for when we might see the oil and gas sector deal, but we live in hope, and we will be watching with bated breath for it to be very soon.

Question put and agreed to.

Resolved,

That this House has considered the UK oil and gas industry.