Thank you for giving me the opportunity to take part in this debate, Mr Streeter.
I congratulate the hon. Member for Aberdeen North (Mr Doran) on bringing this timely and important debate to the House. He has set out how important the industry is to the north-east of Scotland and the whole of the UK. I declare an interest recorded in the Register of Members’ Financial Interests to do with the oil and gas industry—a shareholding in Shell—but I am participating in the debate because mine is one of those north-east constituencies and many of my constituents are affected by what is happening out in the North sea, and because of how important the industry is to the country.
It is not only the specialist jobs that are at risk; in fact, some of those jobs might well not be so much at risk in the long run, because of the skills shortage and the need for people globally to sustain oil and gas production. I worry about the cascade effect on jobs: as companies reduce their use of catering facilities, for example, those who work in catering will lose their jobs locally, and they will not be able to go to Angola or Azerbaijan to find other employment. I have written to the Department for Work and Pensions to find out what it is doing to gear up its facilities and resources to tackle that challenge in the local economy. Perhaps the Minister will chase up the Department for a reply.
The hon. Member for Aberdeen North mentioned 1986, and some people have said, “We’ve been through this before. We’ve had downturns. We had one in 1986 and we bounced back.” He was right to say that there was a difference going into this downturn, but even without the cut in oil price, a restructuring was needed in the industry and there were concerns about the cost base and the profitability of the North sea, as it was becoming more challenging. In 1986 the platforms were younger; the neglect of maintenance showed through only later on in their life. Also, in 1986 the finds and the reserves were bigger, so the temptation was to hang on, see through the trough and still be there when the upturn came.
Now we have much smaller finds, but we still need the larger hubs to be sustained and maintained throughout the downturn. It is not only a matter of price; there is still a future. BP is coming forward with investments that will last for 40 years, and that is before they get an extension of life—almost every field seems to last longer than originally planned. It is the scale of the future that we need to be worried about, as well as the size of the tail and how it is to be sustained.
As the hon. Gentleman said, it is very important to deal with tax incentives and the implementation of the Wood review. That review should result in swifter and more independent regulation, and bring the industry
together to co-operate in maximising production from the North sea. The crucial message to the Treasury is that it does not have the skills to produce oil and gas from the North sea; with the Treasury acting alone, there would be no oil and gas production. It needs to incentivise skills so that tax can be taken off the profits that come out of the North sea, and we need a cross-party consensus.
The hon. Gentleman highlighted some of investment incentives needed. We need to build on the work that the Treasury has already done. The 2% cut was small, but it was symbolic of the fact that the Treasury is beginning to understand how important the long-term signals are to the industry. The wider investment allowance will be helpful and investment in more seismic will encourage greater exploration, but the current negotiations to see what else can be done to encourage exploration are extremely important. We still need to look at the message that a cut across the board in the supplemental tax would send to investors. If they can see that more of the profit will be retained by them after an investment, they will see that this country wants to see us through this trough and come out the other side.
An important message to the Treasury is that a smaller percentage of a real cake is better than a bigger percentage of no cake. It is crucial to optimise those signals to the industry, not just for the benefit of getting more of our energy out of the ground rather than importing it, or for the jobs in the north-east of Scotland and throughout the United Kingdom, but to sustain that jewel in the crown of the industry: the export potential of the skills that we have developed in the North sea, particularly in subsea engineering, where we are world leaders. By keeping the North sea as vibrant and as active as possible, we maintain the anchor that keeps those industries here in the United Kingdom, exporting and earning us considerable amounts of revenue and keeping many people in employment.
We have a Budget coming up that can be used, following the negotiations, to produce the best signal and incentive to see us through this trough and through to a brighter future, when we can maximise the jobs, the energy production and the tax take for future generations.
2.55 pm