[Sir Nicholas Winterton in the Chair] — Oil and Gas

Part of the debate – in Westminster Hall at 3:25 pm on 29th October 2009.

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Photo of Robert Smith Robert Smith Shadow Deputy Leader of the House of Commons, Opposition Whip (Commons) 3:25 pm, 29th October 2009

That is a valuable point. The pace of progress that we are making towards carbon capture and storage means that it is important to keep that infrastructure there for some time-there have been several postponements on the route to CCS. The Treasury must recognise that it has a very targeted regime-it is high-temperature and high-pressure. All the experts say that it is going to incentivise just one field in the whole of the UK continental shelf.

Ensuring that the existing platforms-the existing hubs-get incremental development has been mentioned. The enhanced oil recovery talks are welcome, but one of the quickest ways to enhance oil recovery for a platform is to get new wells drilled from that platform. The Treasury needs to consider how it can incentivise that extra development in those platforms. If the big platforms and the pipelines that connect them are decommissioned early, the small fields lying around them will no longer be worth exploiting.

The west of Shetland has already been discussed. What the Minister needs to take away today is the fact that the decision points are coming up on that project, at a time when the gas price for the industry is extremely low. A bold investment decision is required on the gas price going up between the point when the decision is made and when the gas is needed. Every encouragement, therefore, is needed for the west of Shetland. That encouragement is psychological, because if the province were unlocked more fully, that would send a positive message about the vibrancy of the UK continental shelf, and support the supply chain that would still be there for the more incremental developments in the remaining part of the North sea.

One of our recommendations that the Minister did not touch on was the acceleration of payment of tax allowances to try to deal with the bank cash-flow crisis. The hon. Member for Sherwood made the valid point that, although the Government replied that they have a global strategy for dealing with the banking crisis-that is a recognisable part of the strategy-in the car sector, it was not just left to the banks to sort out the sector's problem. A lever has been identified by the industry, which the Government could use in that industry, which is important both for employment and strategically. The Minister should take back to the Treasury the need to look again at that matter, to ensure that it is doing everything it can to overcome the cash-flow crisis, which is stifling potential developments. He should take back the message to the Treasury, "No shocks in the pre-Budget report this November". Again, stability is the watchword for getting investment into the industry.

We have the pipes and platforms, but if other investors coming into the North sea cannot access them, we are not getting the benefit. It could be said that we might not start from here and that we do not have the regime we need for now. The regime started off all right with big players coming in. People thought that the North sea had a short life cycle, and did not see the need to build in some of that infrastructure. The Gulf of Mexico has a much more effective regime for handling access to infrastructure, and the Department may need to dangle even more tough talk about how it will come back to the issue to incentivise the owners of that infrastructure, so that they see that it is in their interest to unlock it efficiently to small players, rather than have the Government come in and do that for them.

The wider public need to understand that, at this point in the life cycle of the North sea, it is smaller, new companies that are bringing in that investment opportunity, and the innovation and excitement to unlock the smaller finds. However, they will not keep coming here if they keep hearing stories about how the person ahead of them in the queue got everything else lined up, but when it came to getting the stuff ashore could not find a practical way to do it, even though it looked as though there was an obvious solution there. Unless we can unlock the infrastructure and ensure fair and effective access to it, we will lose out again.

We have already touched on the environment, and the recognition of the industry's good work. The Government's response to recommendation 17 was that they had written to the statutory nature conservation bodies to see if there were any concerns. Has the Minister had any replies from those bodies?

We have also touched on carbon capture and storage, and the important contribution the North sea can make in that field. It was frustrating seeing the Miller field project nearly come to fruition, and then see a competition launched to replace that project, with the competition deadlines and rules shifting. Will the Minister assure us emphatically that this competition will meet its deadline, and that people who make the effort to put in tenders will get a positive and quick response? We will not be the world leaders in this industry unless we get started on making the industry possible. As the hon. Member for Sherwood said, we have so much to play for in this country. We have that storage resource in the North sea, the carbon sources in the coal, oil and gas that we can still produce, and the innovation, skills and technology in the industry. A regime to effectively unlock that full potential and deliver that green agenda is needed.

The other welcome part of the report is the spotlight we put in the last recommendation on the export potential of the industry. I look forward to the Minister's visit to Aberdeen, because he will see a physical sign of what we have been talking about. He will see a vibrant, go-ahead, goal-setting, high-tech industry, which is a major manufacturing base and a major source of new technology and export earnings for the United Kingdom, anchored in the north-east of Scotland, because of what has happened in the North sea. Departments have been restructured, and energy has moved from DTI to DBERR and BIS, and now to DECC. DECC obviously focuses on the environment and climate change, but will the Minister reassure me that it still has just as vibrant a role as spokesman for the industry as a major employer and exporter?

I welcome the Committee's report and the spotlight that it puts on an often unsung hero of the UK economy and a major contributor to our country's well-being. The Government and industry are for ever inevitably locked together in an attempt to make the best of those resources. Any oil and gas left in the ground does not pay tax, does not support jobs and does not contribute to our security of supply. The North sea is a great success story, but a lot remains to be achieved.