It is excellent to see you in the Chair tonight, Madam Deputy Speaker. Let me say from the outset that the main message I receive from all parts of the energy sector—the Minister will know how many parts of that sector exist in my constituency—is this: let’s get the Bill passed; let’s get on with our job that needs to be done. That said, this is a complex Bill. We have heard about some of that complexity tonight, not least the various conflicting priorities that it is the Minister’s unenviable task to sort through.
I will not go through every part of the Bill as time will not allow—in fact, time probably will not allow me to go through the topics I wish to try to talk about, so I will get on with them. Oil and gas has been spoken about already, but the “inconvenient truth”, to steal a phrase from former Vice-President Al Gore, is that we are not going to get to 2050, keeping the lights on, homes warm and the economy moving, without oil and gas, albeit at greatly reduced demand. It therefore stands to reason that we will not get to net zero by 2050 without carbon capture, usage and storage, and I want to talk about the Scottish cluster in particular.
Before the energy profits levy was introduced, the oil and gas industry was already paying 40% tax, compared with most businesses paying 19%, which rose to 25% last month. With the EPL, the oil and gas industry is now paying 75% tax on oil and gas profits—not on global profits, but profits made in this country. According to the Office for Budget Responsibility, it will pay around £15 billion in financial year 2022-23. That represents a fifth of the UK’s corporation tax receipts, from exploration and production alone.
The Climate Change Committee’s ambitious net-zero pathway profile predicts that demand for oil and gas will decline at a slower rate than domestic supply. It is hugely important that we are able to access our own domestic supplies to meet that continuing, albeit declining, demand. It is also hugely important, as the Minister knows, that the industry is adequately engaged through the passage of the Bill. Oil and gas companies, and their employees, skills, technology and expertise, stand ready to help the Government and this country not only to deliver our energy security needs, but to invest and drive the energy transition that, as should have been said, is at the centre of the North sea transition deal that was signed between the Government and the oil and gas sector in 2021.
The industry and Governments must continue to work together to make the most of our homegrown industry and supply chain in which, crucially, most of the 200,000 oil and gas jobs in the UK exist. With that in mind, I reinforce calls that I know the Minister has already heard from the industry through the trade body Offshore Energies UK. In the immediate term, we need to introduce a clear mechanism, or announce what such a mechanism will be, by which a trigger or a floor price ensures that the 75% tax rate is applied only to company profits that are earned from the excessively high market price environment. In the medium to long term, we must legislate for an effective decarbonisation investment allowance that allows for decarbonisation expenditure, which is essential to delivering the UK’s net-zero ambitions and North sea transition deal emission targets. There are longer-term requests, of which I am sure the Minister is aware.
A huge part of our decarbonisation effort is this Government’s strategy to deliver up to 30 megatonnes of carbon capture and storage by 2030. I welcome the Chancellor’s announcement in the spring statement of £20 billion to help deliver at least that commitment of four CCUS clusters in the UK by 2030, and more beyond that. The £20 billion is for 20 years, from this year. Last month the launch of track 2 of the cluster sequencing process was widely welcomed by industry stakeholders and project developers alike. That includes the Acorn project in my constituency, and the Scottish cluster more generally. Despite continued efforts to downplay the status of that project by SNP Members and Members of the Scottish Government in particular, work on that project has never stopped. In fact, more than £40 million of UK Government money has been directly invested into the Scottish cluster, compared with £80 million promised by the Scottish Government and then withdrawn, with clarity not provided on exactly where that £80 million has gone.
As I said, the sector is impatient to get on with the work to be done on energy security and decarbonisation. Speaking for not only the Scottish cluster but CCUS
more broadly, the announced streamlined approach to track 2 is very much welcome, but, as I am sure the Minister realises, even more welcome would be a clear and rapid process for rolling out track 2 clusters, building on the lessons learned from track 1. For example, it would be extremely helpful to award initial capture projects swiftly—and concurrently, if possible—with transport and storage licences. May I also ask for the inclusion of shipping and other non-pipeline transport of emissions, bearing in mind that most centres of industrial activity around the UK do not currently have clarity on what their pathway for decarbonisation will be?
Finally, on CCUS, given direct air capture’s current absence from the Bill as a carbon capture entity, will the Minister clarify what role that will play? Will it need to be included in the context of the appropriate clause—I think it is clause 63—of the Bill? If the Government cannot table that amendment, would it be helpful for me to table such an amendment, as others have offered? I am sure we can discuss that in more detail as Committee approaches.
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