It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for Falkirk (John Mc Nally) on securing the debate, and he has done so at an opportune time, just under three weeks before the Chancellor delivers his Budget. He has also provided us with the opportunity to highlight the vital importance of the industry to the UK: it is essential for the UK’s security of energy supply, it has contributed billions of pounds to the Exchequer over the past 50 years, and it provides hundreds of thousands of highly skilled and well-paid jobs.
The industry has been through a great deal in recent years. As a result of the collapse in the price of Brent crude, tens of thousands of jobs have been lost and the industry has had to restructure. In many respects, it has emerged fitter and leaner, but significant challenges remain, and it is vital that the tripartite approach of industry, regulator—the Oil & Gas Authority—and Government working together continues. The oil price has bounced back, but that is almost certainly for short-term global geopolitical reasons, and it would be complacent to assume that the higher price will be sustained into the longer term. Production is up significantly, and by the end of the year could be 20% higher than over the past five years. Significant cost reductions have been made, though it is important that they are sustained if the industry is to remain globally competitive. However, warning lights remain on amber, with exploratory drilling activity at a record low and the revenues of supply chain businesses continuing to fall. It is vital that exploration and production companies work collaboratively with their supply chains, as their respective futures are very much intertwined.
I will briefly highlight three factors that need to be centre stage for the industry to continue to play its lead role. The first is the need for a stable fiscal regime. One of the key reasons why the UK continental shelf is an attractive investment proposition is that it is fiscally competitive. That reputation has been hard won and must not be thrown away because of an increase in tax rates. That would be short-termism, and it would cause lasting damage. In the Budget, the Chancellor should re-emphasise the Government’s commitment to the “Driving investment” plan. The proposals for transferable tax history, to be included in the forthcoming Finance Bill, are extremely welcome and will drive investment in late-life assets and maximise economic recovery. It is also vital that the Treasury urgently clarifies its plans for ship end-use relief and introduces proposals that are in line with the “Driving investment” plan.
Secondly, it is vital never to forget those who work in the industry. As the hon. Member for Falkirk said, 167 people lost their lives in the Piper Alpha disaster 30 years ago. The drive for business efficiency, which is very important for the industry’s future, must never compromise safety. It is also important to provide attractive career paths to encourage people into the industry. OPITO estimates that there is a need to recruit 40,000 people into the industry over the next 20 years, 10,000 of them into roles that currently do not exist. The “Workforce
Dynamics” review has been taking place this year, and skills demand maps are being worked up. The Government should encourage and support that initiative, which will enable the industry to employ safe and well-trained people who will maximise its contribution to the UK economy.
Lastly, the industry must provide a bridge to a low-carbon future, which means setting out a clear and deliverable deployment pathway for carbon capture, utilisation and storage. The Government should consider carefully the conclusions of the cost challenge taskforce and work with the industry to develop regional clusters that will bring significant economic benefits to both the north-east and to Scotland.
Off the East Anglian coast, in my part of the world, an enormous development of offshore wind farms is taking place. The two industries—oil and gas and offshore wind—need to work together. There are encouraging signs that that is beginning to take place, as evidenced by the Oil & Gas Authority’s promotion of “Gas to Wire”, which involves the gas produced from gasfields being generated into electricity offshore, and then transmitted to shore via spare capacity in the subsea cables used for wind farms. The industry has a great future—it is important we do not squander it.
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