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Report (3rd Day)

Part of Infrastructure Bill [HL] – in the House of Lords at 4:30 pm on 10th November 2014.

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Photo of Baroness Verma Baroness Verma The Parliamentary Under-Secretary of State for Energy and Climate Change 4:30 pm, 10th November 2014

My Lords, the UK oil and gas industry is of national importance. It makes a substantial contribution to the economy and supports around 450,000 jobs. Oil and gas will continue to be a vital part of the energy mix as we transition to a low-carbon economy, still meeting around 70% of our energy demand in 2030. Therefore it is vital that we maximise our indigenous supply, to put downward pressure on prices, support jobs and maintain secure supplies. The Government commissioned Sir Ian Wood in June 2013 to review UK offshore oil and gas recovery and its regulation, and we have been making good progress in implementing the recommendations.

Amendments 113C to 113F seek to remove from Clause 30 all references to commercial arrangements. This issue is clearly of the utmost importance, since a great deal of what industry does in its efforts to maximise the recovery of offshore oil and gas is affected through oil and gas’s commercial arrangements with one another. Never in the history of the UKCS has this been more true than today. As set out in the Wood review, collaboration between licence holders, operators and infrastructure owners will be a key requirement to meet the challenge of maximising economic recovery from the UKCS.

Clause 30 provides for this and makes collaboration a central part of the principle of maximising the economic recovery of UK petroleum. However, the Government recognise the legitimate concerns that industry has raised about the way in which commercial arrangements are dealt with in the clause. The industry is concerned that it may have an adverse impact on investment in the UK continental shelf, and we take those concerns seriously. It is not in anyone’s interests to undermine investment in the UKCS at such an important time.

We have just launched a call for evidence to discuss in further detail with interested parties the best way in which to implement the recommendations contained in the Wood review. We will use this opportunity to discuss how the maximising economic recovery strategy should apply to commercial arrangements without creating any unforeseen circumstances.

Amendment 131A is minor and technical in nature. Clauses 30 and 31 and Schedule 6 come into force on such days as the Secretary of State appoints by regulations. The purpose of the amendment to Clause 41(7) is that regulations bringing into force those provisions may appoint different days for different purposes. It is for these reasons that I propose these amendments and I beg to move.