Peter
Luff: The evidence of recent months is that we might not
be faced with higher oil prices so much as with fluctuating oil prices.
We live in an increasingly unknowable, unstable world, and that
highlights the very real risk to the British economy, especially given
the previous question on oil and gas pricing, of our increasing
dependence on imported gas and our failure to develop adequate gas
storage supplies to deal with the increasing uncertainty. Can the
Minister give the Committee any encouragement that one consequence of
oil and gas price instability is that the Government are giving much
greater priority to ensuring that we have the gas storage necessary to
even out the peaks and troughs and maintain British supply in the face
of diminishing British
production?
Mr.
O'Brien: I certainly agree with the hon. Gentleman that
dealing with the issue of storage is important. We want to address it,
and we have been encouraging the
companies to consider the extent of storage
capacity—“rough”, as it has been called—to
ensure that it is adequate.
I caution the
hon. Gentleman that we have access to pipelines and the capacity to
import from relatively friendly countries such as Norway. They operate
in a market and will sell their gas to whomever pays the highest price,
but we have long-term relationships with Norway. When it does not have
particular problems, as it unfortunately did last year with a gas
platform, it has been relatively reliable. The Langeled pipeline, for
which I signed the treaty about four years ago when I was last an
energy Minister, has proved valuable. We want to ensure that we have
that sort of capacity to bring in gas as and when we need
it. A
considerable amount of rough is available. The storage is full, and we
want to ensure that we can go through winter securely with the access
to that rough, or any other gas storage that we may need in due course.
We are encouraging the companies to look at the opportunities to create
extra rough and to ensure that we have the storage that we need for the
market in the long
term.
Mr.
Robinson: Can my hon. and learned Friend tell us, while he
is on gas storage, whether there are any plans in hand to increase it?
I think that it is only a fraction of what they have in Germany, for
example. We are right at the end of the main pipeline that comes from
the turbulent central Asian countries, and therefore in the most
prejudiced position. If the Government have any plans to increase our
gas storage, which is perhaps a quarter the size of Germany’s,
that would be very interesting to
know. I
would like my hon. and learned Friend to reply to two points on social
tariffs, which were mentioned earlier. He said that a certain amount of
money had been put to one side—was it £325
million?
Mr.
O'Brien: It was £225
million.
Mr.
Robinson: That does not seem an awful lot of money in the
context of what we are discussing, and given the importance that the
European Commission has attached to the matter. When does my hon. and
learned Friend think we will have the pension credit information
available to us? I know that he played a big role in getting that
legislation through, and it will be the most useful thing for us to
know, at least in broad numbers. We will then have something to measure
by. It is all right to say, as he did, that the gas and energy
companies are meant to compete on social tariffs, but they do not even
compete on price, let alone social tariffs. My question is
simple—if I am in order, Mr. Taylor, as I am not used
to this format. When are we going to have some information that we can
actually use? My hon. and learned Friend is responsible for providing
that information for us to measure the companies’ performance on
the
ground. I
turn to a couple of questions on the long-term situation. If gas and
oil are going to be more difficult to recover, when will we have an
idea of what longer-term reserves are available to the UK? I have in
mind the Celtic approach in the other areas around these islands, which
has good prospects. I asked the Minister’s predecessor
about that and I got quite a positive reply that can be found on file.
Will he indicate the extent of those reserves? They will become
economical as the premise of the document before us is fulfilled. We
have an advantageous price at the moment for oil and gas—it is
coming down—but in the long term it will surely go back up and
we can therefore look to recovering economic
resources. My
last question concerns the Canadian oil sands. Can the Minister tell
the Committee why those extensive, long-term future reserves have been
abandoned? He might care to look into that. Although the oil is
difficult to recover—the document makes this point, and the
Government’s own policy specifically mentions the long
term—there are enormous reserves in
Canada.
Mr.
O'Brien: On the Canadian oil sands, there are enormous
reserves in Canada, and I met the Canadians last week to talk about
their plans for developing them. I would hesitate a little over those
plans because there are clearly environmental issues associated with
the development of that kind of resource. It requires a considerable
amount of carbon generation, and there is concern that that should be
done in a way that minimises damage to the environment. However, as far
as I am aware there is no abandonment of the fields. Indeed, the
Canadian Government people whom I spoke to last week were supportive of
the process of the private sector developing and extracting oil from
the
sands.
Mr.
Robinson: I believe that my hon. and learned Friend will
find that Shell has in fact abandoned a big project in the
sands.
Mr.
O'Brien: Shell has decided to withdraw, but I am also
aware that there is a great deal of interest from several other
companies. The Canadians led me to understand that they were expecting
the extraction of oil to be expanded substantially in the longer term.
However, we also discussed dealing with some of the issues associated
with carbon capture and storage, which they, too, are interested in.
They are also aware of the environmental problems caused by the
extraction of oil from that kind of sand and the way in which it has to
be
done. My
hon. Friend asked a series of other questions, including whether there
are plans to increase gas storage. The truth is that there are always
plans to do that; the question is whether they are delivered. At
present, some companies are indicating to us that they are interested
in expanding storage capacity. I will not publicly list them, but I
would say that I have heard such comments before. We really need to see
some action and to have considerable investment going into gas storage.
We certainly want to encourage that in the long
term. On
the social tariff, the big six companies have indicated that they are
prepared to put aside an additional
amount—“additional” is the key word—of
£225 million to bring more people into social tariffs. The
difficulty is that when the new Pensions Bill is through—in the
coming weeks, I hope—we would have to work out as of the start
of next year, when the Bill or at least the relevant portions of it
would come into effect, exactly how information that comes from the
Government and information on consumers that comes from the various
electricity and gas companies will be co-ordinated so that each company
gets information about only its customers who are on pension credit. We
do not want to give them all the information about all the people on
pension credit. Therefore, it is important that we work through the
process of how information will be exchanged. We want the
energy companies to work with us to agree a way in which information
can be passed to them. They will then have to consider how to do so
within the envelope of the £225 million, or whether they will
need to go beyond that, and I suspect that they may have to consider
that. In the past, they have signed up those people whom they knew were
on very low incomes, particularly pensioners. They have done that
themselves. They have always said to the Energy Minister, and certainly
did to me four years ago, that they wanted that information and that if
only they had it, they could put so many more people on to social
tariffs. Well, now is their opportunity to show that they can, and I am
looking forward to their doing so. They may need some encouragement,
and we will do what we can to encourage
them. My
hon. Friend made a point about the ability to measure the performance
of energy companies, and he is right. We disclose the number of
pensioners on pension credit, so it will be possible, at least
collectively, to measure the number of pensioners who are put on to the
social tariff. We shall have a performance management mechanism, but
the energy companies have not quite grasped that. It will be public and
open, and I am sure that the media will be interested in seeing how
well those companies are doing in helping their customers who are on
very low incomes, and in ensuring that they are not paying more than
they should for their
energy. Turning
to difficult-to-recover oil and gas, particularly that on the UK
continental shelf, there are prospects for the next 30 years or more.
The question is not whether it is there; it is whether it is economic
to access it. Some of the reserves are smaller, in deeper water and
more difficult to access for various reasons. Not so many big oil and
gas companies are developing substantial reserves because the
easy-to-access reserves have been developed. We reached the peak around
1999, and it has been dropping off since then. The ability to access
that oil and gas, and the economic viability of some of the projects,
will be affected, and there will be a gentle decline in the UK’s
CS development of oil and gas. That is inevitable. It is dropping off
by about 9 per cent. a year, and we expect that to continue for a
significant period.
It will be
decades before that becomes uneconomic, but given the recent problems
in the financial markets, many oil and gas companies that carry out
exploitation and exploration activities in the North sea particularly,
but also in other parts of the UK continental shelf, are looking for
finance. Companies in America and other countries are also looking at
the price of oil and gas, and for us as consumers the fact that the
price of oil and gas is falling is a good thing, but if someone is
considering a substantial investment in exploration in a
difficult-to-access reserve, it is not so good because profits are
likely to be
lower. It
is clear that the problems in the financial markets, together with the
fact that oil and gas prices have fallen, partly as a result of those
problems, means that we are
expecting some companies to come to us at some point down the line and
say that they are putting off some of their developments. At the
moment, we are not seeing much of that, but to predict that that will
not happen would be wrong. It is clear that the number of people who
are prepared to invest depends on their perception of where the market
will
be. Charles
Hendry: May I question the Minister a little further about
fuel poverty, which is such a key element in this report? He will be
aware that the Government have given the United Kingdom a statutory
duty to end fuel poverty for vulnerable households by 2010 and for all
households by 2016. The indications are that we are moving strongly in
the wrong direction: the Government’s own figures show 3.5
million households in fuel poverty, representing an increase of 1
million in the number of households in that position. Energywatch
estimated that the true figure is about 5.5 million
households. The
Minister will also be aware that last month there was an attempt by
Friends of the Earth and Help the Aged to get the Government into court
on this issue and to have a judicial review because they said the
Government were not meeting their own targets. What is the outcome
following the loss of that court case? Do the Government no longer have
a statutory duty to end fuel
poverty?
The
Chairman: Before I call the Minister to respond, I remind
him that we are close to the end of the time allotted for questions. I
want to move on at 5.30
pm.
Mr.
O'Brien: Thank you, Mr. Taylor. Since 1997,
fuel poverty has fallen—as a result of our policies, there was a
significant drop after we came to government. We still have 900,000
people out of fuel poverty who were in fuel poverty when the
Conservative party was in power—if we had continued the policies
of the Conservatives in government, far more people would be in fuel
poverty—mainly because we have taken a number of steps to help
people. We have also made changes in the market that have lifted people
out of fuel
poverty. I
assure the hon. Member for Wealden that we are taking steps through the
insulation package that the Prime Minister announced in September,
which will mean that a lot of people can reduce their fuel bills, and
through the winter fuel payments to increase the amount of money that
goes to pensioners in particular. For people over 60, the winter fuel
payment is increasing from £200 to £250 and for those
over 80 it is increasing from £300 to £400. As we know,
people over 80 are most susceptible to hypothermia, so it is important
that we help them the most—and we have done
so. The
hon. Gentleman will be aware that the increase in winter fuel payments
does not necessarily affect the fuel poverty figures. That means that
although those payments are important for individuals, they do not
necessarily impact substantially on the statistics because of how the
statistics work. We need not get into that. The point I am making is
that fuel poverty has fallen under this Government. If I were him, I
would not raise the issue at all, because on this matter the record of
his party in government was absolutely
abysmal. While
we are talking about the record of the hon. Gentleman’s party
and what is happening in respect of fuel poverty, I would appreciate it
if he took the opportunity—no doubt he will do so in a
moment—to
tell us about the fair fuel stabiliser, which his party advocated back
in July and under which the price of oil and petrol would increase
substantially for the consumer. We estimate that there would be an
increase— The
Chairman: Order. The debate should focus on the
Committee’s analysis of the causes of the recent increase in oil
prices and the proposed course of
action.
Mr.
O'Brien: Thank you, Mr. Taylor. Indeed, I was,
I hope, looking at the price that people have to pay for
fuel. There
are various ways in which it is suggested that the price of fuel could
be reduced or increased. The official Opposition introduced a
policy—a proposal that they asked us to undertake—that
would have meant, initially, a reduction in the price of petrol, but
which would, now, mean a substantial rise. I would like to know how far
they accept that the price of petrol would rise under their policies,
because it looks like 5p a litre extra would have been added on top of
the average petrol price if we had accepted that view from the
Conservatives. That is what we think they are proposing and at some
point I hope the hon. Member for Wealden will be able to reassure the
Committee that they have dropped their support for the so-called fair
fuel stabiliser, because it is not fair.
The
Chairman: We have come to the end of the time allotted for
questions. I call the Minister to move the
motion. Motion
made, and Question proposed,
That the
Committee takes note of European Union Document No. 10824/08,
Commission Communication on Facing the Challenge of Higher Oil Prices;
and welcomes the Government’s support for appropriate action at
the European level, where this would be effective in furthering energy
efficiency, security of supply and the development of a liberalised
energy market within the Union, and the Government’s own
response to higher oil prices, in particular the Global Energy
Initiative.—[Mr. Mike
O’Brien.] 5.30
pm
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