Clause 80 - Acquisition of rights to use upstream petroleum infrastructure

Part of Energy Bill [Lords] – in a Public Bill Committee at 5:00 pm on 16th June 2011.

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Photo of Charles Hendry Charles Hendry The Minister of State, Department of Energy and Climate Change 5:00 pm, 16th June 2011

I am grateful to the hon. Lady, but I think she has misunderstood the nature of the clause. It is a relatively straightforward change to the way that we try to resolve disputes on infrastructure matters in the North sea. She talked about the need to wean ourselves off oil and gas. We agree with that, but at the moment we are dependent on oil and gas for approximately two thirds of our energy today. The reality is that for the foreseeable future, however much we try to change that—it will be a gradual change—we will either have to use our own resources or import them at a cost of billions of pounds to the British economy, but we will still be using virtually the same amount every year. We are going to use other measures to lead us in the direction of a low-carbon economy. It is not realistic to  suggest that we can do that at an incredible speed and will have come off oil and gas completely in the next few years. That is not going to happen and we therefore have a national interest in making sure that we continue to get the benefit of our own natural resources.

The hon. Lady said that the hard-to-reach fields are by definition riskier. That is not the case. Some of the riskiness, danger and difficulty depend more on things such as the temperature or pressure of the oil. Those may be in shallower rather than deeper waters. We are nevertheless seeing a change in the way in which the North sea is operated. I welcome the fact that we are seeing some smaller companies moving in. The huge international oil corporations are perhaps less interested in fields of the scale that we now find in the North sea and UK continental shelf and are looking elsewhere.

There is a real role for specialist niche operators that are still nominally multi-billion pound companies that can take part in the process. The issue at stake in the clause is that where they want to use access that is already in place—not their own infrastructure, but somebody else’s—it can sometimes be difficult to get agreement. Sometimes it is straightforward. Sometimes they cannot agree on the funding formula and the long-term arrangements and liability issues. At the moment, the legislation enables them to come to the Secretary of State for a determination, but that is a rarely used procedure. Only one application has been made. We are aware that companies are sometimes worried about approaching the Secretary of State for a determination, because of the importance of that trading relationship to them. They feel that if they come to us, it may be adverse to our long-term relationship. The simple change that we are making here gives the Secretary of State the power, where he believes there is a blockage, to intervene and say, “This is how I believe that access to the infrastructure should be covered”.

The change makes no difference to the long-term liability cover: there have to be assurances that those companies are in a position to decommission or reach an agreement on how the decommissioning should be funded, and the liabilities issues remain intact. It makes a very small change indeed to the process, in which the Secretary of State would now be able to instigate finding a solution rather than having to be asked to do so. On that basis, I hope that the hon. Lady will be prepared to accept that the clause should stand part of the Bill.