Strait of Hormuz

Energy and Climate Change – in the House of Commons at 10:30 am on 26th January 2012.

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Photo of Christopher Pincher Christopher Pincher Conservative, Tamworth 10:30 am, 26th January 2012

What assessment he has made of the potential effects on UK oil and gas supplies of any disruption of shipping through the Strait of Hormuz.

Photo of Harriett Baldwin Harriett Baldwin Conservative, West Worcestershire

What assessment he has made of the potential effects on UK oil and gas supplies of any disruption of shipping through the Strait of Hormuz.

Photo of Christopher Huhne Christopher Huhne Liberal Democrat, Eastleigh

We have made assessments of the impacts of short-term disruptions to shipping through the strait for both oil and gas. There is no reason to believe that such closure would create a physical shortage of oil or gas in the UK. Price impacts would depend on the exact nature of the disruption. The UK has access to a wide variety of oil and gas sources and routes, including production from the UK continental shelf, imports from Norway, storage, and oil and liquefied natural gas from global markets.

Photo of Christopher Pincher Christopher Pincher Conservative, Tamworth

Given that 20% of the world’s traded oil, and 35% of the seagoing trade, passes through the strait every day, presenting a significant terrorist risk, will my right hon. Friend encourage the diversification of supply, including overland pipelines, such as project Nabucco, the Abu Dhabi pipeline and the Iraq pipeline across Saudi Arabia, despite its being called IPSA?

Photo of Christopher Huhne Christopher Huhne Liberal Democrat, Eastleigh

My hon. Friend is right to highlight the overland capacity. Unfortunately, the IPSA pipeline, as he may know, is not currently functioning—I do not know whether that is anything to do with its namesake. Diversification is a crucial part of our strategy, and the Minister of State, my hon. Friend Charles Hendry, and I have been working hard on getting closer relationships with some of our key suppliers, including the Norwegians.

Photo of Harriett Baldwin Harriett Baldwin Conservative, West Worcestershire

My constituents already suffer from high fuel and heating oil prices, so will the Secretary of State reassure them that EU sanctions on Iranian oil will not cause further price pressures in that market?

Photo of Christopher Huhne Christopher Huhne Liberal Democrat, Eastleigh

I would love to assure the hon. Lady that we are able to have greater control over the politics of the middle east than has been the case so far, but the reality is that that part of the world is extremely sensitive geopolitically. As she may know, HMS Argyll is supporting the USS Abraham Lincoln in the carrier group, and we are sending out clear signals that we want the issue dealt with in the most rapid way.

Photo of Albert Owen Albert Owen Labour, Ynys Môn

Coupled with the potential problem of oil import is the problem of a lack of oil refinery capacity in this country, made worse by the Petroplus decision to close refineries in the south-east. What assessment have the Government made of refinery capacity, and what are they doing to increase that capacity?

Photo of Christopher Huhne Christopher Huhne Liberal Democrat, Eastleigh

The hon. Gentleman misunderstands the situation in the refinery market. With regard to Petroplus, the problem with Coryton has been the over-capacity in the refining market, which has led to shaved margins. We are working to resolve that as quickly as possible.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

Although the Secretary of State has reflected on the potential disruption through the Strait of Hormuz and on the point made by my hon. Friend Albert Owen about refining activity, and although it is good news that the tankers have resumed distribution from the refinery this morning, will he update the House on whether oil is now being delivered to the refinery for refining activity?

Photo of Christopher Huhne Christopher Huhne Liberal Democrat, Eastleigh

There is indeed a cargo ready to be delivered this morning, and there have been contingency back-ups. I know that BP has been working closely with us on this matter and I very much hope that normal activity will resume.

Photo of Tom Greatrex Tom Greatrex Shadow Minister (Energy)

I thank the Secretary of State for that response, which will, I am sure, bring comfort to many people. As well as the 850 jobs, including those of contractors at the refinery, that are at risk, he will know that the background is that this situation is less to do with the refinery’s operation and more to do with the financial structure of the Switzerland-based former owners. Given the significant role played by UK-based refineries in providing energy resilience, is he concerned that the ownership of such a significant number of UK-based refineries is now overseas?

Photo of Christopher Huhne Christopher Huhne Liberal Democrat, Eastleigh

We have traditionally benefited enormously in this country, both under the previous Government and under this Government, from our open-door policy on foreign investment. Indeed, we own a substantial amount of investment in other countries. The swiftness with which the arrangements have been put in place suggests that there is no case for reviewing that policy at this stage.