Energy Bill [HL] - Commons Amendments

Part of the debate – in the House of Lords at 5:39 pm on 12th April 2016.

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Photo of Lord Bourne of Aberystwyth Lord Bourne of Aberystwyth The Parliamentary Under-Secretary of State for Energy and Climate Change, Lord in Waiting (HM Household) (Whip), The Parliamentary Under-Secretary of State for Wales 5:39 pm, 12th April 2016

My Lords, following a Division on Report in this House, a new clause was added to the Bill. This new clause rewrote the OGA’s principal objective in three significant ways. First, it removed the Wood review’s central premise to maximise the economic recovery of UK petroleum within Part 1A of the Petroleum Act, and replaced it with an objective to maximise the economic return of UK petroleum. Secondly, it imposed on the OGA an obligation to retain oversight of the decommissioning of oil and gas infrastructure. Finally, it imposed an obligation on the OGA to secure oil and gas infrastructure for reuse for the transportation and storage of greenhouse gases. Noble Lords will know that these changes were reversed in Committee in the other place.

The OGA has important functions in respect of both decommissioning and the storage of carbon dioxide. However, the change to the principal objective made on Report detracts from the OGA’s focus on maximising economic recovery and is damaging to the North Sea. This is unacceptable—particularly at a time of unprecedented challenge for the oil and gas industry. The OGA should remain focused on maximising economic recovery, and anything other than this risks seriously weakening its ability to provide crucial and urgent support to our oil and gas industry.

The amendment made at Lords Report stage had significant potential knock-on effects. By diluting the OGA’s principal objective, it would not only risk the premature decommissioning of key North Sea infrastructure but seriously jeopardise vital skills and experience, including those that could help to promote the longevity of the industry through carbon storage projects. From this perspective, the amendment is self- defeating.

Furthermore, the MER UK strategy has now been published and is in force. This strategy is focused on the delivery of maximising economic recovery, and any amendment to the principal objective would undo the significant amount of work that has been undertaken with industry. It would also require the OGA to revise this strategy to take into account the expansion in the principal objective.

The Government firmly agree that decommissioning and CCS are of significant importance. It is clearly evident from the provisions currently included in the Bill that we wholeheartedly stand behind the development of these industries and recognise the role the OGA will play in supporting them for the future benefit of the United Kingdom continental shelf. Importantly, the provisions as they stand are substantive and measured, and are welcomed by both the oil and gas and CCS industries. They strike the right balance between ensuring the OGA can deliver what is needed to support the oil and gas industry at this time while keeping its eye firmly on the potential future benefits of CCS.

It is imperative that the OGA’s focus be on maximising economic recovery of oil and gas from United Kingdom waters. At this time, industry urgently requires a regulator with—as the honourable Member for Aberdeen South in the other place termed it—a “laser-like focus” on this objective. The OGA is working very closely with government and industry to do all it can to support the North Sea. It is focused on delivering key pieces of work in 2016 with the aim of making the basin more attractive to investment. These include: stimulating exploration in both frontier and mature areas; making new seismic data freely available; introducing regional development plans to protect key hubs and infrastructure; and progressing a technology strategy to make new fields more viable.

We must support the OGA’s crucial mission to protect our domestic energy mix and to support jobs. This can be achieved only through supporting the OGA’s principal objective—to maximise economic recovery. I hope I have provided noble Lords with clear and strong reasons why it was right for the Commons to remove the clause, thereby restoring the principal objective to that envisaged by Sir Ian Wood in his independent review. I beg to move.