09:30 Malcolm Bruce (Gordon) (LD)

Among those who are not well acquainted with the offshore energy industry, there is a presumption that oil and gas are in sharp decline and little recognition of the crossover between oil and gas and renewable energy. In Oil & Gas UK’s latest economic report, there is a clear indication of a huge industry with a long-term future. Domestic oil and gas production was 2.4 million barrels of oil equivalent a day in 2009. That is equivalent to 94% of the UK’s oil needs and 68% of our gas requirements. With sustained investment, that level of production will decline slowly, at about 5% per annum, although even that may level off if we get the right type of investment. The position is that 39.5 billion barrels of oil equivalent have been produced, with between 15 billion and 24 billion barrels of oil equivalent of recoverable reserves remaining.

We have a huge amount of technical innovation to enhance the recovery of our existing reserves, to operate in more difficult areas and to squeeze more oil and gas out of the existing reserves that we have found and, at the same time, to adapt the technology to be able to install offshore wind farms and provide for electrical transmission and possibly other marine renewable energy. This is one of the industries that could help to grow the private sector and grow the recovery of the UK economy if it is handled correctly. It is my contention, and the purpose of asking for the debate was to say, that the economic and Exchequer revenue potential of this sector for the UK economy is massive, and if it is not properly handled, significant future benefits could be put at risk.

There seems to be universal opposition to the bureaucratic confusion between the Department of Energy and Climate Change and the Crown Estate, which are responsible for licensing the sea bed for offshore renewable energy. The Minister expressed his view on the issue in opposition, although I do not know whether he or his Department still hold to that view. My question is simply what prospects there are of DECC becoming the sole licensing agency. The industry is certainly asking for it to take on that role. To anticipate the counter-argument, I accept entirely that the interests of the fishing industry and other commercial maritime interests need to be taken into account, but I, for one, see no reason why DECC could not be trusted to take on such a role.

The story today is as follows. Offshore oil and gas is in a mature phase and has a more challenging and fragmented role than in the past. Properly handled, however, it will make a huge contribution to the UK’s energy supply, investment, our balance of payments and jobs, as well as to deficit reduction and economic recovery. At the same time, we have a growing, new offshore renewable energy industry, which shares some of the same technologies and therefore offers diversification. The industry is already heading for a £2 billion turnover and it has the potential to grow, more than taking up any slack that might emerge in the oil and gas sector. As I said, competition between those sectors could be inflationary despite the obvious synergies. For example, it could cause cost inflation in terms of offshore vessels, because there are nothing like enough vessels to meet the challenge of further developing the North sea, and the same could apply to subsea equipment. All that could prejudice marginal investments so that they do not happen at all.

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10:01 Mr Frank Doran (Aberdeen North) (Lab)

The Minister cheered me up immensely two or three weeks ago after we had heard the statement from the Secretary of State for Energy and Climate Change on the oil spill in the gulf of Mexico and the action that he was taking in relation to the North sea. After that statement, the Minister said to me, “I’m going up to Aberdeen next week and I’d like to meet the trade unions.” I must say that after the 20-odd years—with a slight break in the middle—that I have been a Member of Parliament, a Conservative Minister saying such a thing shows that there has been a change everywhere. If this Government recognise the importance of the trade unions, particularly in the area of North sea safety, I welcome that wholeheartedly. I know that the Minister had a good meeting with trade union officials in Aberdeen.

Finally—I have probably spoken for a lot longer than I should have—although the Department of Energy and Climate Change is now responsible for the energy industry, who looks after the oil and gas industry as a business? There is a sense in the industry that it has been abandoned by the Department for Business, Innovation and Skills, previously the Department of Trade and Industry, and that the Government are no longer focusing on the industry as a business. Will the Minister say a little about that that important issue, which relates to not the industry’s place in the energy industry, but its status as a business like any other?

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10:26 Emily Thornberry (Labour)

In its report last summer, the Select Committee on Energy and Climate Change highlighted the difficulties in accessing infrastructure that some smaller companies experience. The difficulties came to a head when Endeavour International sought arbitration from the Secretary of State regarding the charges levied by Nexen for access to the gas transportation infrastructure. What progress has the Department of Energy and Climate Change made in finding a more equitable solution to that problem?

The contribution of public money and the renewables obligation have ensured the fast development of the industry. In the 2009 Budget, £50 million of funding was made available for the testing of offshore wind facilities and £15 million was provided to the new renewable energy centre in Northumberland to test wind turbine blades. Just this month, the Secretary of State reconfirmed the previous Government’s decision to grant £5 million to Siemens Wind Power. In the March 2010 Budget, the Labour Government also announced a £60 million competition to help ports to develop, to which the right hon. Member for Gordon referred. We wanted ports to have the capacity to help to drag out to sea massive, heavy windmill towers for the turbines to sit on. The amount of money offered might not have been large, but it was of sufficient size to be an important signal, and General Electric and Siemens quickly declared that they would be investing £200 million in the UK’s offshore wind industry. On 15 June, the Minister announced that the ports competition was under review. Will he commit to the level of investment proposed by Labour or is he prepared to risk driving away such investment?

In the case of offshore wind generation, a loss of investor confidence would be an absolute tragedy because, according to the Select Committee on Energy and Climate Change, it is the only low-carbon technology that is ready for large-scale deployment now. Perhaps another way of asking question four is this: what plans does the Minister have for offshore wind infrastructure and for port development? In the energy security debate last week, the Minister was kind enough to agree that the renewables obligation has helped to expand the UK’s offshore wind capacity. Will the Minister commit himself today to continuing with our commitment to renewables obligation certificates?

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10:36 The Minister of State, Department of Energy and Climate Change (Charles Hendry)

The fallow initiative, put in place by the Department of Energy and Climate Change, continues to encourage companies that are not actively working on blocks or licences to relinquish them so that other companies can be given opportunities to exploit them. To ensure maximum production efficiency from North sea fields, the Department has a stewardship process, which is an annual review in which DECC works with the fields’ owners and looks at individual field performance with the aim of maximising economic recovery and enhancing production levels wherever possible.

We will also be looking at how we take forward work on carbon capture and storage, which offers many partnership opportunities. Some of the most extraordinary academic work on CCS in the world is being carried out in Scottish universities. People such as Professor Jon Gibbins and Professor Stuart Hazeldine at the university of Edinburgh are doing wonderful work to ensure that we lead the world in that technology. I want to work closely with them in ensuring that we make the best and strongest case for Britain in that respect.

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