Examination of Witnesses (Questions 140-159)
MR DAVE
BLACKWOOD AND
DR REBECCA
BROWN
18 JULY 2006
Q140 Chairman: Prices are high just
now and companies are making profits and the Government is making
profits, but the ultimate price is being paid by consumers and
the motorists; they are not getting any benefit out of this. Can
you tell me at what level, if the price falls, you will be really
concerned and you would like to see a decrease in taxation? Is
it at 40, 35, 30, 25?
Mr Blackwood: It is a very extreme
statement, Chairman, and I think I would put it in a range. I
know there is stuff out there just now which would be and is today
unattractive economically, it just does not return its costs in
the low 30s, so if things were coming down the other way you are
going to start to see that pain threshold become an issue at something
more like $40.
Q141 Chairman: Then you would be
really concerned. Of course then the Committee members and the
Government would be sympathetic, when you were not making that—
Mr Blackwood: It is hard to make
a precise judgment on that figure.
Q142 Chairman: I can also understand
the industry's concerns that there must be some type of certainty;
you do not want to be in a situation where next year or in two
years there is another tax increase. Would you be looking for
some kind of guarantee from the Government that there will be
no tax increases within the next five years or 10 years?
Mr Blackwood: If I was only allowed
one wish, my wish would be actually to have some undertaking that
in the event that this price softens in the medium term future,
this recent tax increase would be revisited.
Chairman: Thank you. John.
Q143 Mr MacDougall: This Committee
has a deep interest in how Scotland will meet its future energy
needs and we were very interested in UKOOA's view that, by 2020,
energy generated from oil and gas could account for 83% of the
UK's requirements. Given that the Government has just announced
an energy review that involves commitment to a new range of nuclear
power stations in Britain, and also recognition of the need to
address this issue of renewables for Scotland, do you think UKOOA's
view is a credible one, is an accurate one?
Mr Blackwood: It is slightly gas-biased
if I am honest, with respect, but I do think we need to have clarity
between the recent energy review which, if I may say, has focused
almost too hard on electricity generation and the UKOOA view which
has focused more on the totality of what are our fuel needs which
include transportation, mobile needs as well. It may be slightly
on the high side but I think that whether the number is that or
whether the number is slightly less than that, the fundamental
message is that in 2020 we are still going to be critically dependent
on oil and gas from the UKCS. The real point that UKOOA is trying
to make behind that is that it increases the pressure on all of
us, on Government and on industry, to try and maximise that recovery.
Whether the number is 70% or 80% is almost immaterial.
Q144 Mr MacDougall: We heard today
from the Prime Minister a report-back from the G8 saying that
all the members of the G8 have agreed now to recognise that there
is a global warming situation that has to be addressed, and part
of that you may think is to cut back and try and encourage—obviously
in a sustainable way—a move away from that type of energy
source and a move into the more environmentally friendly ones.
All the indicators, therefore, appear to be that we are heading
in a different direction from the kind of direction that would
actually make you feel more comfortable with oil and gas. Is that
something that you believe has been taken into account in an accurate
way? You have mentioned UKOOA's view, but in general do you think
that that has been taken seriously enough by the oil companies?
Mr Blackwood: Yes, I believe it
has and I think we have to temper it with obviously everybody
can actually sign up to that aspiration; the reality is how are
we going to achieve that and fill the gap if we take oil and gas
away? That then brings in the hard realities—the aspiration
is great, it is actually how do we achieve it.
Q145 Chairman: Mr Blackwood, we are
talking about slightly over 80% or less. If we have a situation
where this country has to be dependent 83% on gas and oil, do
you not think this would be a disaster for our economy in this
country, especially the gas when we have to be dependent on imports
from abroad. I can see that we have to strike a balance between
coal energy, wind energy, tidal, hydro, thermal, solar, but to
give the figure of 83%—I do not think it is a difference
of five or less, I think the figure has been exaggerated substantially.
Mr Blackwood: Chairman, I honestly
do not know enough of the depth of UKOOA's figures to defend or
attack them, but the sense is that UKOOA has focused more on our
total energy requirements. All of those things you mentioned there
of coal, solar, of wind and wave, these are all conversations
which we are focusing on at the moment around the generation of
electricity.
Q146 Chairman: We are making reasonable
progress on renewable energy in Scotland. Committee members visited
Orkney and Shetland where the wind average blow is 35 miles per
hour, and I think we can generate a huge amount of energy from
there. These are optimistic figures we are talking about from
renewables.
Mr Blackwood: I believe the first
distinction we need to make is that between the set of figures
which relates to how we generate our electricity and the UKOOA
figures which look at our total energy demand. Unless we assume
that in 2020 we are all driving electric cars there will still
be a large component of our primary energy consumption of fuel
for mobile purposes, which then causes the figures to be ones
that you see.
Q147 Mr Walker: What percentage of
our overall energy use is accounted for through electricity, business
and domestic, and what percentage is accounted for by cars and
lorries?
Mr Blackwood: Off the top of my
head I could not tell you, but I can happily get you that data.
Mr Walker: That would be quite interesting,
thank you.[3]
BP does not generate independent UK energy use data
in the details. We suggest the DTI would be the most accurate
and reliable source for this data.
Q148 Ms Clark: On that point a huge contributor
towards our carbon emissions is all forms of transport, in particular
cars of course. When we were in Shetland last week when the Committee
was there we went to an experimental hydrogen production plant,
and indeed we saw a hydrogen-powered car. There is an international
acceptance that we can no longer rely on hydrocarbons because
of climate change, but also because of the fact that the oil is
going to run out, it is a finite resource. How do you think you
are going to be affected when vehicles are moving towards hydrogen
as a method of road fuel rather than hydrocarbons? The major car
companies are investing in this and I would like your comments
on that and how you think it would affect your business.
Mr Blackwood: We are as involved
as anyone in trying to develop alternative fuels and it is a little-known
fact that BP is either the first or second in the globe in terms
of the manufacture of affordable fuel cells. We have just announced
a £500 million investment in biomass and we are completely
in alignment with the statement that says we need to alter our
carbon footprint as we look forward 20, 30, 40 years into the
future. What we are doing is trying to find a responsible way
of getting there, to get there in a responsible and feasible way
without taking away anyone's right to heat, light and mobility
is the task we all face.
Q149 Ms Clark: Given that it is essential
for humanity that we do tackle these issues and that we move towards,
for example, hydrogen fuelled cars as soon as possible, what kind
of fiscal regime do you think is required to encourage companies
like yourselves to be actively investing in such a development
for the future?
Mr Blackwood: With respect the
conversation here is about the fiscal regime to the extent that
it affects our extraction of oil and gas in the North Sea and
there is a piece here which actually gives rise to the carbon
emissions. The fiscal policies that attempt to look at how we
should try to manage carbon actually need to move themselves to
the consumption end of the scale and actually see how we take
carbon into the equation at that end. It is a step too far to
connect those policies to extraction.
Q150 Mr Walker: I think I have asked
this, but if you were to have a wish list of removing red tape
that would enable you to get at your gas and oil more effectively,
what would it be? What is the one single thing that causes you
most misery?
Mr Blackwood: On red tape?
Q151 Mr Walker: Yes, the annoyance,
everybody talks about red tape.
Mr Blackwood: "Unforecast"
regulation coming by and large on the environmental assurance
front—not the environmental performance front, but the environmental
assurance and the paperwork around it, more and more of it coming
from Brussels.
Q152 Mr Walker: Can you give us some
examples of painful legislation that perhaps is questionable in
its merits?
Mr Blackwood: Our commitment to
reduce the amount of oil in produced water which is discharged,
which is actually giving rise to re-injecting that water back
into the reservoirs underground, which means we will run turbines
to produce the power to re-inject that water; those turbines will
emit CO2.
Q153 Mr Walker: Basically it is a
false economy because you are spending more energy to re-admit
that water than if you disposed of it in a more traditional fashion.
Mr Blackwood: Yes.
Mr Walker: Sorry, I am being a bit dopey
here, I was just reflecting—
Mr Devine: Can we record that for the
minutes?
Mr Davidson: Ten out of 10 for self-awareness.
Q154 Mr Walker: There used to be
a Department of Energy; do you think you would benefit from the
re-introduction of a Department of Energy as opposed to these
various bodies that all have a finger in your pie—for want
of a better description?
Mr Blackwood: I would not be presumptuous
enough as to tell Her Majesty's Government how to organise themselves,
but I do believe a more focused, more cohesive approach to energy
policy—we welcome the energy review but building on that
and having a more cohesive approach to energy policy where we
actually deal with more of a singular face from Government can
only be a good thing.
Q155 Mr Walker: Finally, do you think
that the BP public relations campaign that has been run over the
last 12 months in reference to what you are doing with renewables,
what you are doing for the environment, has been effective in
re-positioning your company as being green, a proponent of green
policies?
Mr Blackwood: With respect, this
public relations campaign has been no more than a statement of
fact that we are investing in these different technologies. It
is not an attempt to re-brand, it is an attempt to genuinely confront
the issues we have spoken about.
Mr Walker: I was not meaning to be argumentative,
that is a very good point. The perception that people have of
the oil industry—the people who have to take responsibility
for that are the oil industry, and it comes from within the oil
industry so it is up to you to challenge those perceptions. I
would agree that a lot of what you are doing is to be welcomed,
and I wish you perhaps had broadcast that at an earlier stage
as opposed to being a little bit frightened to engage with the
public.
Mr McGovern: Last June, in their report
on Fuel Prices, the Trade & Industry Committee were
fairly critical of UKOOA members for your perceived reluctance
to contribute to the easing of fuel poverty. Can I ask you both
if you consider such criticism to be justified or unwarranted?
Q156 Mr Walker: Speechless.
Mr Blackwood: Can I ask Dr Brown
to answer that question first?
Dr Brown: I do not feel qualified
to answer that question.
Q157 Mr McGovern: Okay, thank you.
Mr Blackwood: I will stick my
chin out; I believe the criticism to have been unwarranted. It
is a very real issue that we are all concerned about, but I think
people have heard the wrong way the statement which UKOOA made
as a reflection of industry. Fundamentally, this is a very real
issue but it is an issue that—whatever the mechanism is
there to fund and how this is dealt with—it is something
that should be dealt with by governments and not by individual
corporations.
Q158 Chairman: I appreciate that
it is an issue that you believe is the responsibility of governments
and they have to ensure they are dealing with the issues of poverty
and fuel poverty, but at the same time do you not think that when
the companies are making huge profits this is something they owe
to the community as well. There are a number of organisations
who have their budgets set for the community involvement and community
purposes.
Mr Blackwood: If you look at our
personal record and the industry's record, we make significant
investments in the community. I signed a paper the other day for
another instalment and we are spending £10 million planting
trees across Scotland as an abatement of the carbon emissions
of our activities; we are engaged with local schools, there is
a long list of where are actually involved with the community.
Q159 Mr Walker: Am I right in thinking
that some of your larger shareholders are pension funds?
Mr Blackwood: Yes.
3 Percentage of UK overall energy use. Back
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