Oil and Gas Sector

– in the Scottish Parliament on 9th January 2013.

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Photo of Elaine Smith Elaine Smith Labour

The next item of business is a debate on motion S4M-05310, in the name of Fergus Ewing, on oil and gas—the success and opportunities. The debate is oversubscribed, so I expect members to be succinct and to include interventions within their time limits.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I welcome the opportunity to pay tribute to and recognise the success of Scotland’s oil and gas sector. The sector is one of Scotland’s biggest economic successes. It accounts for more than 90 per cent of total United Kingdom oil and gas tax receipts and supports 440,000 jobs across the UK.

Scotland’s oil and gas strategy was launched by the First Minister in Aberdeen last year. Its key message is that there is much, much more to come. The strategy’s development was led by industry and the oil and gas leadership group, which Melfort Campbell and I co-chair. I am delighted that the UK Government is to put together a similar strategy, to complement Scotland’s. I have been particularly pleased to have close and, I think, constructive working relationships with Ed Davey and Charles Hendry and now with John Hayes. As part of that, I attend and play what I hope is a constructive part in PILOT meetings, which take place in London.

Our strategy is aptly entitled “Maximising our Future”. It is focused on how we can maximise the value of remaining reserves, to create skilled jobs and prosperity for people throughout Scotland. Of the 440,000 jobs that the North Sea oil and gas industry supports across the UK, nearly 200,000 are in Scotland. The sector is a major source of tax revenue for the UK Exchequer; I believe that revenues have totalled more than £300,000 million over the years.

Photo of Neil Findlay Neil Findlay Labour

Will the minister say what the current rate of UK corporation tax is on oil and gas and how much revenue would be lost if a 10 per cent rate were applied?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I do not look at the figures in that way. I will deal with the tax issue in due course.

Since large-scale production commenced in the North Sea in the 1970s, more than 39 billion barrels of oil equivalent have been extracted from the UK continental shelf. This is not a story of decline; significant unharvested reserves remain. Estimates, by definition, vary. Oil & Gas UK estimates that up to 24 billion barrels have yet to be recovered, and forecasts from Professor Alex Kemp at the University of Aberdeen and others suggest that oil and gas production will continue well into the 2040s. By volume, just under 40 per cent of Scotland’s reserves remain in the ground. At current prices a potential £1.5 trillion in reserves are left. That is extraordinary potential—one and a half million million pounds of reserves are still to be returned to these shores. It is imperative, therefore, that we push to maximise recovery of our precious resource.

In the latest round of North Sea oil and gas licensing, the Department of Energy and Climate Change offered 167 new licences, covering 330 North Sea blocks, with a further 61 blocks under environmental assessment. This is an exciting period of new investment and new discoveries. There have been a number of recent investment announcements. On 24 October last year, Talisman announced investment of £1,600 million to prolong North Sea oil fields. Also in October, Shell announced the development of the Fram field, which is one of the biggest Scottish North Sea energy projects of the past decade and will pump 5 per cent of Britain’s gas needs at its peak production. In December last year, Dana Petroleum announced a £1 billion development for nine wells in the Harris and Barra fields 100 miles east of Shetland, and it aims to double its production to 100,000 barrels a day by 2016. Just before the Christmas period, Statoil announced a £4.3 billion investment in the North Sea, which will create 700 new jobs—and the Mariner field is expected to produce for 30 years.

Investment on that level is unparalleled in our economy. There is a vibrancy to the sector that we must celebrate and encourage in these challenging economic conditions. That is why I have spent the past 20 months as minister visiting all those companies and many others.

I want to dispel the myth that the oil and gas sector is just an offshore industry. Each of those companies supports a long supply chain offshore and onshore, providing Scottish jobs and commercialising Scottish technological advances. Our offshore industry is the basis for a vibrant economy onshore, and Aberdeen is now established as one of the world’s most important energy hubs. It has an enviable reputation throughout the world in the engineering disciplines for its innovation and subsea skills.

Aberdeen is truly an international centre of excellence, but the energy industry stretches far beyond the north-east. There have been new developments—for example, from FMC Technologies, which has located in Bellshill and Dunfermline; Glacier Energy Services, whose new office I opened last year in the Clyde Gateway; Oceaneering in Rosyth; and the Global Energy Group in Nigg, which has expanded its existing 800 personnel with an announcement before Christmas that it is creating 400 more jobs. The sector is truly a pan-Scotland industry.

In our oil and gas strategy, the Scottish Government seeks to support the industry in all the ways that we can. Our strategy has been developed with—in fact, almost devised by—industry, and sets out a compelling long-term vision for the sector’s future.

The most important element of the strategy is its focus on innovation to improve recovery rates. Scotland’s historical recovery rate is only 40 per cent on average, while 60 per cent of our precious resource remains in the ground. By contrast, the recovery rate in the Norwegian territory is 48 per cent. Our oil and gas strategy sets an ambition to improve average recovery rates to 50 per cent, so that we take out more than we leave behind.

To put that into perspective, an increase of just one percentage point in our recovery rates would result in a rise in economic output of £89,000 million, and a rise in taxation revenue of £22,000 million. An increase in recovery of one percentage point over the lifetime of fields equals £22,000 million more in taxation, which is money that we would all wish to be used for such things as vital public services.

There are six key themes in the strategy: the domestic supply chain; the international supply chain; innovation; skills; new opportunities; and industry promotion and place. The strategy focuses on technology and innovation within the industry, as well as developing the supply chain internationally.

The focus is now on delivering the strategy with industry, Government, academia and the economic development agencies. Scottish Enterprise has identified £10 million from its existing budget to support industry innovation with a series of calls over three years. The first call was aimed at innovative projects that can improve the integrity and reliability of oil and gas industry assets, and I expect the first awards to be made within the next few months.

Future research and development calls will take place in the spring and autumn of 2013 for proposals to address subsea challenges and improve reservoir imaging. I anticipate a further two calls in 2014, and more beyond if the outputs continue to merit that approach. Scottish Enterprise is working with industry to leverage in additional support and expertise from industry so that we can make the value of those awards even greater.

Here in Scotland and worldwide, hydrocarbons will remain a central element of the energy mix for some time to come. Our draft electricity generation policy statement gives our clear view on the need for both rapid expansion of renewable electricity throughout Scotland and the underlying requirement for new efficient thermal capacity. Carbon capture and storage is the only technology that is capable of cutting fossil fuel emissions by up to 90 per cent.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Not just yet.

Linking CCS with enhanced oil recovery could accelerate its development and unlock 3 billion barrels of hard-to-reach oil—worth £190 billion—from the North Sea.

The centre for North Sea enhanced oil recovery with CO2, which was launched in May last year and is based in Edinburgh, will develop understanding of enhanced oil recovery technology. That could create a commercial use for CO2 that is captured from power plants and industry. The new centre will become a hub for collaboration across the energy sector to help realise CO2-EOR’s true economic potential for Europe.

I recognise industry’s view that more work needs to be carried out before EOR is fully commercially viable, but I will continue to push for a partnership of industry and Government to see our CCS ambitions become a reality.

Photo of Patrick Harvie Patrick Harvie Green

I am sure that the minister will accept that even if CCS technology can be brought to maturity, it has no effective role to play in relation to the carbon emissions that come from the vast majority of our oil consumption, which is in transport and heating, not energy generation.

Is it not a wee bit like putting the cart before the horse to say that we should use the CCS industry as a way of extracting ever more oil and ever more fossil carbon from the ground, which will end up in the atmosphere?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

No, I do not agree with that. It will allow huge reserves of oil to be extracted, which will be hugely beneficial. Frankly, I would have thought that the Greens would welcome the application of CCS, because it will allow reductions of 90 per cent in carbon emissions. I thought that that was a good thing.

Furthermore, without CCS, I do not know how the European Union’s energy emissions targets can be achieved. Only the application of CCS to power stations can make reductions in emissions of the scale that is necessary to achieve the targets. Those are not my views; they are the views of the International Energy Agency, whose chief executive spoke at the Council of Ministers meeting that I attended in November 2011. I disagree with Mr Harvie.

I turn to ageing infrastructure on the UK carbon shelf. It is estimated that there are resources of up to 27 billion barrels of oil equivalent still to be recovered, but it is possible that around 5 billion will not be extracted due to infrastructure access issues. That equates to approximately £85 billion in lost revenues.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I do not think so—I have too much to cover.

We simply cannot afford to lose revenue on that scale, nor can we afford to lose the tax revenues, which I have described, that are linked to that. Irrespective of what our politics may be, no one can afford to forfeit or lose this vital opportunity.

If no action is taken and things continue as they are, the majority of North Sea hubs will not be available after 2035. The current exploration and production activities are forecast to recover around 12 billion to 14 billion barrels of oil equivalent from the 25 billion barrels that are estimated to remain in the UKCS.

The industry recognises that many of the solutions are industry solutions. However, industry and Government will have to work together to resolve the problem of ageing infrastructure and guarantee the long-term future of the UKCS. I am pleased that some progress has been made, including the introduction of a DECC infrastructure stewardship process, incentives to increase exploration and activity, a review/update of licence terms and the establishment of areas of special economic interest around critical hubs.

However, UK oil and gas production has declined by 30 per cent over the past two years. Tavish Scott’s amendment, which I should say for clarification’s sake that we will accept along with the Labour amendment, recognises the challenge. How we respond to that challenge is the real debate.

Although the industry is confident that it can slow the decline by introducing new technologies and procedures, investors need long-term certainty. More needs to be done and I will continue to work with the UK Government to provide the right package of fiscal and other measures to ensure the longevity and continuity of production on the UKCS.

Presiding Officer, I have foreshortened the remainder of my speech—[Interruption.] Well, I will do so just slightly in the light of your direction.

The oil and gas sector is a global business and we want to increase the international impact of our supply chain. Ten years ago, international activity in the industry accounted for 31 per cent of Scotland’s supply chain sales; in a decade, that figure has risen to 46.4 per cent. In other words, nearly one half of the money that the oil and gas sector makes comes from international work. I do not think that that important point is well enough understood. Because of the standards of excellence of so many of its companies and individuals, the industry has become truly international and operates throughout the world.

The Deputy Presiding Officer:

Minister, you really must draw your remarks to a close.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Ah, well. All I can say is that that figure must increase.

I have not talked about skills, but we are working on the issue as we move towards the announcement of an energy skills academy with a particular focus in Aberdeen on oil and gas.

I look forward to hearing what members have to say in the debate and to working with members from all parties on implementing and delivering our strategy.

It gives me great pleasure to move,

That the Parliament recognises the importance to both the Scottish and the UK economy of the oil and gas sector in Scotland; welcomes that oil and gas extraction will continue in Scotland for decades to come; notes progress in delivering Scotland’s first oil and gas strategy; recognises the world-leading capability of the Scottish oil and gas sector and supply chain workforce, and supports close collaboration between the Scottish Government and its agencies, industry and academia to work to meet the future personnel and skills needs of the sector and ensure continuing sector growth.

The Deputy Presiding Officer:

I am afraid that I must reiterate that we are very tight for time. I call Rhoda Grant to speak to and move amendment S4M-05310.2 in no more than 10 minutes.

Photo of Rhoda Grant Rhoda Grant Labour

I pay tribute to the workers who make the oil and gas industry a success. Many of them work onshore in back-up and planning roles but, given the real personal risk and inconvenience that they undergo, we must especially recognise the contribution of those who work offshore.

We are approaching the 25-year anniversary of the Piper Alpha disaster, in which 167 people lost their lives, with many more directly impacted. The lives of those who survived or who lost loved ones were changed immediately. Since then, much has changed. Safety is now given the highest priority—and rightly so—but that does not mean that dangers do not exist. Indeed, recent helicopter incidents have brought home the risks to us.

I was lucky enough to visit the Elgin-Franklin platform as a guest of Oil & Gas UK and Total—the details of my visit are in my entry in the register of members’ interests. The platform worked with extremely high pressures and, subsequent to my visit, developed a gas leak. Having visited the platform, I can only imagine the real concern that such an incident caused and the grave risks involved.

In preparation for the visit, we had to attend a helicopter safety training course. Although it forms only a small part of the training that personnel usually undertake, I found it a real eye-opener to the risks involved. Being submerged upside-down in a swimming pool and having to find one’s way out of the vehicle were pretty challenging, although the training took place in a very safe environment compared with the North Sea itself. One can hardly imagine the reality of ditching, which is why the recent problems with offshore transportation helicopters are extremely worrying.

Constituents have expressed to me concerns about their work. Because of the lack of transportation to rigs, workers have been unable to get to work and are suffering financial hardship. I know that the industry is looking at the problem with helicopters and is exploring alternative forms of transportation, but given the hostile environments in which oil and gas platforms are situated it is difficult to see a safer solution. Nevertheless, the situation emphasises the vulnerability of the workforce to such changes and steps must be taken to ensure that they do not suffer hardship while the safety issues are—rightly—being dealt with.

Wider safety in the oil and gas industry is every worker’s business, and the trade unions have pushed safety to the top of the agenda through the utilisation of safety representatives. They have also made sure that safety is a priority for every worker. Research commissioned by OPITO shows that learning enhances employees’ commitment to safety. The trade union movement has also promoted training and the development of skills within the workforce. Unfortunately, despite the issue’s importance, the oil and gas industry still has a way to go, although Nigg might be bucking the trend by taking the issue of in-house training very seriously.

During the Economy, Energy and Tourism Committee’s recent inquiry into renewable energy, one of the renewables industry’s common complaints was that although it was investing in skills the oil and gas industry was not and that because of the skills shortage in the engineering field many of its skilled personnel were being poached by the oil and gas industry where higher wages are available. In its briefing for the debate, Aberdeen city and shire economic future highlights Subsea UK’s estimate that the oil and gas sector will require a further 10,000 employees over the next five years, while a PricewaterhouseCoopers report has suggested that Aberdeen might have to find another 120,000 workers by 2022—regardless of what will be a natural decline in the industry because of finite resources.

We are facing a skills shortage in engineering, and the industry, as well as the Government, has a role to play in addressing the problem. The industry must look at how it accommodates apprentices offshore and grow its own workforce.

The industry has an ageing workforce and needs to act now to ensure that it has adequate skills into the future. It needs to show that it is an ideal career choice for women, too. When I visited the Elgin-Franklin platform, one of the people who showed us around the rig and explained all the processes was a woman. She was proof—if anyone needed it—that that lifestyle suits women.

Oil and gas companies in particular need to reach out to women because they can help to fill the skills shortage in the industry. The Government has a role to play in that regard. As we saw in the Scottish Women’s Convention’s report into rural issues, women were concerned that their daughters were being discouraged from taking science, technology, engineering and mathematics subjects at school. In order to break down gender barriers we need to start at school. We also need to ensure that engineering courses are available. Cuts in college funding are not conducive to that, and neither are caps on the number of students entering degree-level engineering studies.

Skills must be at the forefront as new oil and gas fields provide even more challenges—the industry is moving into more hostile and deeper waters to access fields that are increasingly difficult to reach. Indeed, as the minister acknowledged in his opening speech, it will take new technologies and skills to bring onshore the reserves that are available. We must have highly trained people to ensure that those technologies are robust, given the disasters that can be wrought by oil spillages. We are all more than aware of the problems caused by the Deepwater Horizon and the impact on many communities. We cannot afford to risk the occurrence of similar incidents, especially in our waters. Skills and a stable workforce are crucial to the industry.

The new challenges require fiscal stability. I am glad that the minister acknowledged that, because companies need to plan ahead and develop new fields and technologies—a point that was stressed in Oil & Gas UK’s briefing for the debate. It is therefore important that the Scottish Government is clear about its fiscal regime for oil and gas should Scotland leave the UK. While it pursues its goal of independence, the Government must ensure that, during the campaign and this period of uncertainty, the industry has clarity to enable it to develop. For example, it is unclear whether the Government’s proposed oil fund will be top sliced from existing taxation—indeed, it is unclear whether levels of taxation will remain comparable to those in the rest of the UK—or whether a new tax will be levied on the industry.

Decommissioning is another issue. What might be the fiscal regime for decommissioning in an independent Scotland? Would decommissioning relief contracts entered into by the UK Government be honoured in Scotland if it were no longer part of the UK?

Those questions need to be answered as quickly as possible so that the industry’s priorities are not skewed. Failure to answer them will cause instability, hinder development and possibly lead to the early decommissioning of fields.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I am happy to assure Rhoda Grant that, as far as decommissioning is concerned, Scotland will honour her responsibilities.

On taxation, we recognise that stability and predictability are absolutely key. Does the member agree that the worst possible thing would be the repetition of the tax hike that the industry faced—without any warning—in 2011, of a 12 per cent supplementary petroleum tax? Does the member agree that that did considerable damage by undermining the confidence of oil investors and companies based throughout the world?

Photo of Rhoda Grant Rhoda Grant Labour

That proves the point about why we need stability and why the industry needs to know what the fiscal regime will be, should Scotland become independent of the UK, and whether contracts that the Government enters into with the UK Government will be honoured. That is an important point because, if we decommission too quickly, we lose out on the benefits of the reserves that are there and we may also lose out on the decommissioning work. I am sure that Tavish Scott will talk about the role that the Shetland Islands will wish to play in decommissioning. The islands are ideally placed for that work—they have a skilled workforce and a history in the oil and gas industry.

I will touch briefly on carbon capture and storage, which the minister spoke about. Although we boast some of the most ambitious carbon reduction targets in the world, I do not believe that we can ignore the reserves of oil and gas that we have, so it is extremely important that we have in place CCS technologies that allow us to mitigate the impacts of what is a carbon-intensive industry. It is wrong to say that we are in a position to ignore our oil and gas reserves, because when it comes to fuel for things such as heating and transportation, we do not have the technology to replace that now. We need to move on apace in delivering such technology so that as well as meeting our climate change targets, we can loosen our dependence on carbon-intensive forms of fuel.

Oil and gas certainly make a contribution to our economy. We hope that that continues, but we need to have the stability that allows that to happen.

I move amendment S4M-05310.2, to insert at end:

“; notes the challenges to the industry in managing a finite and unpredictable resource; believes that the industry must play a role in encouraging young people to pursue a career in engineering, working with schools, OPITO and the further and higher education sectors, paying particular attention to the encouragement of young women into the industry; recognises the high costs and technical challenges of extracting remaining oil and gas resources from the UK Continental Shelf and the future costs of decommissioning; recognises that attention to safety must be paramount both at work and travelling to and from oil and gas installations, and believes that workplace safety representatives, trade unions and the Health and Safety Executive have key roles to play in ensuring that safety comes first.”

Photo of Tavish Scott Tavish Scott Liberal Democrat

I begin by agreeing with the broad tenor of the minister’s remarks and thanking Rhoda Grant for her observations on decommissioning, in particular. I agree with her central observations on safety.

In the regular discussions that the minister has with the industry—I am thinking of Dana Petroleum, in particular—perhaps he could have a wee word about geography. He cannot have been the only person who spotted its curious decision to give the Barra and Harris fields, which are 100 miles east of Unst, the names that it did. There are plenty of seabirds that fields have yet to be named after. During one of his many busy days, perhaps the minister could impress on the industry the need—not least for the benefit of his poor colleagues who represent the Western Isles—to get its geography a little more accurate.

I want to make three main points in support of my amendment. First, the offshore installations in the North Sea have now been with us for the best part of three to four decades. Every industry contact whom I meet—including the process engineer from the Forties field whom I met on the train from Aberdeen this morning—says that the most significant requirement is the constant need for re-engineering, reinvestment and the giving of attention to the fabric of oil rigs, gas platforms and every piece of kit out there. That is hardly surprising, given what has gone and what will go in the future.

Huge investment is needed, but it makes sense because, as the minister hinted, some of the major unplanned maintenance shutdowns during 2011, when production of gas and oil fell considerably—by 21 and 17 per cent respectively—were caused by the fabric challenges that the industry faces. It is in the interests of Government strategy here and in London, which is about enhancing recovery and maintaining the degree of progress that the minister talked about, for such unplanned shutdowns and unplanned maintenance to be limited to a large extent. That strongly supports the point that Rhoda Grant rightly made about safety. I meet plenty of safety reps at home and across Scotland who advocate the case for investment.

The need for such investment represents an enormously positive opportunity for the supply chain, not just in the north-east of Scotland but across Scotland and the rest of the UK. Given the state of the whole economy at the moment, the oil and gas sector is one of the highest growth areas. We should recognise that and support and encourage it. The issue comes down to jobs, businesses and success. We should strongly support investment in the fabric of the industry.

There is also a need for onshore fabric maintenance. Sullum Voe oil terminal was opened in 1978. At the tail end of last year, BP announced a £300 million reinvestment in the terminal, which Arthur Spence—the Shetlander who is in charge of the terminal—said to me on the phone this morning would secure the terminal into the 2040s. That means that it has the same potential lifetime as the one that the minister rightly identified for the entire industry. That is a very important commitment by BP, by the partners to the terminal, and indeed in the UK continental shelf overall.

The islands that I have pleasure in representing in Parliament have taken oil as part of our life for a long time. All my life, oil has been very much part of things. We deal with the risks as well—I could hardly fail to mention that on the 20th anniversary of the Braer. We also take the risks from west of Shetland. I recognise that for some, particularly in the environmental movement, there are huge challenges and they are right. I have been on an exploration drilling rig west of Shetland. The environmental and weather issues that will be confronted out there should not be underestimated. Rhoda Grant rightly mentioned helicopters and it is said that as regards helicopter transfers to Schiehallion and Foinaven the delays are far more than, for example, to an oil rig east of Aberdeen for all the obvious reasons.

In that context, I am disappointed that Chevron’s Rosebank gas pipeline option is to bypass Sullom Voe, but we hope to gain business from crude oil shuttle tankers at Sullom Voe. I am sure that the minister takes his role seriously in the context of the overall assessment, analysis and approval of oil and gas recovery plans and that when strategic decisions are taken about where pipelines are based they are taken on the basis of the best long-term interests of the entire industry.

On field extraction, I agree with the argument already made by members, not least because who would have envisaged a decade ago that horizontal drilling was possible. Now, we can be taken into control rooms and shown 3D maps of how it is done. Technology moves on and I cannot guess where it will go in the next 10 years but it will go further and further.

I thank the minister for his work in relation to decommissioning at Lerwick. It is not just about Lerwick, as Rhoda Grant rightly suggested. It is about every port in Scotland. There is so much work out there over the next 20 to 30 years that it will not just be one port—in that case, happily, in Shetland—that benefits, but many ports across Scotland.

Although decommissioning is moving back because of crude oil prices of $100 a barrel, there is no question but that it will be an important Scottish business in the future as well.

I move amendment S4M-05310.1, to insert at end:

“; notes the need for constant investment in North Sea oil and gas assets for personnel safety; further notes 43 offshore field transfer deals during 2012 between private and state-owned companies; appreciates the necessity of long-term certainty around the £30 billion decommissioning of oil and gas platforms, and recognises the decline in North Sea production from its peak of 137,099,000 tonnes in 1999 to 51,972,000 tonnes in 2011.”

Photo of Patrick Harvie Patrick Harvie Green

I like to begin with a note of consensus when I can—Alex Johnstone looks sceptical already.

I agree strongly with all three members who have spoken on the point about the safety issues around the industry—we can all agree on the importance of safety as regards people and the marine environment. Despite the fact that we will disagree on the future that we want to see for the industry, I hope that everybody in the chamber would come together in paying tribute to those who work hard to protect the safety of people and of the environment.

I want to give credit where it is due to the Scottish Government. The Scottish Government has a clear focus on its renewable energy targets and I have consistently welcomed that. For the first time last year, we saw a £1 billion investment in renewables in Scotland. There is high confidence that the 100 per cent target for 2020 can be achieved and that there will be big increases for the marine sector after that so that we can export efficiently to help to decarbonise Europe’s electricity production.

However, that is not the whole story in terms of decarbonising our energy system. Renewables cut carbon emissions only if they replace fossil fuels. We need to reduce demand. Not only investment in renewables is necessary if we are serious about climate change, but disinvestment in the high-carbon industries and sadly the current minister seems not to agree with that. Indeed, since he took on the job I have only ever really noticed the fire come into his eyes when he talks about another 40 years of oil and gas extraction in Scotland.

Under the Scottish National Party Government, there has been an increase in opencast coal extraction, a relaxed attitude to unconventional gas, coal-bed methane and fracking potentially, support for deepwater drilling and now an oil and gas strategy that is focused on squeezing out every last drop from the North Sea.

I refer members to the document that I mention in my amendment, the International Energy Agency’s “World Energy Outlook 2012”, which concludes that

“no more than one third of proven fossil fuel reserves can be consumed” prior to 2050 if the world is to achieve the goal of constraining climate change to 2°C unless carbon capture and storage technology is widely deployed. As I mentioned earlier, CCS cannot be deployed in relation to uses of fossil fuel for transport and heating, for example, which is where most of our oil goes.

The International Energy Agency is generally a conservative body—it is not where we would look to if we wanted to find an overly alarmist approach. The next Intergovernmental Panel on Climate Change report seems likely to focus minds on just how much tougher the 2°C target is than was previously thought.

There are three ways of resolving that contradiction. One is to say that domestic production is necessary in order to reduce our reliance on imports. Pretty much every country that has any fossil fuel to extract domestically will use that argument—indeed, they are using it—with the result that nobody budges and we carry on putting more fossil carbon into the global economy and therefore into the atmosphere.

The second option in response to the contradiction is to say that we need to continue our reliance on fossil fuels for a while to bridge the gap before we transition properly to a genuinely low-carbon economy. That argument boils down to saying, “Lord, make me chaste—but not yet.” In fact, it does worse. Increased production will help tendencies to keep prices down, so it will delay the transition towards the low-carbon economy that everybody says that they want.

The third argument is the one that the minister used. CCS is talked about as the essential technology to take fossil carbon back into the ground after we have consumed fossil fuels. As I have made clear, we cannot apply that approach in relation to the fossil carbon that comes from the oil industry. That is simply not an option.

Photo of Mark McDonald Mark McDonald Scottish National Party

I know that Mr Harvie and I have different opinions on economic growth, but what would be his message to the many constituents whom I represent whose livelihoods and family incomes are entirely dependent on the offshore industry in the oil and gas sector?

Photo of Patrick Harvie Patrick Harvie Green

My argument would be one of transition, not about ending an industry and putting nothing in its place. It would be about transitioning to the renewables industry, which can create jobs and is already doing so.

If we are remotely serious about the 2°C target for the world to try to meet, as we all said that we were when we passed the world-leading climate change legislation, the bulk of our existing proven reserves of fossil fuels must remain unused, especially those in respect of which CCS cannot play a role. Therefore, it follows that, globally, the oil and gas industry is hugely overvalued. That increases the risk to Scotland from our economic reliance on that overvalued industry.

There is another way: committing not only to a cap on our ultimate extraction of fossil fuels, but to investing the income from that resource into something to replace the revenue from it for the future. The scale of the profits from renewable energy in Scotland—especially from wave and tidal energy—will be astonishing, and we will miss a trick if we do not keep a portion of them in the public sector. I am delighted to welcome the likes of Vattenfall, which is a successful public sector entity, to come and invest in renewables, but I am sad that we do not have a public sector entity like it that is owned by our public sector.

Photo of Patrick Harvie Patrick Harvie Green

The building of a Scottish public renewables company is the best priority that we could set. What a legacy to leave for future generations.

I move amendment S4M-05310.3, to leave out from “welcomes” to end and insert:

“notes the findings of the International Energy Agency’s World Energy Outlook 2012, which states that no more than one third of proven fossil fuel reserves can be consumed without losing any hope of constraining climate change to 2°C; notes also that the fossil fuel industry is largely valued in relation to reserves; considers therefore that the industry is dramatically overvalued and that there is great danger for Scotland in allowing such an overvalued industry to continue to play a central role in the economy; recognises that the transition from fossil fuels to renewable energy is urgent but cannot be accomplished overnight, and calls on the Scottish and the UK Government to adopt a long-term approach to fossil fuels that would result in a substantial portion of existing reserves remaining unused, to end the support for exploration for new reserves and to invest much of the remaining revenue from the fossil fuel industries in a public renewable energy business that can generate revenue for the public purse without destroying the life chances of future generations.”

Photo of Mary Scanlon Mary Scanlon Conservative

I thank the minister, Fergus Ewing, for his measured approach and commend him for his positive and constructive partnership with the Westminster Government. I am sure that the industry, too, will welcome that approach.

I was pleased to hear what Rhoda Grant said, and I support her amendment. However, I noted from the Oil & Gas UK briefing that the safety record in the North Sea is better than that of the retail industry. Therefore, I question some of the points that have been raised.

We are pleased to participate in this debate on oil and gas, and I confirm at the outset that we will support the Government’s motion and the Liberal and Labour amendments. I will leave my very capable colleague Alex Johnstone to deal with the Green amendment. That pleasure is all his.

Given that 200,000 people are employed in the oil and gas industry and that it contributes £32 billion to the United Kingdom balance of payments, it is only right that the Parliament acknowledges and values the excellent work of the sector. As a member for the Highlands and Islands, I acknowledge the sterling work that is being done at the Nigg Skills Academy.

I am old enough to remember when the oil industry started in the north-east. In the late 1960s and early 1970s, the predictions were that we would be extracting oil from the North Sea for about 25 to 30 years. We are now 40 years on and we will still be taking oil and gas from the North Sea for some time to come. As Tavish Scott said, we have platforms that were built for the initial period and whose lifetime has been significantly extended. As other members have said, there have been many changes over the period. Technology has changed out of all recognition—for example, we now have horizontal drilling. In 1972, the price of oil was $3.50 a barrel, or around $18 in current prices, compared to today’s price of $111 for Brent crude.

I want to highlight some recent estimates relating to oil and gas in the North Sea. Revenues are undoubtedly difficult to predict because of erratic prices and levels of production. There have been significant recent outages, including the Elgin leak, which has resulted in production falling by more than 12 per cent. According to the centre for public policy for regions, the cumulative fall in production since 1999, which was the peak year, is now well over 60 per cent. The Office for Budget Responsibility’s North Sea tax revenue forecasts for the period post 2011-12 have almost halved in the past 18 months, although higher capital investment should help to extend production in future years.

Gas production is set to be 13.7 billion therms in 2017-18, which is a fall of 46 per cent from the 25.5 billion therms that was achieved in 2008-09. Oil and gas projections from the Treasury budget and the autumn statement clearly signal a gradual decline in total tax revenues from 2013 onwards. As a result, the current forecast for North Sea tax revenue from 2012 to 2016 is half the level that was forecast 18 months ago.

Along with the CPPR research and predictions, the work of Professor Alex Kemp at the University of Aberdeen highlights the erratic and unpredictable nature of North Sea oil and gas production. In a recent paper, he highlights the comparison between the peak of revenues of £28 billion in 1984-85 with the low of £1 billion in 1992. In the past 20 years, the average has been about £6 billion per annum. Professor Kemp estimates that there are between 11 billion and 35 billion potential barrels of oil remaining and that future tax revenues in the next decade will be about £5 billion to £10 billion per year. Of course, the £34 billion investment for decommissioning must be brought into the equation, in terms of capital infrastructure and jobs.

It is important to emphasise the figures that leading economists and research organisations have given, particularly in the lead-up to the referendum, when people across Scotland are looking for accurate figures on which to base their decisions. In February last year, the First Minister stated that there were 24 billion barrels of oil left in the North Sea—most people would agree—which he said were worth more than £1 trillion. This month, he stayed with the figure of 24 billion barrels of oil, but the value has now risen to £1.5 trillion, which is a 50 per cent increase in less than a year. I find that rather odd, given that the price of Brent crude in February last year was $121 and this month it is $111. The amount of oil in the North Sea still to be extracted remains the same and the price of oil falls by $10 a barrel over the 11-month period, yet the First Minister claims that last year’s £1 trillion-worth of oil is now worth £1.5 trillion.

Photo of Mary Scanlon Mary Scanlon Conservative

That is the sort of misinformation that the people of Scotland do not want in the lead-up to the referendum.

The Deputy Presiding Officer:

The member is closing.

Photo of Mary Scanlon Mary Scanlon Conservative

If Mr Stevenson would be quiet, I would find it easier to concentrate on my speech, Presiding Officer.

The Deputy Presiding Officer:

I am afraid that you must close, please.

Photo of Mary Scanlon Mary Scanlon Conservative

In the lead-up to the referendum, it is worth noting that oil and gas revenues account for 0.7 per cent of UK gross domestic product, compared to 17.7 per cent of Scottish GDP.

The Deputy Presiding Officer:

We move to the open debate, and I call Maureen Watt to be followed by Lewis Macdonald. We are very tight for time, so you have up to 6 minutes. Less would be more.

Photo of Maureen Watt Maureen Watt Scottish National Party

I welcome the opportunity presented by today’s debate to recognise the contribution of the oil and gas industry to the Scottish and UK economies. I sometimes think that, because the bulk of the oil and gas activity is centred in the north-east of Scotland, which is remote to some, too many people do not appreciate the huge contribution that the industry makes to the economy. Indeed, successive UK Governments have been keen to fill their coffers with tax revenues from oil and gas—£300 billion in the past 40 years—but they have had very little understanding of the industry and its requirements. David Cameron admitted as much in a visit to Aberdeen last year.

That is why I congratulate the minister on the huge amount of time and effort that he has put into understanding the industry. I know that that has been much appreciated. The oil and gas strategy that he mentioned has been well received, and I thank all those in the industry who took the time to input to that strategy.

When I entered Parliament in 2006, too many here and in the other place were content to peddle the myth that the industry was in terminal decline and to discourage youngsters from entering it. Today, the industry is in one of the best boom periods that I have known, and I have seen and worked in the industry in bad times as well as in good times. I am glad that the current Scottish Government and the industry have done much to turn round that perception and recognise that 24 billion barrels of oil are still to be recovered from the North Sea. They have a value of more than £1 trillion. I do not quite understand what point Mary Scanlon was making, other than to suggest that an independent Scotland could not handle the volatility of the oil price, which is plainly rubbish.

Photo of Maureen Watt Maureen Watt Scottish National Party

Not at the moment.

I thank ACSEF—Aberdeen city and shire economic future—and other organisations that have given members their briefings. According to ACSEF, the oil and gas industry contributes £7 billion in exports, £13 billion or one quarter of all corporation tax collected in the UK, and £6 billion in corporate and payroll taxes. Oil and gas activity from Aberdeen city and shire accounts for 15 to 16 per cent of gross domestic product, and it is vital that the right conditions are in place for Aberdeen and the north-east of Scotland to continue to be the hub for oil and gas in future, and that, with independence, the whole of Scotland begins to reap the benefit of this resource.

The oil and gas industry supports approximately 450,000 jobs in the UK, half of which are in Scotland. It is therefore important that the expertise that has been developed in the north-east is retained in the north-east and in Scotland. It should be used in the North Sea and overseas, and in other fields such as renewables. Many oil and gas firms are already involved in those other fields.

As Rhoda Grant said, a recent PWC report suggested that the oil and gas industry might have to find another 120,000 workers during the next 10 years. Many oil and gas companies are currently recruiting large numbers of people. I am heartened that our learning institutions in Aberdeen and beyond have embraced the concept of the oil and gas academy and I hope that the whole industry will get involved with that. It is quite unsustainable for companies within the industry to carry on poaching employees from one another, thereby driving up salary costs, rather than taking on apprentices and giving opportunities to highly trained graduates from our universities.

I pay tribute to all the men and women who work in the industry—although there are not nearly enough of the latter—onshore and especially offshore. We should make no mistake about it: those people work in a very risky industry. I know from experience what it is like to travel offshore in a helicopter, and I have seen at first hand the work that is done on the drill floor and derrick. It can be scary. That is why safety is always at the forefront. Although the current helicopter situation is costing the industry millions, it is vital that all the safety issues surrounding helicopters are resolved so that workers can confidently use that method of transport offshore.

The perception that high salaries and wages are paid in the industry is correct—it is a risky industry. Nonetheless, I highlight one of the unique challenges faced by the industry. Everyone agrees with the introduction of automatic enrolment into pension schemes. It was only in the late 1980s that the company that I worked for introduced a pension scheme. However, the law firm Pinsent Masons recently warned that the nature of the oil and gas industry, which extensively employs contractors, and rotators, which is when employees are sent overseas, while people are brought into the UK on short-term assignments—the UK Border Agency does not comprehend the damage that it is doing in that area—presents particular challenges with pensions. I have written to the Minister for Pensions at Westminster on the issue and I hope that Fergus Ewing might raise it with his UK counterparts when he next meets them. I support the motion.

Photo of Lewis Macdonald Lewis Macdonald Labour

It is right to celebrate successes and opportunities in oil and gas, but it is important also to remember that those successes and opportunities have come at a cost. When we last debated oil and gas, in November 2011, I spoke of the impact of the Piper Alpha disaster 25 years ago, which Rhoda Grant and others have mentioned. Offshore workers have died in the intervening period; indeed, a support vessel crewman died at sea only a few weeks ago. However, there has been a step change in safety since 1988 and the gains that have been made in that time must not be taken for granted.

Before Christmas, the Scottish Parliament cross-party group on oil and gas heard from Terry O’Halloran, who is a safety representative of the offshore workforce that is taking part in the investigation into the causes of the two helicopter ditchings in the North Sea in 2012. He and his colleagues told us about the work that is under way, and they confirmed that the manufacturers and operators have agreed that the helicopters in question should be grounded for as long as it takes for the causes to be found. That is what it means to put safety first; not warm words, but firm actions, even if they come at a cost to business profits and Government revenues, because those financial costs matter less than the human costs of getting it wrong.

I welcome the further development of a Scottish oil and gas strategy. When Parliament first debated oil and gas, in Aberdeen in May 2002, I said that we were only halfway through the life of the industry and that we had a shared priority

“to secure the benefits for enterprise and employment in Scotland of extracting the remaining resources”—[Official Report, 29 May 2002; c 9274.]

from the North Sea. That is still true today.

Aberdeen and Grampian Chamber of Commerce published in November its latest oil and gas survey of its 400 member companies in the sector. Skills gaps and difficulties in recruitment came up time and again. The chamber of commerce highlighted the need for progress with the energy skills academy, with

“appropriate resources from both the private and public sectors.”

That must mean investment by the Scottish Government and the Scottish Higher and Further Education Funding Council in the oil and gas academy of Scotland, which is a new initiative that is being developed by the universities and colleges in and around Aberdeen. Investment in OGAS at this critical time can help to secure the position of Aberdeen city and shire as the leading centre of excellence in oil and gas outwith North America, second only to Houston on the world stage. It would help oil and gas today, and would also help to build a strong platform for development of offshore renewable energy skills and capability in the future.

I welcome Fergus Ewing’s renewed commitment today to working in partnership with the UK Government and industry through PILOT. That is essential to tackling the barriers to maximising production and to maintaining the highest safety and environmental standards.

Last month, Professor Alex Kemp at the University of Aberdeen produced his latest report on potential production of oil and gas. In his view, to extract even half the remaining potential reserves in the UK continental shelf would require a continuing high oil price and increased levels of exploration, enhanced production from existing fields, fewer shutdowns, improved access for new operators to other companies’ pipelines, and investment to extend the life of existing infrastructure.

Those are not simply technical problems for economists and engineers to resolve; they go to the heart of the issues of safe working offshore and potential future production. We can achieve nothing in relation to either if issues including ageing infrastructure are not addressed in good time—as the minister acknowledged and as Tavish Scott emphasised. Although new technology such as horizontal drilling will enable harder-to-reach oil and gas reserves to get to market, much of it will still find its way onshore via production platforms and pipelines that are now 40 years old. Maintaining that infrastructure and affording the new technology depend on the price of oil and uncertainty about future costs and returns.

With oil at $111 a barrel, Aberdeen will continue to lead the world in developing new technologies to extract oil and gas in a most hostile environment. However, that innovation is dependent on price and is focused on production. It is vital that safety is not compromised in the extension of the working lives of production platforms and pipelines, which is why the step change in safety must be protected and why the industry’s growing willingness to be open and transparent is so important.

I commend Eurocopter and the helicopter safety steering group on their willingness to put safety first when it comes to journeys to and from workplaces offshore. It is just as important that accidental releases of hydrocarbons are now routinely publicised on Oil & Gas UK’s website and that the industry body’s step change in safety has led it to include elected safety representatives from the offshore workforce. Those changes suggest that the industry recognises what its future priorities have to be and that a safe and sound working environment is the key to greater production, revenue and profits. It knows that untapped reserves will stay beneath the sea bed unless they can be extracted safely, efficiently and in an environmentally responsible way. None of that can be taken for granted.

If people are asked to go to work in such a hostile and hazardous environment—Tavish Scott rightly highlighted the particular challenges that will be associated with the developments west of Shetland—those people should be confident that they have the support of Parliament and all of us in putting their safety first.

Photo of Kevin Stewart Kevin Stewart Scottish National Party

We have already heard some statistics relating to the oil and gas industry, but I will go over some of them again because it is vital that everyone in Parliament recognise the importance of our oil and gas industry. It provides 196,000 jobs in Scotland; it makes a £32 billion contribution to the balance of payments; it accounts for £7 billion in exports; it contributes £13 billion pounds in corporation tax—a quarter of the total that is collected in the UK—and £6 billion in corporate and payroll taxes; and there are 24 billion barrels of oil, worth £1.5 trillion, still to be recovered. That shows the importance of the industry.

However, for those of us who come from the north-east—Aberdeen loons like me—it means much more than that, because a great many of our family and friends are employed in the industry. Earlier, when Mr McDonald asked Mr Harvie what he would do with the oil and gas industry, which Mr Harvie seems to be keen to get rid of, Mr Harvie responded, “Transition”. I have to say to Mr Harvie that it would be a huge transition, because according to Aberdeen city and shire economic future, 77 per cent of direct employment in Aberdeen city and shire is attributable to the oil and gas industry.

Photo of Patrick Harvie Patrick Harvie Green

This is a phenomenally difficult problem, but it is a problem for both of us. The SNP does not imagine that oil and gas resources will last forever. Where does Kevin Stewart think Scotland’s income will come from after Fergus Ewing’s 40 years of oil and gas extraction have finally come to an end?

Photo of Kevin Stewart Kevin Stewart Scottish National Party

A 40-year period is a huge amount of time in which to achieve a transition, and we are undergoing that transition. It will take a long while to get renewables on stream, and the skills that we are discussing are transferable, as Rhoda Grant has said.

Scotland has a huge part to play in the industry—not only in the next 40 years, but beyond that, in terms of the expertise that we can give to other places in the world. At this moment, my brother is working in Indonesia, my father works in the supply chain in Aberdeen and my brother-in-law works to the west of Shetland. I could go on and on and list a huge number of family and friends. That shows how important oil and gas are to the north-east of Scotland and beyond.

I agree completely with the comments that Rhoda Grant, Lewis Macdonald and Maureen Watt made about safety. Like thousands of others throughout the country, the first thing that I did when I heard about the recent ditchings that took place was phone home to ensure that my own kith and kin were not involved. Lewis Macdonald was absolutely right to say that safety comes first in dealing with the helicopter situation. I am really glad that the industry is working with the health and safety representatives in trade unions and has taken a responsible attitude in that regard. I am sure that that will continue. It is right to highlight the importance of the step changes that have been made. The industry, the unions and the health and safety representatives are to be applauded for it.

I cannot agree with Rhoda Grant on the tax regime. The greatest danger to the oil and gas industry is the recent United Kingdom tax regime. As has been pointed out, the Chancellor of the Exchequer announced without consultation a tax hike on oil and gas production; the supplementary charge went from 20 to 32 per cent. There has been a welcome U-turn on that, but it was all really cack-handed.

Photo of Kevin Stewart Kevin Stewart Scottish National Party

I do not have any time. I am sorry.

The Aberdeen and Grampian Chamber of Commerce oil and gas survey that was published in late 2012 noted:

“confidence in the stability of the UK tax regime remains low.”

I am sure that the tax regime in an independent Scotland will recognise the value of the industry to our country and will create the stable tax regime that is required.

We have a huge amount of competition from elsewhere in the world—Houston, Abu Dhabi, Kuala Lumpur and Perth, to name but a few places. We must ensure that investment in the industry continues and that the skills gap is filled. That is why I am so pleased that we will have an energy skills academy. I am sure that the institutions in the north-east of Scotland will play a vital part in it.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

I will pick up on what my colleague just said. Banff and Buchan College, which is based in Fraserburgh and elsewhere and is part of the energy skills academy, is a welcome addition in employment and in supporting what the industry needs in the way of skills.

The energetica corridor extends from Aberdeen up to Peterhead in my constituency. It will be an important axis for the next generation of energy, just as it has been in the exploitation of oil and gas resources off our coasts over the past decades. That axis has largely insulated the north-east of Scotland from the economic downturn. If members go to Aberdeen, they will see an environment that is different from almost all the rest of Scotland, so we value the industry highly.

Hydrocarbons, about which we have been talking and of which we have many decades yet to come, are not only used to generate electricity and to power transport but are important as a chemical feedstock. One of the things that we will see over the period of our exploitation of that natural, but limited, resource is a move away from using it for transportation and generating electricity.

Photo of Patrick Harvie Patrick Harvie Green

Does Stewart Stevenson worry—as I do—that the MSPs who stand here to debate such issues in the 2050s will curse us for burning the hydrocarbons that they will consider too valuable to burn?

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

We must map our transition not just in Scotland but across Europe and the world. A huge economic and environmental opportunity comes from the development of carbon capture and storage not simply for us, but as an exportable technology and a technology that we can use our engineers to support.

I have discussed that subject on a couple of occasions—for example, with ministers in the Polish Government. In Poland, 90 to 95 per cent of the electricity comes from coal or lignite, which is not just CO2 polluting but is hugely sulphurous. We could play a key role in helping countries such as Poland to address their issues, because their transition to a different world will be much lengthier and more difficult. That is not simply a matter of economic imperative; it also has an environmental benefit.

We have heard a bit about the need for certainty, about which I will say a few words. The chief corporate officer of Iberdrola, Keith Anderson—he also heads ScottishPower Renewables, so an intimate link across the energy sector exists—captured the issue for the industry when he said:

“Give the clarity now and let us understand the mechanism and you will see the investment come through in an orderly fashion.”

That was in the context of the Energy Bill, because the industry is uncomfortable about what it sees—it wants such certainty.

Another interesting aspect is whether the way forward depends on fracking. I particularly tak tent of Charles Hendry, who was the UK energy minister—I know that our minister knows him well. Charles Hendry pointed out that shale gas is very unlikely to play a significant role in the UK. The reasons for that are partly environmental and partly economic. Shale gas just will not make sense in the UK, so there will be a fundamental and continuing role for renewable energy and huge economic opportunities for us.

Rhoda Grant raised proper questions about the transition to an independent Scotland. I popped out of the chamber, Presiding Officer, to get the factual information that I knew that I had online. Since 1946, the UK Government has passed 23 acts of independence, so it is quite experienced in that. All the acts are short—the longest is eight pages long. The legal transfer is almost invariably expressed in the following terms:

“Subject to the provisions of this section, the existing laws shall, notwithstanding the revocation of the existing Orders or the establishment of a Republic”—

I am quoting the legislation for Kiribati—

“continue in force on and after Independence Day”.

Legal certainty is available at that level.

The question was posed: what happens to contracts? It is worth saying that legislation by Parliaments trumps contracts but, in any event, contracts in the commercial world are rarely without a provision for novation, which is about the transfer of the purchaser or the supplier to another party. That applies in commercial terms.

There is no difficulty about the mechanics of the transfer. The issue is whether, post-independence, the Scottish Government would be motivated to maintain the certainty and an environment that would be internationally competitive for the investments that we need and which would enable the industry to have a long-term future with us. When we look at the economic benefits that we derive in our communities in north-east Scotland and elsewhere, beyond peradventure the answer is yes.

Photo of Richard Baker Richard Baker Labour

I very much welcome the chance to debate the oil and gas industry’s role in Scotland and I endorse the minister’s motion. The debate is useful. As several members have said, those of us who represent the north-east are, of course, keenly aware of the industry’s central role in Scotland, not only in giving Aberdeen its status as the energy capital of Europe but in being the key driver of the wider Scottish economy. Its future is vital to us, and Parliament’s role must be to ensure that the industry plays a central role in our economy for many years to come.

Of course, there will be debate today about where the levers of power should lie in forming policy for the industry, but the fact is that in the crucial issues for its future—ensuring that we have the skilled workforce that the industry needs and, in doing so, promoting a culture of safety; encouraging more of our young people to pursue careers in oil and gas and the energy sector more widely; and developing an infrastructure in Scotland and the north-east to support the long-term future of the industry—Parliament already has the key role. That is increasingly realised in the industry as well—particularly through the work of the Scottish Parliament cross-party group on oil and gas and at events at which we have had the chance to engage with the industry.

Taxation is certainly a key issue when we discuss the prospects of oil and gas businesses. On the other side of the argument, Neil Findlay raised the impact of a cut in corporation tax—which is the Scottish Government’s policy—on revenue from the industry. However, the other major concern that we all hear again and again from the industry is that we need to ensure that we have the skilled workforce that the industry needs in the long term—both in the oil and gas sector, as Lewis Macdonald said, and in our energy sector more widely, including renewables.

That issue is also highlighted in the excellent briefing that we received for today’s debate from Aberdeen and Grampian Chamber of Commerce. Too often, we hear that firms cannot get people with the skills that they need, which not only threatens the ability of oil and gas businesses to maximise their economic impact in the North Sea, but represents an opportunity cost, especially for the young people who could be taking up excellent career opportunities.

I am sure that the minister is aware that good work is being done to tackle those issues by organisations such as OPITO and in our schools by the your future in energy initiative, which is running a programme of events at Northfield academy next week.

It is regrettable, however, that some of the Scottish Government’s actions run counter to tackling the problem. The further education cuts are outwith the minister’s bailiwick, but they are certainly affecting our local colleges in the north-east and will make the goals more difficult to achieve. The announcement by ministers that an energy academy is to be established is welcome, although we are still to get clarity on what the long-term funding arrangements for the academy will be and where it will be based. Particularly for all of us who represent the north-east, it is a no-brainer that, although the academy’s work will involve institutions across Scotland, the sensible place to base its leadership is in Aberdeen, because it is Europe’s energy capital and an industry hub, and because our four local academic institutions have joined together to develop exciting plans for the work of the academy. I hope that we will soon have more clarity from ministers on the north-east’s role in what is a positive and important development for the industry.

I, too, will touch on the inevitability of Scotland’s oil and gas resources being part of the constitutional debate. There is no disagreement on the importance of a strong future for our oil and gas sector—although the Green Party may demur—nor is there disagreement that we have left on the UK continental shelf decades of oil production, which is of huge benefit to Scotland’s economy. We can all be confident and positive about the future of the industry in Scotland and our role in helping to secure it.

Nevertheless, that does not lead members in this part of the chamber to believe that it is sensible to rely so much on one industry to balance the books. Oil prices are strong now, but we know that they fluctuate. The north-east economy is now strong in comparison with the rest of Scotland because of oil and gas, but there have been times when that has not been the case. In 1999, one newspaper article reported thousands of job losses in the industry and reflected that, from 1985 to 1988, when the rest of the country saw economic growth, the oil industry was in the doldrums and house prices in Aberdeen were falling by 10 per cent a year. Aberdeen has weathered the storm. The city now thrives and the outlook is bright, but its past shows that it would be folly indeed to pin to the price of a barrel of oil our economic fortunes as a nation.

Photo of Maureen Watt Maureen Watt Scottish National Party

When I entered the industry quite a long time ago, the price of a barrel of oil was $20 and the recovery cost was $8 dollars. It is the difference that decides whether the industry explores or not.

Photo of Richard Baker Richard Baker Labour

Costs in both areas have gone up. My point about fluctuation still stands. Indeed, Mary Scanlon mentioned differences in price over just the past few months.

We know that with decades of oil production remaining in the North Sea, the industry will be vital to Scotland for many years to come. The previous Scottish Executive and Lewis Macdonald, when he was a minister with responsibility for enterprise, ensured that Parliament played a full role in developing policies and planning ahead, through the PILOT initiative. I am pleased that the Scottish Government is continuing that approach to developing strategy in order to ensure that we have the policies that we need for a successful oil and gas industry in the future. I welcome this chance to discuss such important issues.

Photo of Nigel Don Nigel Don Scottish National Party

The economy of the north-east does not depend solely on the export of oil. In my constituency, in particular in Montrose, we have the opportunity to export technology and hardware around the globe in ways that will be dependent on the oil price but which will have nothing to do with how many barrels are coming through the pipes in Aberdeen.

A few days ago, I spent a wee while looking at a large hole. Politicians periodically spend their time looking down holes, but no election is due and I was looking at a sand hole. Thousands of tonnes of sand have been removed from Montrose. Why? GE Oil & Gas is about to build a big box in the hole, to push the sand to the sides. It will end up by having a deep swimming pool in which to test the trees that it will manufacture for oil sites around the world.

That is precisely the kind of activity that will fuel the economy of my constituency and Scotland, regardless of where exports are going, and which is an important part of what our industry has to give us. I must say that it is serious engineering—it is not just big stuff; the components are machined to one thousandth of an inch, and anyone who has used a lathe will know that they would rather leave that to an expert.

We have a lot of industry that puts clever stuff down pipes into the rock beneath. I also talked to Halliburton, also in Montrose, which puts all kinds of valves, filters, liner hangers and so on well below sea level, to enable what is going on down there to work, to be measured, to be filtered and to be switched off when necessary.

Of course, many people in my constituency do not work in the oil industry, but what I have seen of the oil industry in my constituency tells me that we have an export business that will last for a very long time, which is very innovative and technically extremely competent. From talking to the industries, I know that they are committed to our part of the world. They are not doubling the size of their workshops for any reason other than because they are committed to Montrose. They are putting in machine tools that cost millions, which demonstrates their commitment.

Members talked about the training that is going on. I pay tribute to the businesses and others who are taking on apprentices. I think that the industry recognises that it might have a bit of catching up to do and that in previous years it did not take on enough apprentices. Angus College and Angus Training Group—and similar organisations in Aberdeen—are seriously involved in training. Apprentices are coming in, whether they are welders, machine operators or general mechanical engineers. There is a huge amount of activity and I get the impression that there could be more. If there is one thing that I want to encourage the Government to do, it is to believe that more training could be done.

The Maritime Rescue Institute in Stonehaven, which was recently battered by storms and was mentioned in the Parliament, is training people in offshore techniques and survival in and rescue from the water. The kinds of activity that I have described are an important part of Scotland’s economy and are present in my constituency.

Members often mention the need to get youngsters interested in science, technology, engineering and maths—those hard STEM subjects—at school. Although—as has been suggested—that issue is not currently within Fergus Ewing’s bailiwick, we really must work on it. STEM subjects start at school; they may even start at home. I tend towards the view that we cannot have too many engineers, as they can do a lot of things. We cannot have too many people who understand mathematics, and they will do other things. We need to encourage our education system and our teachers to produce youngsters who have STEM subject skills and generate some enthusiasm for that type of thing. That will benefit not only the oil and gas industry but our whole society.

Photo of Mike MacKenzie Mike MacKenzie Scottish National Party

I am struck by the thought that Opposition members in the chamber this afternoon seem to have come down with a very dismal dose of January blues. First, Rhoda Grant was wringing her hands about health and safety issues, when in reality the health and safety record of the oil and gas industry is better than that of construction, farming and fishing, and—as we have heard in the chamber—better than that of retail. When we consider the hazardous nature of what the industry does, that is a terrific record, so Rhoda Grant ought to congratulate the industry rather than complain about health and safety.

Photo of Rhoda Grant Rhoda Grant Labour

The member mentioned my point, so he should give way to me.

Photo of Rhoda Grant Rhoda Grant Labour

Mike MacKenzie totally misrepresents my point, which was that the industry is a hazardous area in which to work because of the geographical challenges of where the oil and gas rigs are. When an accident happens, it has very serious consequences, and travelling to and from work is a dangerous thing. It is to the credit of the industry—and indeed of the workers and the trade unions—that there are fewer accidents and that safety is taken so seriously. That was the point that I was trying to make.

Photo of Mike MacKenzie Mike MacKenzie Scottish National Party

Yes—and as good as the safety record is, we should of course all strive to improve it.

We also heard from Mary Scanlon about when she was a slip of a lass and oil was $3 a barrel; it is now $100—or well over $100—a barrel. I am afraid that I just cannot follow the logic of the assumption that, somehow or other, oil prices will drop away and be as unreliable as she seems to suggest.

Photo of Mary Scanlon Mary Scanlon Conservative

I am not sure whether the member was fully awake at the time, but I took that figure from a Scottish Government press release by Alex Salmond, in which he pointed out the erratic volatility of the oil industry. I never made any implication or assumption that prices would fall to $3.50. If the member wishes to represent me, he should please do so accurately.

Photo of Mike MacKenzie Mike MacKenzie Scottish National Party

I did not say that Mary Scanlon was suggesting that. The point that she made very well and eloquently was that oil prices are rising steeply and have been doing so, and that that is the long-term trend. I am old enough to remember—just like Mary Scanlon—the discovery of oil and gas in the North Sea. We were told that there really was not very much oil there at all, and I am old enough to remember that we were told that it was somehow the wrong sort of oil. If it is the wrong sort, it is wrong in the sense that it seems to be a special type of oil that is always running out almost before it has been discovered.

Every year seems to bring another scare story that talks down Scotland’s oil. The reality has been, and is, quite different. More than £300 billion in oil revenues has been sent to the Treasury, and Scotland’s oil has been one big fat golden goose that has somehow survived the abuse of considerable fiscal uncertainty as successive Westminster Administrations have seen how much it can be squeezed with a sometimes careless abandon with regard to the wellbeing of industry or its future. I was therefore shocked, but not at all surprised, at the eventual publication of Gavin McCrone’s report in 2005. It was immediately evident on reading that report why it had been buried in secrecy for so long.

So much for the past, but what about the future? I am sure that the Presiding Officer and all the members in the chamber are as happy as I am to have heard in today’s debate that the future of Scotland’s oil and gas sector looks very bright indeed, with the prospect of 24 billion barrels of oil still to come and a wholesale value of £1.5 trillion. So much for Scotland’s oil running out. That equates to about 40 per cent of oil by volume still to come, and at least 50 per cent of oil by value. By any measure, that is still a considerable resource indeed. It is a good-news story that all Scotland’s politicians should be talking up, and for more than one reason.

Recessions are mainly about the loss of confidence and, although the current one was precipitated by the banking crisis, nevertheless it continues only because of a loss of confidence. At some point in the economic cycle, confidence always returns, so there is a sense in which we can literally talk ourselves out of recession. For ideological reasons it may suit the Tory agenda to talk up our economic difficulties, but that is the opposite of what we should be doing.

Scotland’s oil and gas industry deserves to be talked up for yet another reason.

Photo of Elaine Smith Elaine Smith Labour

You are in your last minute.

Photo of Mike MacKenzie Mike MacKenzie Scottish National Party

In these days of unemployment—and, especially, youth unemployment—we hear of significant skills shortages in oil and gas, yet we also hear that young people are reluctant to embark on careers in the industry, despite the prospect of rewarding employment. One good reason for that is that we continually see scaremongering in the press and media about uncertainty in the industry. No wonder young people are reluctant to contemplate careers in oil and gas.

It is not oil resources that are unpredictable so much as it is UK Government policy. As far as Scotland is concerned, let us hope that the UK management of those resources comes to an end soon. Scotland’s oil and gas reserves certainly deserve to be talked up as being a valuable economic resource—all the more so with the exciting development of carbon capture and storage just around the corner.

The Deputy Presiding Officer:

Thank you very much.

Photo of Claudia Beamish Claudia Beamish Labour

Although I agree with previous speakers that the oil and gas industry has been of tremendous economic benefit to Scotland and the UK as a whole, members perhaps will not be surprised that, in my capacity as shadow minister for the environment and climate change, I would like to draw attention to the detrimental impacts fossil fuels have had and will continue to have on the global environment and to pose some questions about long-term strategy.

The oil and gas industry will continue to play a significant role in providing employment and attracting investment in Scotland, but one cannot help but recognise that it is a finite resource—in spite of members’ points today. As we are continuously told by the Scottish Government, Scotland is a world leader in renewables technology, and I certainly would not wish to dispute or undermine that claim. That being the case, it seems that we should concentrate more on moving transferable skills to the renewables industry from the oil and gas industry to ensure the long-term health of the Scottish and British economies. As Stewart Stevenson said, we have to map our transition, and I would like to hear more from the minister about that transition and what the plans are for it.

Does the Scottish Government’s “Oil & Gas Strategy 2012-2020” sit well with the Scottish Government’s commitment to a low-carbon economy? I am pleased to see that the strategy contains provisions to create opportunities for supply chain companies in the offshore and carbon capture and storage sectors.

The increase in oil recovery is very welcome, as the minister highlighted. In the context of climate change, the UK CCS demonstration projects are deeply significant, as highlighted by my colleague Rhoda Grant and others. It is disappointing that the UK Government is cutting funding to those demonstration projects and it might be helpful if the minister could update us on that, especially as one of the projects is to be in the gas sector.

One of the more striking elements of the oil and gas strategy is the intention to help expand the oil and gas industry abroad, with Brazil, west Africa and others being cited as recipients of support from Scottish Development International.

I believe that the Scottish Government—though no doubt with good intentions—has missed the central point: that we work with other countries to reduce emissions rather than increase them. Indeed, when I spoke to our Minister for Environment and Climate Change on his recent return from the international climate change negotiations at Doha, I was pleased to hear his thoughts on the progress of negotiations and his continuing commitment to reduce carbon emissions in Scotland, so as to set an example to the wider world. How does that ambition sit with increases in oil production in the longer term?

Indeed, members will be only too aware that this very chamber recently passed legislation committing the Government to emissions reduction targets under the Climate Change (Scotland) Act 2009. Now that we have unfortunately failed to meet the first annual targets for decreasing emissions, I am concerned about the oil and gas industry’s impact on the next annual targets. The contradictory nature of these competing aims must have occurred to the Scottish Government; strengthening the oil industry in the long term and reducing carbon emissions surely cannot sit comfortably together. The Rural Affairs, Climate Change and Environment Committee will soon be scrutinising the draft second report on policies and proposals, and many share the view that we need to shift transport modes away from oil and that, as well as cutting fuel poverty and the high demand for oil and gas in house heating, energy efficiency measures will be key to cutting our emissions. In Rhoda Grant’s words, we need to loosen our dependence on carbon in the long term.

On the future of fracking, a range of legitimate concerns have been expressed about the expansion of this industry in Scotland and my colleague Claire Baker has lodged a motion that highlights concerns about fracking’s impact on the environment. The extraction process uses a great deal of water, which is not plentiful in some parts of Scotland—not that we would believe it sometimes—or in Britain. Moreover, the UK Government report on fracking failed to consider the potential for groundwater contamination. As things stand, there is a distinct lack of clear guidance for councils on dealing with applications from private companies. The current regulatory regime is cluttered and confusing and communities find it extremely difficult to get represented. As a result, I have backed my colleague Claire Baker’s call for the Scottish Government to introduce national guidelines to provide clarity and to stop the potential for the industry’s rapid expansion without proper scrutiny. I ask the minister to clarify today whether such guidance will be forthcoming for local authorities and, if so, when.

Photo of Brian Adam Brian Adam Scottish National Party

I am pleased to say that the universities and colleges in Scotland are going to step up to the plate with regard to skills. That is particularly true of those in Aberdeen and the north-east. I am also aware of recent mergers and acquisitions. Such moves can sometimes be controversial, but they show a measure of confidence in the industry.

There is also international momentum. The minister referred to Talisman, which recently concluded an agreement with a company owned by the Chinese Government. Both companies are international, and I have to say that it is a sorry state of affairs when, despite that kind of international confidence in the industry’s future, we have doomsayers who want us to say no to such developments.

It is interesting, too, that Scotland’s international supply chain is continuing to invest in the future. I am delighted to see that there is confidence going forward. It is also interesting that there has been such interest in the recent release of fields for exploration. That kind of development displays further confidence. I think that we are as much at risk from timidity and doomsayers as from anything else, and we should be very careful in that respect.

I would like to make a particular reference to carbon capture and storage. We should not be left behind. Others are trying it, and it will be applied in the North Sea, so why should we not benefit from research? Mr Harvie would like us to say “No more oil and gas”, but we cannot do that, so I do not agree with him.

Photo of Mark McDonald Mark McDonald Scottish National Party

I am aware that time is tight and the length of speeches for final speakers has been reduced, so it is not my intention to take interventions.

I should first declare my interests in the subject. My brother is employed in offshore health and safety, and my father owns and operates a business in the supply chain in the north-east.

I start with the supply chain and indirect employment. We often focus on those who work offshore or who are directly employed by oil companies, but there is a vast network of companies, businesses and jobs in the north-east that are dependent on the industry. It is not as simple as looking only at the companies that directly supply the industry; members need to consider, for example, the shops, hotels and other facilities within the area that depend on the industry for their income and their survival.

My colleague Kevin Stewart made the point that the transition needs to take time in order for it to bed in. I say to Patrick Harvie that that is a valid point because so much of the infrastructure is dependent on the sector and it is not just a simple case of making the transition quickly.

Having said that, I agree that the skills are transferable between the oil and gas and renewables sectors. Indeed, from the discussions that I have had with oil and gas sector representatives, it is clear that they are aware of the transferable opportunities and what those could realise for their businesses. They recognise that they operate within a sector that will not be around for ever due to the finite nature of the resource, but they also recognise that their businesses, companies and expertise can be around for ever if they diversify and take advantage of the transferable opportunities.

We have an extremely good and strong safety regime in the North Sea. Unfortunately, it has too often been shaped by tragedy. It has often been the case that the reaction to tragedies, such as those related to Piper Alpha or helicopter ditching, has resulted in good work being done by the industry and the unions to ensure that the health and safety of those working in the sector is paramount.

On the economic argument of the value of oil and gas, I noted the comments made by Kenny Paton, oil and gas partner at Bond Pearce, in the Aberdeen and Grampian Chamber of Commerce report:

“With a grim economic picture elsewhere in the UK Aberdeen is bucking the national trend. It is a beacon of activity attracting all sorts of professions seeking exposure to this market from accountants to IT and, of course, legal as well as those more readily associated with the industry.”

The fact that Aberdeen was the only part of the UK that grew during the recession demonstrates how important the sector is not only to the north-east but to the wider national economy.

I was interested in Mary Scanlon’s comparison of the value of oil and gas revenues and her statement that they account for only 0.7 per cent of UK gross domestic product. In that case, the UK will not miss them after 2014.

Skills shortages exist in the oil and gas industry, and the Aberdeen and Grampian Chamber of Commerce is doing work to address them. The skills survey identified that 68 per cent of contractors and 75 per cent of operators reported experiencing problems in recruiting suitable employees in particular occupations.

In my discussions I have noticed that there is a significant recruitment gap. A number of people are due to retire and, although there are significant numbers of new entrants into the workforce, there is a gap in the middle that needs to be filled. The difficulties faced relate to the existing immigration rules and controls that the UK Government is putting in place and which make it difficult to import skilled workers from elsewhere to come and work in the north-east and rest of Scotland. It is vital that those difficulties are addressed appropriately.

When I attended the recent your future in energy event in the north-east, at which young people from schools were given the opportunity to learn more about the oil and gas sector, I found it interesting how few of them understood the sector, even when they had parents and family members who worked in it. That spoke of an industry in which people do not share their experiences to a large enough extent.

That takes us back to the skills shortage argument. In the past, many have been put off a career in oil and gas as a result of unfortunate scare stories and tales of woe about the industry and its future viability. We finally have a consensus on the future viability of the oil and gas industry such that young people know that they can enter the industry when they leave school and have a full career in it if they wish to do so. If those truths had been told back in the 70s and 80s, we might not have been facing the skills shortages that we face now and our nation might have seen much more economic benefit as a result.

The Deputy Presiding Officer:

We move to the winding-up speeches.

Photo of Patrick Harvie Patrick Harvie Green

Members will appreciate that, from my point of view, the debate has been full of contradictions. The industry is one that is full of contradictions: it is an industry in which the recovery of a resource means the burning of that resource and in which managing a resource means consuming it as quickly as possible. This is a debate in which we can recognise the vital role that a particular source of income has for the public purse, but in which most members agree that they want to get through that as quickly as possible, as though there is no tomorrow. It is also a debate in which rhetoric about world-leading climate change legislation goes right alongside “It’s Scotland’s oil” rhetoric.

The central contradiction that I sought to highlight in my opening speech and in my amendment is between the 2°C target that we have set to give our world a reasonable chance of having a sustainable future and all the consideration of how many jobs and how much money can be made from burning through the fossil carbon as quickly as possible. It is the contradiction between the low-carbon economy that we have all said that we want and the ever-increasing supply of fossil fuels and therefore the ever-increasing release of fossil carbon into the atmosphere.

In answer to those contradictions, Fergus Ewing talked about CCS, but he did so as a means of achieving ever more oil extraction through enhanced oil recovery—which basically means extracting fossil carbon for power generation, getting some of that carbon back through carbon capture and then using it to extract even more fossil carbon to put into the global economy in industries that cannot be served by CCS. All of that amounts to a continued emphasis on dumping ever more carbon into the atmosphere.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Could Mr Harvie clarify whether the Greens are against carbon capture and storage? I genuinely do not know the answer.

Photo of Patrick Harvie Patrick Harvie Green

We have not been against research to see whether it can work, but it has a limited transitional role to play. It cannot be something that we can rely on to take the carbon out of what the oil industry produces and put it back under the ground.

Rhoda Grant mentioned CCS and called for investment in new technologies to replace a reliance on fossil fuels in those industries in which CCS cannot play a role, but we are already failing to achieve our carbon targets. That is why demand reduction in, for example, transport—especially aviation—is so important.

Mary Scanlon has promised that I will get a response to my arguments from Alex Johnstone, and I look forward to that. She and Maureen Watt had an interesting exchange—a dispute—on the economic value of oil and gas, but even the SNP accepts that we are talking about a resource that will not last for ever.

I mention in passing to my SNP colleagues something that will be relevant for the next couple of years: I want Scotland to be independent for more than 40 years and to have a viable economy for more than just one generation. The SNP seems to be in denial about the long-term future. For the life of me, I cannot understand why there is an argument against having a publicly owned renewables company, which would ensure that at least a proportion of the profit from Scotland’s long-term energy resource serves the common good. What is not to like about that?

Photo of Maureen Watt Maureen Watt Scottish National Party

Is that not precisely why we need independence, so that we can set up an oil fund like Norway’s? The income from that fund is now more than the income from oil and gas in that country.

Photo of Patrick Harvie Patrick Harvie Green

That depends on what that fund would be used for. We will disagree across the chamber about the need to keep our fossil carbon, or at least a proportion of it, in the ground or under the sea. However, I ask all members, after they have voted down my amendment this evening, to consider the long term. The climate cannot wait 40 years for us to act, but even if climate change was not happening Scotland would need an economy after oil.

The building of a Scottish public renewables company would take many years. We could begin right now—this is in answer to Maureen Watt’s comment—by empowering and even expecting local authorities to use their own borrowing powers to set up local energy companies. I have continually pressed the minister to do that, but he seems unenthusiastic. We could build on that approach with the current powers that we have at local level and complete the task with the revenue and borrowing powers at national level that come with independence.

Photo of Patrick Harvie Patrick Harvie Green

I am afraid that I do not have time to take a further intervention.

Surely that is the legacy that we should be aiming to leave for future generations—a source of income for those future generations to replace the fossil fuel income that we all know will disappear, although we may disagree about when. That legacy would be not only income for future generations but a source of energy that will not destroy the prospects for Scotland’s future. It would be a legacy that would last as long as the waves and tides themselves, not one that will last only one generation.

That is the opportunity that we should be seeking to exploit. If it means exploiting a proportion of our fossil fuels to that end and leaving another proportion where they are—where the fossil carbon belongs and ought to stay—that is the opportunity that we should be looking to for the future.

Photo of Tavish Scott Tavish Scott Liberal Democrat

I used to think that there would be a few challenges in holding together all the parties that believe in keeping the United Kingdom together but, after that speech and the attacks on Mr Harvie by his “colleagues” in the SNP, I think that it will be a piece of cake.

We were doing quite well on the constitution until all the back benchers got going on it. Stewart Stevenson said most about it, and I will deal with his arguments because he made the legal argument—he got his researcher to dig out some piece of legal paper that shows that various islands in the far Pacific are now independent.

If Mr Stevenson wants to have a legal argument about oil and gas, I commend to him the report by UK Economics Focus that was published last night, which says about oil and gas that there are potential complications here. For example, a significant proportion of Scottish oil lies in waters surrounding Shetland, which would put the latter in a strong position in the event of independence negotiations between Scotland and the rest of the United Kingdom. Indeed, secession by Scotland could encourage similar aspirations by Shetland.

If Mr Stevenson thinks that it is his oil, I assure him that it is wir oil first.

Photo of Stewart Stevenson Stewart Stevenson Scottish National Party

Is the member aware of the Vienna convention on successor states, which has a population de minimis that would exclude Shetland from the rights to that oil?

Photo of Tavish Scott Tavish Scott Liberal Democrat

Mr Stevenson has just excluded Shetland. I cannot wait to get my press release out on that one—SNP policy now to exclude Shetland.

More seriously, I understand that the SNP back benchers all have to attack the UK Government, no matter what the debate or what the subject is, but I found the argument that everything is awful and it is all London’s fault a bit puzzling, not least because of the commendable list that Mr Ewing, the minister, read out at the start of his speech. He pointed out, amongst other investments, that Statoil is investing £4.3 billion in the Mariner field and that Dana Petroleum is investing £1 billion in the Western Isles field. I do not think that he mentioned JX Nippon but I am sure that he would recognise the point that JX Nippon, a Japanese company, is buying Eni’s stakes in 20 fields on the UK continental shelf.

Photo of Tavish Scott Tavish Scott Liberal Democrat

I will just make these points—actually, Mr McDonald did not choose to take any interventions in his speech so I will just leave him in his place.

TAQA and SSE plc have bought £1 billion of North Sea assets from BP, so if it is all the UK Government’s fault—and it was of course every Government’s fault from 19-oatcake on—why is all that investment taking place?

Maureen Watt gave the game away, although she comes from the north-east and therefore genuinely reflects a strong sense of how important the oil and gas industry is—a view that I share. She said, however, in the context of talking about tax resources, that we look forward to “recouping the benefits” of that resource. I hope that I have quoted her correctly; I am sure that I can check the Official Report tomorrow. In the context of an independent Scotland—if that were to happen—the central belt would not do anything other than use the oil and gas industry as a cash cow.

Photo of Tavish Scott Tavish Scott Liberal Democrat

No, thank you. Judging by his contribution, Mr MacKenzie has the disadvantage of having written his speech before he came to the chamber.

I will move on to the rather more positive issues that many members have mentioned, rather than all that constitutional stuff. No wonder the oil industry simply yawns at that debate.

A number of colleagues have mentioned the ownership of fields. Something quite important is going on in that respect, not just in the North Sea, but worldwide in oil and gas. Even on our continental shelf, there have been 43 changes of ownership. Many of those changes have been small and less significant, but Chinese state-owned companies and a number of other companies—from the middle east, for example—are buying more and more North Sea assets and taking stakes in west of Shetland developments. That pattern is happening across the world, not least in the tar sands of Canada.

It is important to look at that in the context of what would happen if some of the left-wing ideas that Mr Harvie put forward on public ownership of the oil industry or the renewables industry were implemented. I am not quite clear how that would happen. Where the argument absolutely fell down was that some in the environmental movement who make that case never put any details behind what they describe as the transition over the next 40 years. We should be rather more optimistic about what is happening on renewables, not least because the development of power sources for cars, buses, boats and other forms of transport will change the high—indeed, leading—level of emissions from that particular source. Patrick Harvie rightly highlighted that.

The Deputy Presiding Officer:

You are in your final minute.

Photo of Tavish Scott Tavish Scott Liberal Democrat

To say that nothing is happening is unfortunate and simply wrong.

I want to pick up on the safety points that Lewis Macdonald made in respect of Piper Alpha. I seem to recall that Mr Macdonald opened the debate in Aberdeen back in 2002—I believe that he was the minister at the time, to spare his blushes on that—and that Brian Adam spoke very knowledgeably in it. The two helicopter ditching incidents are possibly the most important issue that the industry is currently dealing with in the context of the safety of men and women who work offshore, not least because, as it explained in the cross-party group on oil and gas, getting that right involves a fix that has the confidence of the industry and of the men and women who use helicopters into and out of Aberdeen on a daily basis. The most important message should be that that fix needs to happen.

Photo of Alex Johnstone Alex Johnstone Conservative

I welcome the opportunity to talk about the oil and gas industry and to ensure that my party shares the consistent, across-the-board approach that most parties that are represented in the chamber have demonstrated, perhaps with the exception of one, to which I may return if I have time.

Most members in the chamber understand the nature of the oil and gas industry, but perhaps that is a very well-kept secret. The truth is that the scale of the North Sea oil and gas industry and the oil service industry that has been built up around it in the north-east of Scotland is incalculable and not understood by a great many people, even from other parts of Scotland. We need to tell the world that the industry is buoyant and that, despite reduced production, it continues to grow substantially. The fact that the service industry now operates across the entire world to the extent that the economic value of that industry to Scotland is now almost 50 per cent generated outside the North Sea basin is a tribute to those who have developed businesses in the north-east of Scotland and to the expertise, knowledge and application of those who are involved in it.

Unfortunately, however, as we have heard, the industry is in terminal decline. It is our job, at this and every other level, to ensure that the decline is as slow and constructive as possible, while we continue to act as the base for a growing service industry that has the world as its market.

During the debate, we have occasionally centred too much on the idea that we need the resource that comes from the North Sea. Over time, as production falls, its value will increase to compensate. It is unfortunate that basic assumptions have been made in the debate that fail to take into account the options that the oil and gas industry has for the future. I do not agree with the idea that it is all about burning that resource. One or two members, including Stewart Stevenson, highlighted the fact that the resource that the industry produces has a value beyond that of simply burning it.

In developing a hydrogen economy for the future, it is inevitable that the North Sea oil and gas sector will be a source of raw material. We have talked about carbon capture and storage as a post-combustion option, but it is open to us to use carbon capture and storage as a pre-combustion option by producing hydrogen for another market. The technology to do that already exists and there are proposals to bring that forward. That is a transitional technology that will deliver against the green agenda that we heard about from Patrick Harvie.

As I said, we will support the Labour Party’s amendment. It is the nature of the Labour Party that some of its amendments sound a bit lefty in character, but I will not let that stand in the way, because its amendment today is accurate and true and deserves the Conservatives’ support. We can be proud of the safety regime in the North Sea, although many lives have been lost in transport and in production. All members of the Parliament must highlight the need to support that regime.

I am significantly concerned about the requirement to expand the workforce in the North Sea. Many members have spoken about the fact that surprisingly few young Scots today see the oil and gas industry as their future employer. We need to get round that prejudice and ensure that, in future, there is more confidence.

We must also ensure that we do not just provide jobs for the young people of the north-east of Scotland, because Scotland has a requirement for high-quality jobs for people from other geographical areas. We should encourage people to take the opportunity to gain qualifications and move to the north-east to take up jobs. I do not support the idea that immigration to the north-east comes exclusively from outside Scotland or the UK. We need to encourage labour mobility within the marketplace and provide high-quality young Scots for the industry in future.

I will finish by talking about the political argument that a few members have mentioned and the idea that oil will become a key issue during the build-up to the 2014 referendum, although I do not want to say too much. That is inevitable, so we need to keep the process constructive. For that reason, at this point, I do not intend to go into too much detail on my position. However, as I travel between here and Aberdeen on the east coast main line trains, I often talk to men who are travelling back to their homes in places such as Newcastle, Middlesbrough and Sunderland. From the very bottom of my heart, I find it hard to understand how those in the south-west of Scotland can claim their justifiable right to benefit from the wealth of the North Sea, but can then say that the people of the north-east of England cannot do that. Do not tell me that—I will not believe it.

Photo of Kenneth Macintosh Kenneth Macintosh Labour

The debate has been enjoyable. The clear message that we in the Labour Party want to send out—and which most parties in the chamber have united around—is that the Parliament values the oil and gas industry and recognises its importance to Scotland and the UK.

It is a simple message, but it is important to say it because political discussion of the oil and gas industry is often framed around the political debate about separation. The discovery of North Sea oil and the rise of Scottish nationalism have gone hand-in-hand. While resisting the arguments about independence, the Labour Party wants to make it clear that we see the industry as having a viable future and staying a key part of the Scottish and UK economies.

It is also an important message because the industry needs whatever certainty we can supply. That theme was developed by several members, including the minister. In fact, I found myself agreeing with virtually everything that the minister said, which was very pleasant, for me if not for him. I am intrigued to see whether the minister uses the same tone when he is winding up, but the conclusion to his opening remarks was that we need long-term certainty and we want to continue to work with the UK Government to support the industry. The Labour Party can certainly agree with that sentiment. Whether it is in the waters around the UK or in international waters, oil and gas often suffers from breaks in production, from political disruption across the globe, and from wide variations in price. In an unpredictable world, political reassurance is of importance and value to the industry.

It is also an important message because it is clear that the industry itself does not enjoy the most favourable public profile. On the whole, oil companies are viewed with suspicion and many of us deeply resent the rising prices we constantly have to cope with, whether at the petrol pump or when paying our domestic heating bills. If we add to that mix the recognition that we will have to move away from carbon-based sources of energy if we are to protect and preserve our global environment, the overall impression can be one that often comes across as quite hostile to the industry. In its briefing for today’s debate, Oil & Gas UK made the point that one of the problems it foresees for the future is:

“Poor public and political perception of the continuing importance of the industry and of oil and gas in the UK energy mix”

Of course, I do not expect many people to shed tears for Chevron, BP, Esso, Shell, or whoever.

I certainly do not wish to diminish the importance of the move to renewables, but even if we are to expand our use of renewable energy sources, as I hope that we will, we will still have to rely to a huge extent on carbon-based fuels. At the moment, the industry estimates that oil and gas provides more than 70 per cent of our primary energy needs and in 10 years’ time that will still be the case. Whatever sympathy members might have had with Patrick Harvie’s case, many of us feel that he took his argument too far. Most members were far more realistic about the challenges that are facing us and what we need to do in response. That point was made by Rhoda Grant, Claudia Beamish, and the minister himself when they talked about the importance of developing CCS technology.

Photo of Patrick Harvie Patrick Harvie Green

To pacify me and encourage me not to go so far, will the member explain to me how maximising the extraction of oil and gas is compatible with reducing carbon emissions?

Photo of Kenneth Macintosh Kenneth Macintosh Labour

It is interesting to note that, in his amendment, Mr Harvie talked about the warnings from the International Energy Agency but he did not finish the quotation. He finished it in his speech when he talked about making sure that we do not go beyond the 2°C rise in temperature

“unless carbon capture and storage technology is widely deployed”.

It is interesting that that quotation was missing from his amendment but was in his speech. That is very important. Most members emphasised our important role in helping to develop CCS technology.

I return to the importance of the industry. Many members repeated the key facts about the industry. I did not agree with everything that Maureen Watt and Kevin Stewart said, but I agreed when they highlighted the fact that the oil and gas industry is the single most important industrial sector in this country, employing more than 400,000 people, 200,000 whom are based here in Scotland. Despite the fact that production has declined in recent years, there are still confident expectations that the industry will continue to produce substantial volumes of oil for many years to come. The minister talked about much of the welcome investment, and I echo his comments about the vibrancy of the sector during these challenging times.

I would also add a caveat—which Lewis Macdonald did very well when he quoted Professor Alex Kemp—about the challenges and obstacles facing us in ensuring that we make the most of the industry in future years. We have an ageing infrastructure and exploration is important. That relies on a high oil price.

Despite the successes of the industry, it faces major challenges, health and safety perhaps being the most obvious. With the exception of Mike MacKenzie, there was unity throughout the chamber on that point. Lewis Macdonald and Maureen Watt made the point very well that although the helicopter ditchings and the suspension of flights have cost the industry millions, there is a commitment within the industry to ensure that, before the flights resume, we resolve the issue successfully.

Historically, the oil and gas industry has suffered from a reputation for being a macho as well as a dangerous and high-risk place to work. Many in the management and the workforce have worked hard through trade union representatives to overturn that attitude. I hope that the industry is right when it claims to be on course to establish the UK as the safest place in the worldwide oil industry.

Despite the industry’s success, a further challenge lies in skills and training—an issue raised by many members today. Although the industry has a record of innovation, entrepreneurial spirit and discovery, it still suffers from skills shortages. That is another reason why the industry needs to take the lead, not just in selling itself as an occupation of the future but specifically in recruiting more women, breaking down gender stereotyping—Nigel Don and Rhoda Grant both made that point—and challenging its macho image.

Richard Baker made a particularly important point, which was that while we welcome the energy academy, we need greater clarity on its location and long-term funding.

A similar challenge lies in decommissioning. I was intrigued to hear what Fergus Ewing would say today on decommissioning, given his difficulties before the House of Commons recently. However, I found myself agreeing with his remarks on decommissioning and the challenges that face us.

Tavish Scott made an important point that decommissioning itself is a business opportunity, of which many, including those in Lerwick, can take advantage.

We will vote for the Government’s motion today, and we hope that most parties, if not all, similarly support our amendment. We purposefully did not mention the independence argument in our amendment, although it was raised by many on the back benches.

I end simply with the observation to my nationalist colleagues that, just as resting our nation’s future on one finite commodity seems remarkably short-sighted, to rest their political hopes on such a fragile argument also seems risky. I particularly enjoyed Mary Scanlon’s speech, when she highlighted that, despite price fluctuations and declining reserves, the First Minister’s optimism knows no inflationary bounds.

I do not wish to end on that note. This is not about the neverendum, but a vital UK industry, which, although facing many challenges, has a clear and important future at the heart of our economy. I hope that the Parliament can send it a message of some certainty.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I have enjoyed the debate. I particularly enjoyed Ken Macintosh’s speech at the end. In fact, were it not for just two sentences that he obtruded at the very end of his speech, I would have said that he displayed the velvet vocabulary that we would expect from a Kofi Annan or a diplomat. Perhaps a future career beckons for him.

I, too, will not dwell on the debates about Scotland’s independence—something I believe in with all my heart and soul—suffice to say that we will be back debating these issues directly, head on, in due course. That is the correct thing to do.

Something has been achieved today that I do not think has been achieved before in the history of the oil and gas industry. Perhaps I am borrowing some of the First Minister’s undoubted optimism, but I do not think that there has been a debate about oil and gas in which there has been an endorsement from all the main parties participating in the debate recognising, first, the enormous value of the industry and, secondly, the fact that it has a secure and long-term future. I do not recall those two statements having been accepted across the board. Hitherto they have been the subject of claim and counterclaim. The fact that, today, both those statements have been accepted by both of the main parties is a step forward. Moreover, it will be seen as a step forward by the industry and its representative bodies.

Members will be aware that Maureen Watt is kindly hosting a reception this evening in the garden lobby that will be attended by leading figures from the oil and gas industry. I hope that all members will come along. Crawford Gillies, the chairman of Scottish Enterprise, will be there, denoting his recognition of the importance of the industry to Scotland, and Melfort Campbell, with whom I co-chair the industry leadership group, will be speaking, as will I. I am delighted that Melfort Campbell has recently been appointed to the board of Scottish Enterprise, which further strengthens the contribution of the oil and gas industry’s expertise and knowledge to Scottish Enterprise. Those are all good things.

Photo of Lewis Macdonald Lewis Macdonald Labour

I welcome the minister’s approach and tone. However, it is my recollection of the debate in Aberdeen 11 years ago—which I believe he attended—that all the major parties acknowledged the long-term future and importance of the oil and gas industry at that time, and they have done so since.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I am happy that that is the case now and I hope that it was the case in the past.

Almost all members spoke about the imperative importance of health and safety. Rhoda Grant spoke quite movingly about the 25th anniversary of the Piper Alpha disaster, and I especially want to note the speech of Kevin Stewart, who spoke about the members of his family who work in the industry. Similarly, I know that Lewis Macdonald’s brother reports on the oil and gas industry, and I hope that he does so for many years to come.

Many members—particularly those from Aberdeen and Aberdeenshire—spoke of the industry movingly and with great knowledge of their families, because the oil and gas industry is part of the warp and weft of life in Aberdeen and Aberdeenshire. I was only sorry that I did not hear the dulcet tones of Dennis Robertson because, whenever I think of Westhill, his name flashes through my cranial area.

Photo of Dennis Robertson Dennis Robertson Scottish National Party

I am delighted that the minister has recognised, once and for all, that Aberdeen and Aberdeenshire are the capital of Europe’s oil and gas industry.

Photo of Fergus Ewing Fergus Ewing Scottish National Party

I thank Dennis Robertson for that contribution. We are all relieved that he did not accept the career opportunity as a night watchman that he was offered at school.

I come, logically and sequentially, to careers advice. Many members mentioned that participation in the industry starts at school. Maureen Watt and others mentioned the importance of the STEM topics. The importance of taking the right subjects is key, but there is more to the issue than that. The industry, Government and academia must ensure that children understand the huge range of opportunities that exists in oil and gas. It is far greater now than it was 10 or 15 years ago. There is a huge range of skills and expertise, and it is important that young people maintain STEM subjects so that they do not deny themselves the opportunity of taking up careers of which they cannot be expected to be aware at the age of 14 or 15. That is why initiatives such as the Glasgow Science Centre’s offer to have all children come along to see what happens there are terrific. I would love such opportunities to be spread all around Scotland.

The provision of energy skills is a wide-ranging matter. From my fairly extensive engagement with the industry, I know that the industry expects Government to make a substantial contribution, and we do. Stewart Stevenson mentioned Banff and Buchan College. There is also Aberdeen College, Robert Gordon University and the University of Aberdeen. Last month, I met Professor Diamond and others, and I have had six or seven meetings about developing an energy skills academy. I want to ensure that there is one plan that unites the academic world, the Government and industry. That is key. We need to avoid duplication and go forward in a way that meets the needs and interests of all.

However, it is important to understand also that the industry’s needs are wider than the provision of graduates, important though they are. It looks to recruit from the armed forces. It seeks more relations with schools. It certainly looks for far more to be done to make it clear that there are massive opportunities for females as well as men in the industry. Many members picked up on that point and were right to do so.

Companies such as the Wood Group have led the way on what is called transformation training. [Interruption.]

The Deputy Presiding Officer:

Can we have order for the minister, please?

Photo of Fergus Ewing Fergus Ewing Scottish National Party

Thank you, Presiding Officer.

Transformation training means transferring skills and being retrained from, for example, the automotive industry into the oil and gas industry. With many sectors, particularly the construction industry, facing grave difficulty, it is logical and desirable that we do everything we can to enable people who find themselves redundant or simply wish to change career to have the opportunity to retrain.

That is why initiatives such as the energy skills academy at Nigg are important. I was delighted that, just before Christmas, Roy MacGregor—a proud highlander, as Mary Scanlon mentioned—announced another 400 jobs in addition to the existing 800 jobs there.

Not only that, but avid readers of The Press and Journal, such as myself, not to mention readers of The Inverness Courier, will have picked up the fact that, as well as Global Energy Group’s energy skills academy, there is a crane operator school—as far as I know, the only one in the UK—at Nigg. Dougie McGilvray set that up, and I am told that his company, Weldex, is now the 11th or 13th largest crane company in the world. The only place to learn those skills in that way, as far as I know, is in Nigg.

The skills issue is wide ranging. There is no single solution. It involves an array of answers. The industry has recognised that it needs to do far more on that front and makes no bones about that. I am working with Oil & Gas UK, Subsea UK, OPITO and the universities and colleges in the area to develop solutions to the problems.

Claudia Beamish said that we were not pursuing opportunities in Brazil. I am delighted to tell her that I am going to Brazil. [Interruption.] Members ask whether I am coming back. I am happy to lead a trade mission to Brazil in March precisely because of the large number of companies that are operating successfully not simply to extract oil from the North Sea west of Shetland but to replicate their skills, expertise and excellence all over the world. The opportunities in Brazil are enormous, so I look forward to my visit and am sure that I will enjoy it.

There is a consensus. We value the industry and what it can provide to Scotland, but I do not think that we yet fully appreciate its range and scope. A huge number of companies are involved in it. It is centred in Aberdeen, which is an international centre of excellence, as Nigel Don mentioned. For example, the GE Group is designing fields off the shore of Australia. Rod Christie, the president of that company, told me that that work is being done in Scotland because we have the best people in the world. That is why the industry is so important to Scotland.

That is why I recognise that the key challenges that are ahead of us are to meet the skills challenge in our skills strategy, address the problems of ageing infrastructure—if we do not address those problems, it could lead to the loss of £85 billion—and advance the maximisation of recovery of our assets, even if only by one percentage point, because every 1 per cent of oil and gas that we recover brings in an additional £22 billion.

The members who said that that was not a good idea—I think there was only one—will be in a small minority today. I am delighted that the Parliament will back and support the industry not only now but for generations to come.