Asked by
To ask Her Majesty’s Government what plans they have to align the
remit of the Oil and Gas Authority from seeking the “maximum
economic recovery” of North Sea oil and gas, to meeting the
United Kingdom’s net-zero emissions commitments.
The Parliamentary Under-Secretary of State, Department for
Business, Energy and Industrial Strategy () (Con)
My Lords, even though renewable electricity capacity has grown
five-fold since 2010, oil and gas are still essential for our
energy needs and are vital to the production of many everyday
essentials such as medicines, plastics, cosmetics and household
appliances. They will remain so in declining amounts, even in a
net-zero world. It is therefore essential that we have a managed
transition away from fossil fuels, as set out in our landmark
North Sea Transition Deal.
(LD)
My Lords, the concentration of carbon dioxide in the global
atmosphere stands at an unprecedented 417 parts per million. At
the very least, we have to stop exploration for new fields. The
truth is that the UK is the most profitable country in the world
for large offshore oil and gas projects thanks to our MER policy.
Companies can offset all spending on exploration against tax, as
well as receiving millions of pounds in direct grants. What plans
do the Government have to phase out such inefficient subsidies,
as required by the Glasgow climate pact?
(Con)
As the noble Baroness knows, we have some of the most ambitious
climate targets of any major economy in the western world and we
are committed to net zero; indeed, it is a legal obligation.
However, we will still need declining amounts of oil and gas, and
the choice we face is whether we wish to use that produced
domestically or to import it. In every scenario set out by the
reductions, we will still have a requirement for petroleum
products.
(Con)
I congratulate the Government on their ambitious climate targets,
but can my noble friend tell the House what proportion of the oil
that will be extracted from the Cambo development
is likely to be exported under current scenarios, as there seems
to be little domestic demand for the heavy crude oil
that Cambo and other future
oilfields will produce? This seems more about exporting than
about domestic energy security, and, in that context, some extra
taxation on production would anticipate some of the future
taxpayer costs that might arise if these oilfields end up being
unable to export in a future scenario of other countries having
to reduce their oil imports.
(Con)
No decision has yet been made regarding the
proposed Cambo field. The export
market for oil and gas produced from Cambo is
purely a commercial matter dictated by the market, the quality of
oil and the different refinery capabilities. But, as I said, even
with continued development, we expect the UK to remain a net
importer of both oil and gas throughout the transition period
when following the Climate Change Committee’s balanced net-zero
pathway.
(CB)
My Lords, HMRC estimates that decommissioning will cost the
taxpayer £18.3 billion over the next few decades. Oil and gas
companies can claim tax back on all decommissioning as well as
R&D, as the noble Baroness, Lady Sheehan, pointed out. We
also have one of the lowest tax burdens for oil and gas in the
world. Shell paid $1.8 billion in tax to Norway last year, but
the UK gave it $99.1 million towards decommissioning costs. What
has happened to the polluter pays principle? After all, the oil
companies have made a lot of money and trashed our planet, and
now we are going to help them continue to make money in order to
transition to a better future.
(Con)
It remains the case that the petroleum sector is a net payer of
taxes to the UK Exchequer. I frankly do not understand the
argument that we should stop all production in the North Sea and
instead import those materials that we will continue to need in
every scenario. We would be declining to give ourselves the
revenue and spending extra to import those same products.
(Ind Lab)
My Lords, a global poll of energy workers showed that more than
half want to leave the fossil fuel industry. What are the
Government doing to support these workers in the UK to ensure
that there is a fair and just transition both for them and for
their communities?
(Con)
That is a very good question, and this is why we have our
world-leading oil and gas sector transition deal, the North Sea
Transition Deal. We are committed to it, with the support of all
the oil and gas companies, to precisely bring about that happy
state of affairs so that workers can transition to working in the
clean economy.
(LD)
My Lords, speaking last month, Tim Eggar, the chairman of the Oil
and Gas Authority, was bullish when referencing future offshore
licensing rounds in the UK. He said:
“Let’s be clear, there is no current ban on exploration and
licensing”—
and, of course, he is right. On the other hand, the International
Energy Agency—the global expert on energy stats—is equally
unequivocal that the development of any new gas or oil field is
incompatible with net zero by 2050. Perhaps the Minister could
help us here and confirm what his department’s objectives will be
with regard to future licensing. Will it adhere to IEA advice,
aim for net zero and end future exploration, or will it go along
with the oil industry and keep on drilling?
(Con)
We will go along with our net-zero commitment. I do not know how
many times I have to repeat this for the benefit of the Liberal
Democrats, but under all of the climate change scenarios,
including that towards net zero, we will remain a net importer of
oil and gas during that period. The choice that faces us is
whether we wish to import them or produce them domestically and
gain the tax revenues from that. I really cannot see why this is
such a difficult concept for the Liberal Democrats to grasp.
(Lab)
My Lords, the Minister surely must know that the target of net
zero means reduced consumption; whether it is produced in this
country or imported, it is still our consumption. How is that
compatible with the Oil and Gas Authority’s target of “maximum
economic recovery” of oil from the North Sea? Bearing in mind
that it takes so long to commission and decommission North Sea
oil and gas plants, is it not about time that the Oil and Gas
Authority changed its target now to give it time to achieve
net-zero carbon when it is due?
(Con)
I actually agree with the first part of the noble Lord’s question
that production from the North Sea is on a declining pathway. Our
usage is, of course, on a declining pathway as we transition to
net zero.
(Con)
My Lords, I declare an interest as set out in the register. Would
it not be helpful to explain even more clearly to the public that
none of the needed energy decarbonisation or transition is going
to happen smoothly without a proper back-up of swing suppliers
and fuel sources? Unless there is a prudent level of continued
investment in fossil fuel sources, we will see many more of the
violent fuel and energy price spikes we have now, which cause
considerable stress and hardship for millions of households
experiencing this every day and threaten our national
security.
(Con)
I know my noble friend speaks with great authority on this as a
former Energy Minister himself, and I agree with him. Of course,
the ultimate solution to the problem of high gas prices is to use
less of it. Indeed, we are doing that, and we are continuing to
develop our renewable sources. We have one of the largest
productions of renewable sources in the western world. However,
fossil fuel generation, such as unabated gas-fired generation,
currently plays an important role in keeping Britain’s
electricity system secure and stable. The development of clean
energy technologies means that it will be used less frequently in
future, but it will still be required.
(LD)
My Lords, I declare my interests as set out in the register. I
think it is the Minister, rather than the Liberal Democrats, who
may be failing to grasp the implications of the Government’s own
policy. But is the Minister aware that if warming is kept to well
below 2 degrees in line with the Paris Agreement, new oilfields
such as Cambo will become
stranded assets? In the light of that, will the Government ensure
that the risks that such stranded assets pose to financial
stability are properly reflected in increased capital adequacy
requirements for those institutions that continue to finance
them?
(Con)
We have a role in the licensing of future developments, but
whether to proceed with them is, of course, a commercial decision
for the operators concerned. I am sure they will bear the noble
Lord’s comments in mind. I am sure many of the big companies
would not wish to end up with stranded assets either.
(Lab)
I am sure the Minister will say that it is right that we await
the Oil and Gas Authority’s scrutiny report looking into the
proposed Cambo oil and gas
field. But surely it never made sense for the Government to
consider progressing with the plans, especially in the run-up to
COP 26 and now post COP. I reiterate: will the Government listen
to the science and, starting with Cambo help
workers and industry wind down production of oil and gas in the
North Sea?
(Con)
The noble Baroness answers her own question—indeed, I would say,
“Let’s wait for the decision of OPRED before we make any final
observations about this.” But, as I mentioned to her colleague
earlier, at the same time we are proceeding with our
ground-breaking North Sea Transition Deal to ensure exactly what
she asks: to help workers to transition away from these
industries in the future.
