Scottish Energy in the 21st Century

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The Chairman: Order. It may help the Committee if I announce that the two wind-up speeches must commence not later than 12.40 pm and that the Minister will be called not later than 12.50 pm.

12.1 pm

Miss Anne Begg (Aberdeen, South): I begin by congratulating the Liberal Democrats on securing the debate, but before I am accused of being too lovey-dovey with them, let me say that they probably got the idea from me, as I secured an Adjournment debate last October on the future of Scottish energy. I had only a half-hour debate then and I began by listing all the sectors of energy production—coal, nuclear and others—that I would not have time to mention. I concentrated on the oil and gas industry. I am pleased that the other sectors have been mentioned in today's debate. We need a vision of the future for energy in Scotland for the 21st century.

The Secretary of State mentioned that many Members of Parliament naturally focused on consumers in an attempt to appeal to our constituents, but many of my constituents are also involved in the production of energy, particularly upstream. I make no apology for concentrating predominantly on the oil and gas industry. As the hon. Member for Gordon (Malcolm Bruce) said. and as statistics demonstrate, the future for oil and gas is healthy. About 264,000 jobs in the UK were supported by the offshore oil and gas industry in 2001. As the Secretary of State said, other jobs are connected with global export projects.

In Aberdeen, several indigenous companies have become global companies operating in a global market. Such companies often started off in fishing or logistics, but are now working throughout the world,

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bringing many economic benefits back to the UK, to Scotland and to Aberdeen. The industry supports employment that constitutes about 6 per cent. of the total work force in Scotland.

The industry is also important in UK terms. It is interesting to observe how the Scottish National party always views it as a Scottish industry, when it is a global industry that operates within the UK. About 200 constituencies throughout the UK support 50 or more oil-related jobs, so the industry is important to the economy of the UK as well as of Scotland. The industry is, as the hon. Member for Gordon said, mature. We are still a long way from the twilight; perhaps mature middle age is a better analogy. [Interruption.] There is no way that I could be referring to myself. It would be an extremely young middle age in my case.

Many new developments have been announced since October, which was the last time that I was lucky enough to debate the issue. The total industry expenditure for 2001 is expected to be close to £8 billion. Development expenditure in 2002 is expected to total some £3.5 billion. That is an increase of more than 25 per cent. on the previous year. Those statistics do not suggest that the industry is ailing or in decline. During 2001, 20 new field development projects were announced.

My hon. Friend the Minister for Energy alluded to some of the exciting developments made in the past two months. The discovery of the Buzzard field, one of the largest discoveries for a decade, was made at a time when people thought that there were no large fields yet to be discovered on the UK continental shelf. They were proved wrong. There is a great deal of oil yet to be discovered. Perhaps the most important developments have been those made in the recovery of oil previously thought to be unrecoverable. The hon. Member for Gordon alluded to the fact that, once upon a time, only 40 per cent. of oil could be recovered. Nowadays, we recover 60 to 70 per cent. of new oil reserves.

One of the most exciting announcements, which was noticed in the energy and business press but not elsewhere, was the reissuing of licences for developments that had previously been thought redundant. I must pay tribute to the Department for Trade and Industry. When the small companies Acorn and Tuscan Energy first embarked on persuading the DTI that it should reissue the licences, many in the industry thought that they were mad, and thought that the DTI would never allow that to go ahead. However, the companies were tenacious in persuading the DTI that they had a good business case, and the DTI relented. The Argyll field licence has been reissued, and the development of that field will begin in the next 18 months or so. That is important for the future of the North sea; they are not big operators, but tiny companies that have seen a market opportunity and have, by working with the Government, developed their businesses.

I must pay tribute to the success of PILOT, the joint industry and Government body. There is no doubt that PILOT is a model for other industrial sectors. It has been suggested that transport might benefit from

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something similar, but I do not know whether it can. PILOT has bought great benefits to my constituents, and it shows that the Government and industry working in partnership can bring about development and look to the future. That is important.

Not only have redundant licences been reissued, but the 20th round has been announced. This morning, licences were also announced for some onshore developments. There is a long future for the oil industry. I concur with the hon. Member for Gordon, who mentioned predictions. Far too many people talk the oil industry down. I am glad to say that the Liberal Democrats are not involved in that, but some of the other Opposition parties do it. We are talking about our future. [Interruption.] Before Opposition Members start saying, ''It's not us'', I must say that as soon as any job losses are announced, some hon. Members are immediately quoted in the local press as saying, ''This is the end,'' and ''This is a folly.''

The loss of a job is dreadful for any person. What is happening in the gas and oil industries will ensure that those people get new jobs as quickly as they can. That has certainly been the case in the past 18 months; there were difficulties when the oil price was $10 a barrel but it has improved greatly with employment opportunities in the North sea.

Angus Robertson (Moray): I apologise for arriving late. The Scottish members of the European Scrutiny Committee tried to get here as quickly as we could.I support the hon. Lady's point about the recent success in the North sea, and associate my party with it. It has a knock-on benefit in the amount of petroleum revenue tax that will also flow from the North sea, sadly to the Treasury.

There is a problem in respect of fabrication, both in the hon. Lady's part of the north of Scotland and in mine. I ask you to turn your thoughts to the opportunities that renewables provide; in Denmark, another country of 5 million people in northern Europe, 15,000 people involved in fabrication are moving from oil to renewables. What can the Government say to ensure that we make progress in that respect?

The Chairman: Order. I remind hon. Members that interventions should be addressed to the Chair.

Miss Begg: I thank the hon. Member for Moray (Angus Robertson) for his intervention. He obviously read my speech in my Adjournment debate, when I stressed the importance of getting involved in offshore wind projects and the development of turbines. I have often told my hon. Friend the Member for Inverness, East, Nairn and Lochaber (Mr. Stewart) how important they will be for the companies involved and for the development of fabrication yards throughout Scotland and the north of England. I am glad that the hon. Gentleman supports the oil and gas industry, as it is important for hon. Members from the north-east to talk it up. Skill shortages are a problem in the North sea oil and gas industry because many people, especially those who work offshore, are in their late 40s

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and early 50s—mature middle age, perhaps—and will soon be retiring from jobs that are often physically demanding. They may have moved to work in the oil and gas industry from shipyards and other sites in the industrial heartland of Scotland when those industries were in decline. The oil and gas companies complain about skill shortages and young people may want to go into the industry when they leave school because it has a future. It is not a dirty industry; the work is something that they can look forward to.

We made the case for the oil and gas industry and it was important to do so. However, we must look further into the future to the development of sustainable and renewable energy. We must consider life beyond hydrocarbons, as they will not go on for ever; they will not be the fuel and energy source of the late 21st century.

I welcome the Minister's statement; he has a west coast bias and he is keen on developments there, as is my hon. Friend the Member for Western Isles, who I hope will have a chance to speak in the debate. I have an east coast perspective; there is a role for Aberdeen, especially in intellectual developments. As the Secretary of State said, the knowledge that already exists in north-east Scotland for developing marginal fields in difficult circumstances is the sort of knowledge that can easily be used to steal a march on the Danes, who already have the advantage in the development of wind power.

There is a great future for oil and gas, but it is important, too, to address the development of renewables. It is a matter of diversifying the north-east's economy from one type of energy—oil and gas—to others, such as offshore and onshore wind, wave power and so on.

Finally, I reiterate what I have said before and will say again; what I want for Aberdeen in the future is that it should be regarded not only as the oil capital of Europe, but as the energy capital of Europe. That is the future of Aberdeen, and of an important energy supply in the 21st century for Scotland and the rest of the United Kingdom.

12.14 pm

Mr. Alistair Carmichael (Orkney and Shetland): I shall keep my remarks brief to allow other hon. Members to contribute to the debate. I have referred to the need for a strong infrastructure for the development of renewable energy in communities such as mine, and to the potential for a lack of joined-up government in respect of the Crown Estate Commissioners. I shall not revisit such matters, but I hope that they will be taken seriously and given particular attention by the Scotland Office.

I shall follow the example set by the hon. Member for Aberdeen, South (Miss Begg) and draw the Committee's attention to the offshore oil and gas industry and the fact that it has benefited the communities in Orkney and Shetland. Recently, I had the privilege of attending a small ceremony at the Flotta oil terminal to mark the 25th anniversary of its inauguration. When the terminal was inaugurated in 1976, people felt that, come 2000 or thereabouts, they

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would be considering a decommissioning ceremony. In fact, a few weeks ago, the story in Flotta was different, as it is now in Sullom Voe in Shetland. We have a reinvigorated oil and gas industry; it is an expanding sector with an expanding impact on the local economy. I take the point made by the hon. Member for Aberdeen, South that much of the credit for that should go to the PILOT project.

It must be said that the offshore oil and gas industry in the isles has remarkably not had an environmental impact. When it was first discussed, many people thought that a dirty monster was about to be foisted on them. In fact, there have been only two spills in Shetland since the oil industry has been in operation. Neither of them was related to Shetland involvement; both were tanker spills, the most notable of which was the Braer. Credit should be given to the oil industry for the way in which it has conducted its business in the northern isles.

I bring to the Committee's attention an outstanding opportunity that exists at present. It is the development of the industry to the west of Scotland, into the Faroese sector, and offers particular opportunities for the communities in the northern isles. The oil could go elsewhere; it does not necessarily have to come into either Sullom Voe or Flotta, although that it less likely. I urge the Secretary of State to encourage the moves that are being taken by different bodies, principally the Shetland Islands council and the Shetland Islands council charitable trust, to foster better links between Scotland and the Faroe islands. When the Secretary of State has mastered French, she may find time to learn some Danish.

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Prepared 13 February 2002