Energy Bill

Written evidence submitted by Oil & Gas UK (EB 13)

I am writing in respect of your Committee’s ‘Call for Evidence’ following the Energy Bill passing its Second Reading in the House of Commons on Monday 18 January.

The objective of Maximising Economic Recovery (MER UK) from the UK Continental Shelf (UKCS) enjoys cross-party support and we hope that this support continues. Oil & Gas UK welcomed the publication of this Bill in the House of Lords, as it formally establishes the Oil and Gas Authority (OGA) as an independent, government company (GovCo). The provisions contained in the initial Bill continue the implementation of Sir Ian Wood’s recommendations for MER UK and as such we support the swift passage of this Bill to set-up a strong, independent regulator for the industry.

The Wood Review was published in February 2014 when the price of oil was significantly higher than today, and even then the need for enhanced stewardship of UKCS resources and a tripartite approach to MER UK was a significant challenge. This challenge has been made even more difficult and requires much greater focus during this extremely difficult business environment.

As such, we support the Government’s amendment to ensure that the Principal Objective remains focussed upon MER UK. This will reverse the changes made in the House of Lords, which extended the Principle Objective of the OGA to include decommissioning of oil and gas infrastructure and securing its re-use for transportation and storage of greenhouse gases.

Oil & Gas UK believes, in accordance with the Wood Review, that the Principal Objective of the OGA should be facilitating the implementation of MER UK. We believe the OGA is a critical catalyst for the work being undertaken to sustain offshore oil and gas activity and the associated employment in the sector, and its tools and capabilities should remain focussed solely on this task.

This objective will be a challenge for the OGA, particularly in today’s severely challenging business environment, and extending the Principal at this stage could compromise the new regulator’s ability to deliver MER UK, which may in turn damage investor confidence, and could ultimately jeopardise the sustainability of the industry in the future.

The OGA has not been established to deal with the main obstacle to offshore CCS projects, which is commercial, and we believe that funding decisions should be taken by government directly, not by the upstream industry regulator.

The offshore industry is not opposed to Carbon Capture and Storage (CCS) technology in the UK. However, it is our firm belief that the strategy for the development of CCS should remain the responsibility of the Office of Carbon Capture and Storage (OCCS) within the Department of Energy and Climate Change (DECC).

Additionally, we support the Government’s amendment to reverse the changes made in the House of Lords to the review period of the OGA’s remit. We believe that the OGA’s performance should be reviewed every three years, rather than annually, to give it time to bed in and ensure it can use its time efficiently.

I would be grateful if you could ensure that Oil & Gas UK’s position on this Bill is taken into account during the debate at Committee Stage.

January 2016

 

Prepared 26th January 2016