This amendment would require the OGA to have regard to environmental considerations and climate change when exercising its functions.
With this it will be convenient to discuss amendment 9, in clause 9, page 6, line 17, at end insert—
The need to re-use North Sea infrastructure for carbon capture and storage projects and marginal field extraction, where economically viable, to be considered prior to the decommissioning of such sites.”
This amendment would require the OGA to have regard to the hierarchy of matters relating to decommissioning when exercising its functions.
We now turn, in the sequence of clauses, to the matters to which the OGA must have regard. The Bill lists those as minimising future public expenditure; security of supply; and the storage of carbon dioxide—I believe that that provision was inserted in another place, and I am pleased that it remains in the Bill. The OGA must also have regard to collaboration, innovation and the system of regulation. There are therefore a number of key directions to the OGA about how it goes about its stewardship of the North sea and its regulation of the industry.
The amendments seek to add a couple of additional items to the list of matters to which the OGA should have regard. This is not about departing wildly from the list in front of us, but about how the OGA operates in its wider sense—that is, not only its stewardship of the industry and the North sea, but its proper concern with what is happening and will happen as far as North sea exploration and development is concerned, in the context of the wider concerns to which the UK should have regard. The two definitions that we wish to add to the list develop and round off that particular mission requirement for the OGA.
I will say a few words about what the additions mean. While the overall list of matters to which the OGA must have regard is pretty wide ranging, it certainly does not include any wider environmental considerations to which the OGA must have regard. It also does not require the OGA to seek its stewardship to be cited, in terms of the UK’s wider concerns, as set out in the Climate Change Act 2008.
Obviously, environmental considerations may concern more closely the OGA’s activities in the North sea—for example, extraction issues, spills and flaring. We have discussed a whole variety of other activities relating to the environmental background and what is going on in the North sea. The Climate Change Act, and section 1 in particular, sets out wider considerations for the UK as a whole to address—not only environmental considerations but the circumstances in which we consider what carbon we emit as a country and how we go about bringing those carbon emissions down to a level within the target set out by the Act.
That obviously concerns our energy mix for the future—where we get our energy from and how we can best ensure that our energy mix is both secure and decarbonises our economy in line with the targets set out in the Climate Change Act. Hon. Members will recall that we discussed on Second Reading precisely what that may mean in terms of the future use of the North sea for the exploration and extraction of oil. I think we concluded across the House that there is no case for closing the North sea industry down on climate change grounds, but we also concluded that it was important to have proper regard to climate change considerations in how we go about stewarding the future of the North sea.
We recognised that we would require a considerable element of oil and gas in our economy for a very long time to come. There is no doubt that, even with substantial changes in the energy mix, there will be a substantial role for gas in the future, and of oil as well, although the Government are already committed to reducing the role of oil and petroleum in transportation and introducing different forms of propulsion as far as possible. Understanding that there will be a substantial role for fossil fuels over the medium period, obtaining those fuels for the UK economy as close to home as possible seems to be an important part of our considerations, but that needs to be seen in the context of the Climate Change Act and how it works. I cannot envisage circumstances in which the OGA will not have proper regard to the Act in its stewardship of the future of the North sea, but amendment 8 would require the OGA to have proper regard to these considerations.
Amendment 9 looks at the question of decommissioning and would align the matters to which the OGA should have regard with what I think we have established between us, certainly on Second Reading and in Committee today. The OGA has a wider role in its medium and long-term stewardship of the North sea—even if there is not a great deal of oil there, in the end—to ensure a vibrant and economically active future.
The present is difficult for the North sea because of current prices and the likelihood that, although they may rise, they probably will not do so for quite a while. There are particular difficulties relating to the number of exploration licences that are being taken up and the extent to which development of infrastructure may be constrained by prices and the arrangements for the exploitation of fields. The whole future of the North sea has to resolve around an effective series of arrangements for the continuation of exploration and exploitation in circumstances where we know we probably will not find find a new Brent or Forties oilfield or a large new basin to exploit. We may instead find a number of smaller fields whose exploitation will require not only infrastructure for themselves, but the use of existing infrastructure. There is therefore the question of the OGA having proper regard for decommissioning activity and how existing infrastructure may be used for other purposes—not only new uses for the North sea, such as carbon capture and storage, but the continuation of and maximum recovery of what is in the North sea now.
I am sure the Minister is aware of the difficult position of the North sea industry at the moment, not only with exploration for future finds and what they might then consist of, but with the 300 already existing, “in the bank” finds, which in many instances remain completely unexploited. Some finds were made as long as 10 years ago and are unexploited because of the present price of oil, which is a considerable difficulty, and because those 300 or so smaller finds are collectively all below 50 billion barrels of oil equivalent. There is then a question about how those fields can be brought into proper exploitation over the next period, or whether they will be exploited at all in future if we do not have careful regard to how the infrastructure will work. None of those fields will be in a position to build their own infrastructure, either now or in future, because of their size and because of the circumstances for the sector that will remain because of overall prices. It is therefore crucial that the finds have the best support possible from the infrastructure already in the North sea and any conceivable infrastructure that comes about in future.
In his report, Sir Ian Wood made a particular point of drawing attention to the problem of what he called the
“misalignment of commercial and technical interests between the owner of the hub platform and infrastructure and the party seeking access to process and transport their well stream.”
He went on:
“The hub owner typically views the provision of processing and transportation to a third party as a low value opportunity, particularly when they have no equity interest. As a result there is little incentive for the hub owner to take on business which could add risks to their own operations and use up capacity in their facilities. In contrast, the small operator seeking access has little bargaining power and often suffers interminable delays in trying to counter the risk issues.”
Sir Ian absolutely nailed the problems for all those smaller fields, which will be the bulk of what we have to live with in the North sea—the problems of infrastructure and decommissioning.
For people who like charts, Sir Ian produced an interesting little one demonstrating what would happen, or how circumstances could come about wherein operators acting perfectly reasonably in their own interests could switch off parts of the infrastructure in a way that would permanently deprive other elements of North sea development of the opportunity to maximise their resource, precisely because of the way in which interests are aligned in the North sea. It therefore seems essential that the OGA has proper regard not only to the process of decommissioning, but to the strategic value of that decommissioning as it relates to the future exploitation of the North sea and the wider aspect of how the North sea makes its way over the much longer period. With this amendment we want to place that requirement firmly within the purview of the OGA. That makes sense as far as the Wood report’s cautions are concerned and it makes sense, it seems to me, in terms of the proper concern for the longer-term stewardship of the North sea, regardless of its mix of oil, gas, carbon capture and storage or whatever. I commend the amendments to the Committee.
I look forward to serving under your chairmanship, Mr Bailey.
While the environmental considerations of climate change are vital, of course, we do not feel that this is the forum to deal with them. It is the Government as a whole, and DECC in particular, who should be dealing with this and who carry the responsibility. As such, we will not pursue this.
As the hon. Member for Southampton, Test pointed out, clause 9 provides a non-exhaustive list of matters to which the OGA must have regard when exercising its functions, so far as is relevant. These include, for example, the need to maintain a stable, predictable system of regulation that encourages investment and the development and use of facilities and other things needed for carbon storage.
Amendment 8 seeks to require the OGA, when exercising its functions, to have regard to the need to address environmental considerations and to facilitate the pursuance of section 1 of the Climate Change Act 2008 in relation to relevant activities. The European offshore safety directive requires the separation of licensing and environmental functions, and to require the OGA to have regard to environmental considerations risks breaching the requirements of that directive.
Climate change is, of course, of great importance, but the OGA’s primary role and focus will be to deliver MER UK. It would not be right to impose obligations on the OGA relating to environmental considerations in respect of which it does not have expertise and is not required to have expertise. It is important that our climate change objectives and environmental regulations are furthered by the experts in the field. The expertise on climate change will remain with the Secretary of State for Energy and Climate Change. Likewise, environmental regulation in relation to offshore oil and gas will remain with the Secretary of State and, onshore, it will remain with the Environment Agency and with the Scottish Environment Protection Agency and Natural Resources Wales in the relevant jurisdictions in Great Britain.
It is right that, once established, the OGA will be bound by environmental law and therefore in the exercise of its functions it will by default have regard to environmental issues. It already has existing close working links with the environmental regulators and these will continue. However, I do not think it is right or necessary to impose on the OGA obligations to consider environmental considerations and climate change. Both of these are matters that would require a change in the core expertise of the OGA if it were to properly fulfil them. In addition, we can foresee circumstances where these obligations might conflict with the requirement on the OGA to maximise economic recovery. The objectives are not incompatible at policy level, in that we will need significant oil and gas in the transition to a low-carbon economy.
I am grateful to the hon. Member for Southampton, Test for reassuring the Committee that his party accepts that there is a future for the North sea basin and they do not wish to shut it down. I am sure that all hon. Members in the Aberdeen area will be delighted to hear that those 350,000 jobs would remain safe in Opposition hands and that it is not their intention to precipitately close down the North sea industry. Nevertheless, in particular circumstances each consideration in relation to the environment and climate change could point to a very different course of action if the Opposition amendments were made, creating a very difficult position for an arm’s length body to manage. That would be very unfortunate for the OGA, leaving it facing an impossible dilemma between two incompatible statutory obligations. I hope that Members are convinced that we already have enough powers to ensure that these important matters are given appropriate consideration.
Clause 10 also gives the Secretary of State the power to give the OGA directions on matters of public interest. The environment and climate change are clearly matters of public interest and the powers in the clause may be exercised if it proves necessary.
Turning to amendment 9, I suggest that we all agree that the economically viable reuse of North sea infrastructure for carbon capture and storage projects and marginal field extraction, as an alternative to decommissioning, is of great importance. I am grateful to the hon. Member for Southampton, Test for his clear examples of precisely why Sir Ian Wood drew up his strategy for the OGA to be not just a regulator but an asset steward. He pointed out some of the clear challenges when lots of small operators in small fields try to share infrastructure, and so on. That highlights the OGA’s need for the proposed asset stewardship powers.
Indeed, consideration of reuse of infrastructure already plays an integral role in the decommissioning approval process, and amendments tabled by the Government in the other place would reinforce that requirement by creating a statutory basis for the alternatives to decommissioning that would have to be considered by industry, the Secretary of State and the OGA. When a decommissioning programme is submitted, the current process requires any person who wishes to decommission relevant infrastructure to demonstrate that the potential for reuse has been fully examined, as set out in Department of Energy and Climate Change guidance on decommissioning under the Petroleum Act 1998.
Further, clause 74 and schedule 2 to the Bill will place a requirement on industry, the OGA and the Secretary of State to ensure that alternatives to decommissioning, such as reuse or preservation, are considered. Requirements to consider reuse of infrastructure will include considering purposes other than the original one—carbon capture and storage, for example.
It is also worth noting that the measures enjoy the support of both the oil and gas industry and the Carbon Capture and Storage Association. It is expected that the OGA will facilitate discussion among all parties to the decommissioning process, to ensure that all options for viable reuse are explored.
I recognise the intention behind the amendment, but I do not consider it to be necessary, as its objective has already been given effect by previous provisions, which ensure that viable reuse of infrastructure for purposes such as carbon capture and storage and marginal field extraction is brought to the forefront of the decommissioning process. They make sure we do not miss the important opportunities that those measures present to develop such industries.
I hope that hon. Members will accept my explanation of why the amendments are unnecessary, and will not press them to a vote.
Amendment 9 is essential both for the future of carbon capture and storage and to enable the more marginal fields to be harvested by smaller operators, which the Scottish National party sees as increasingly vital for the future of the industry. The hon. Member for Southampton, Test and the hon. Member for Norwich South spoke of previous short-termism in the industry and the need for a longer term vision, as pointed out in the Wood report. We completely agree with that and see that there is a requirement for a more holistic view with respect to management of oil and gas collection and transport infrastructure. We therefore support the amendment.
I thank the hon. Member for Coatbridge, Chryston and Bellshill for clarifying the SNP’s position on amendment 9. His support underlines why this is necessary for the longer term stewardship of the North sea. We are looking a little higher than the immediate issues that face the North sea, important though those are, and trying to ensure that, whatever may come its way and whatever its mix of jobs, production and facilities, it has a fully viable future. As we mentioned on Second Reading, although there are a lot of known knowns, unknown knowns, unknown unknowns and so on about the future of the North sea, what we do know is precisely the point that the hon. Gentleman made a moment ago—namely, it will be a future of smaller fields and, through collaboration and careful planning, of maximising best use of infrastructure for those fields to maintain their security and perhaps to start to develop different uses for the North sea, which in the very long term will provide substantial security and jobs and a vital national function for the UK.
The amendments are not about trying to cut off particular routes for the OGA—or, indeed, over-prescribe what the OGA should have regard to. I was disappointed that the Minister sought to suggest that the amendments should not be supported because they would require the OGA to do things beyond its remit and for which it would not have resources. The OGA would not be required by anything in the amendments to move beyond its overall resources or function, but they frame what the OGA needs to look at generally in regard to its business of stewardship. That of course means that the OGA has to look at its overall business within the context of its overall resources, and there will be things that the OGA will not be able to do, or be able to do only in conjunction with other bodies. Indeed, as the Minister pointed out, clause 10 gives the Government the power to undertake direction where necessary, if the Government consider there are particular circumstances wherein the OGA should do more or enter into areas of activity that it has not entered previously. That power is already there, and there are powers in the Bill for the Government to fund those additional activities as necessary.
The amendments are not about the daily management of the OGA and how it can go about its business. As the Minister rightly set out, there are already provisions in the Bill for allowing that management to be undertaken in conjunction with Government direction and OGA function. However, the fact that that is separate from the clause that precedes it points strongly to the idea that having a framework within which the OGA works is the best way to start the process of how the OGA functions on a daily basis for the future. Essentially, that is all these amendments seek to do—point the OGA in particular directions and inform its thought process and general decisions with regard to particular activities. They do not require the OGA to do anything particular in its daily activity, nor do they require it to acquire a whole series of new skills and arrangements as it goes about its task. They simply suggest that a framework should be put in place, after which the Government, particularly under clause 10, can look at whether the OGA in its daily operations is doing what they thought it should do in the first place.
I therefore suggest that the amendments are a help and not a hindrance. I am disappointed that the Minister appeared to suggest that they would, in some way, impede the OGA in carrying out its responsibilities.
The distinction is particularly important for decommissioning and the future use of infrastructure in the North sea, because that is at the heart of what we need to talk about in the next period. For example, it may not just be a question of framing an operation and how it works in maximising economic returns; it could be how infrastructure relates to extraction and carbon capture and storage—that is, the injection of carbon dioxide into depleted seams to maximise economic recovery at certain stages. That process has been undertaken in some parts of the world and could be undertaken in the North sea. The OGA needs to look at this framework properly in the context of how the North sea works in the longer term.
I am disappointed with the Minister’s response to what I thought were constructive amendments to the OGA’s activities. I will therefore press the amendment to a Division.
Amendment proposed: 9, in clause 9, page 6, line 17, at end insert—
The need to re-use North Sea infrastructure for carbon capture and storage projects and marginal field extraction, where economically viable, to be considered prior to the decommissioning of such sites.” —
This amendment would require the OGA to have regard to the hierarchy of matters relating to decommissioning when exercising its functions.