Offshore Petroleum Licensing Bill

Lord Bruce of Bennachie Excerpts

2nd reading
Tuesday 26th March 2024 Lords Chamber

[Lord Bruce of Bennachie (LD)]

My Lords, it is a pleasure to follow the noble Baroness, Lady Young, with her very long credibility and experience in environmental protection. I am interested in some of the points she made; if they do come to amendments, I think we could work together.

I feel that, in some ways, I might be holding the ring in this debate. The whole transition to net zero is incredibly complicated and the energy mix is incredibly complicated. Many people seem to me to reduce it to a binary choice, in a very difficult way.

I declare a political and economic interest, if not a personal one. I have no financial stake in the oil and gas industry, but I have lived for over 50 years in the north-east of Scotland and represented it for many years, and have monitored the industry closely for more than 50 years. I have seen what it has achieved. As the Minister said, it has made a huge contribution to this country economically—jobs, balance of payments and technical innovation—of which we should be proud, while facing very great challenges. There have been mistakes, yes, and disasters on occasion, but also fantastic achievements, and it still has a lot to give. I agree with much of the analysis of the Minister’s introduction, but I do not see the value of the Bill at all—I will develop that point a little later.

Living as I do in the north-east of Scotland, the people I meet absolutely accept that this is a declining industry and that we have to move towards net zero. However, they are hurt and resentful that they are demonised as part of the problem, when they actually delivered what people wanted for the last 50 years, and believe they can help deliver what people want for the next 50 years, if they have the time and space to make that transition in an orderly and reasonable fashion. Quite a lot of the things that are green, and which we wish to have and which are happening fast, are still not happening fast enough to move us away from fossil fuel as quickly as some people think we can or would wish—all the projections make that absolutely clear.

It is still quite a significant industry, worth over £20 billion to the economy—it is not entirely clear because it spreads wide. Directly and indirectly, the figure is around 200,000 jobs, thousands of which are in the north-east of Scotland but the majority of which, believe it or not, are in England. We deliver a third of the subsea technology in the world, and it is an £8 billion to £10 billion industry.

New exploration and development, even if it is allowed to go forward, will not reverse the decline—that decline is inevitable and historic—but it will slow it. However, halting licences will unnecessarily accelerate the decline. It is not about new oil fields; very often it is about tying back existing reserves to the existing infra- structure, which can then be upgraded and decarbonised in the process, so that you are actually cleaning it up as well as getting the benefit of the revenue. As has been said, all the forecasts to and through achieving net zero include oil and gas in the mix. Obviously, the UK has been a net importer for 20 years, and we will import more and more, whatever happens in the future. The faster we build up renewables the better. In the process of doing that, we will naturally suppress oil demand, because people can switch to the alternatives, but it will not eliminate it.

The Minister made a reasonably rational statement, but it did not justify the case for the Bill. The Government are putting out very confused messages, claiming that we are doing really well on climate change but then saying that we need to issue more licences, which, as I said, the industry does not really feel the need for. The industry wants to know that, as and when needed, on a case-by-case basis and where it is appropriate, it will be considered and allowed for. We have never had to have an annual licence; it has just been done on a case-by-case basis, as and when needed. My position is that the Bill is unnecessary, and I do not think it is wise to have a policy of saying that there will be no more licences. The circumstances may well dictate that, rationally, some licences will be required. It is sensible to leave some space for that.

In addition, the Government have—this is not a slight confusion—in a separate decision, pushed back the date for electric cars by five years. Whether you think it is a good or bad idea, the message it sends is that we are in favour of addressing climate change but in an Augustinian way—not just yet. We need to be a little clearer about what we are doing.

We also need to recognise that baseload electricity is a challenge. Some green campaigners say that nuclear is the answer, and it may be the only alternative. I have never had a visceral objection to nuclear, but my experience of monitoring the nuclear industry is that it takes a hell of a long time, costs a hell of a lot, and creates a waste problem that is costly and intractable. On the other hand, I am not sure what the alternative is. It is difficult to see—I do not see it—any projections for 10 or 15 years from now where we are not still generating electricity with gas. It makes sense not to get rid of it faster than we have to, when we are still importing it anyway.

We have another issue, with offshore wind. I happened to fly in from Finland on Saturday, over massive offshore installations as you come to the shore of the UK. It is impressive, but I hear that there are problems with getting connections and landfall. It is no good generating the wind if you cannot get it into the system. We need to address those problems, and fast.

We need to make the investment, and we need to do it as fast as we can, and we need to recognise that climate change is real and probably accelerating. The people who say that we should have no licences, but that we are not shutting down production and are happy to allow any licences that have been granted to continue, seem a little inconsistent. If you are happy to accept them, why would you stop them? I think I have made the point that we need a sensible, balanced approach.

It is interesting to ask which of the oil and gas-producing countries in the world are operating a planned reduction of commercially viable production? The answer is only those that have not got very much. Norway certainly is not; Norway has made it clear that it will produce all the oil and gas that it can. That is not surprising, as it has one big customer just desperate for it, and that is where most of our gas is coming from. I do not see why we should swap Norwegian gas for UK gas when we need both, but that is the reality.

The sector will continue to decline, but, from meeting people in the industry and attending their various events, I know that every company in the supply chain that I meet is increasingly focusing their attention on developing renewable technology. They see it as the future, and they want to be part of the future. They tell me that they are transferring their expertise into that sector and using the revenue they get from oil and gas in the short run to fund it, and that if that revenue chokes off faster, their ability to fund the transition will be lower.

I would be perfectly happy—maybe this could be an amendment—to make it a condition of licensing that operators must ensure that a proportion of their profits is invested in UK renewable technology. They might also be required to demonstrate that they can contribute to lowering energy costs or the cost of living. I am in favour of making the industry contribute more, but I am not in favour of artificially depressing it and leaving us, potentially, risking supply gaps and cost overruns.

We export most of our oil to the Netherlands for refining, and there exists an argument that, because we export it, we should not bother to produce it. I can remember the 1970 election, when one bad month of balance of payments led to a change of Government. Nobody seems to care about the balance of payments any more, but what of the idea that £15 billion-worth of exports should just be discarded? As the noble Lord, Lord Lilley, to be fair, acknowledged, we pay for the imported product, to some extent, by the exports that we make. It is disingenuous to suggest that, because we export it, it has no value to our economy. That goes against normal economics.

We need to focus on how we can get the industry and the public to adopt renewable technologies as fast as possible, and to harness the energies across the energy sector—including oil and gas—towards that, while recognising that managing the transition requires neither a ridiculous stoking up of oil and gas exploration nor an unnecessarily rapid depression of oil and gas. It is naturally declining, and the industry, left to its own devices, will diminish, because it is not there to be invested.

The Bill creates the wrong signal and is completely unnecessary. The industry does not want it, but rather wants recognition that it is part of the solution and should not simply be demonised as being the cause of the problem. That is not a good way to treat an industry that has been the backbone of our economy for 50 years.