Energy Bill

I intend to focus on some of the provisions that are actually in the Bill, particularly those dealing with gas import and storage infrastructure. If I have time, I shall say a little about the reforms of the renewables obligation. In our energy debates in the House, much of the background noise—which has been heard at several points this afternoon—relates to the theme of energy security and, specifically, reliance on energy imports. The phrase ““over-reliance on imports from unstable regions””, or variations on it, is heard time and again in the House when we discuss energy policy. We also see it in early-day motions in which various Members promote their pet policies or projects. It is wheeled out to justify everything from reinvestment in deep coal mining in the United Kingdom to renewables projects to the requirement for a new generation of nuclear power plants. I do not dispute that there may be valid reasons in favour of all those, but so often when the phrase is used the implication is that energy independence equates to energy security. Obviously indigenous sources of fuel and energy have a role to play in a balanced and secure energy policy, but it is simplistic to say that complete reliance on those sources will guarantee energy security. Partly as a result of short memories and partly because of our 30 years' experience of the abundant blessings of North sea oil and gas, we in Britain have a peculiar and somewhat irrational fear of energy imports. What is happening in the United Kingdom now and will continue to develop in the next 10 or 20 years is, in fact, no different from what many successful industrialised countries have faced for years: reliance on countries overseas, or outside their borders, for a large proportion of their primary energy requirements. What is happening to oil and gas as a result of the decline in production from the UK continental shelf is similar in some respects to what has happened to coal. Although last year coal became a more significant producer of electricity even than gas, 75 per cent. of our coal supplies are imported from countries all over the world at economic prices. It is, I think, difficult to argue seriously that there has been a diminution in the security of coal supply in the United Kingdom because we have become a heavy importer of coal. I believe that something similar could happen in the case of natural gas, as long as the necessary gas import and storage infrastructure can be constructed and brought on stream in a timely way. The Bill seeks to answer part of the question involved in that. Whatever criticisms may be made about delays in energy policy over the past 10 years and an overload of consultation, it should be recognised that thanks to a well-functioning liberalised gas market and the exemption on third-party access to gas infrastructure, the private sector has been able to present new project proposals that will create flexibility and diversity in Britain's energy system. That is what I believe energy security is all about. I hope that the Bill will encourage the industry, and provide a framework within which it can produce even more project proposals that will create further options and flexibility in the system, particularly in the area of liquefied natural gas. The technology for LNG is not new, but its recent emergence as one of the energy solutions for the early 21st century represents an exciting development. LNG provides a means of releasing stranded gas supplies and transporting them economically to world markets where those supplies are needed. Many Governments around the world are currently either investing in LNG infrastructure or studying proposals to bring that on stream in their countries. Being an island nation, the UK is particularly well placed to offer a wide variety of suitable locations for both offshore and onshore LNG unloading facilities. Already in the UK in recent years, there has been huge investment in LNG facilities on the western and eastern seaboards. In Milford Haven in my constituency, two major LNG projects are under development: the Dragon project which is a tie-up between Petronas and British Gas, and the large South Hook LNG project involving ExxonMobil and Qatargas. There are other projects as well, such as those in the Isle of Grain and Teesside. These projects often utilise redundant refineries and other facilities. One of the Bill's aims is to create the right regulatory conditions to bring forward even more of this type of infrastructure, particularly offshore LNG infrastructure. I have heard people question whether there is a need for even more LNG infrastructure and whether we are entering a scenario of over-supply, especially given the investment that there has been in pipeline capacity to serve the UK. However, I believe that a more relevant question than whether there is over-supply, is what is going on in the marketplace: is there an appetite in the marketplace for more investment in LNG capacity, and are artificial barriers at work to create disincentives that prevent that investment? From studying the responses to the consultation of the Secretary of State and Minister on this issue, it is clear that the mood in the industry is very much that a disincentive is at play preventing the right level of investment in new infrastructure. The Bill tries to go some way towards rectifying that. Although I am generally relaxed about Britain becoming a major importer of gas, as long as certain conditions are fulfilled, one area that does concern me is the need for much greater provision of gas storage facilities to provide a buffer against potential supply interruptions and to smooth demand peaks. In previous parliamentary questions I have tabled and in points I have raised in previous debates, I have tried to establish whether the Minister and his Department believe that there is an appropriate level of gas storage infrastructure that we need to reach, given the projected level of gas import reliance. He has the figures to hand, but I have still not been able to tease out of him whether he thinks there is such a level. I think everyone would recognise that there is nowhere near enough gas storage infrastructure in the UK. There is an appetite in the industry to create new storage infrastructure, but there are various barriers—the Bill seeks to address them. There is an important wider point to do with the regime that will govern gas storage in the UK in future. Might there be an EU-wide stocking obligation? Might something similar to the crude oil stocking obligation be at work? I would certainly be interested to learn of the Minister's thoughts on the correct level of storage infrastructure. I have run out of time, Mr. Deputy Speaker.