Chamber
Meeting of the Parliament 17 November 2011
17 Nov 2011 · S4 · Meeting of the Parliament
Item of business
Oil and Gas Sector
Thank you for accommodating this important debate, Presiding Officer. I welcome the opportunity to acknowledge the success of Scotland’s oil and gas sector, which is a cornerstone of Scotland’s economy. The North Sea oil and gas industry makes a significant contribution to the economies of Scotland and the United Kingdom and acts as a major source of employment by supporting 440,000 jobs across the UK, including more than 196,000 in Scotland alone.
The industry is also a major source of investment: BP’s recent announcement of a programme of investment of almost £10 billion in North Sea oil and gas in the next five years is terrific news for Scotland. The industry is also a major source of tax revenue and has provided more than £300 billion in tax revenues to the UK Government over the years. The industry also supplies the majority of the UK’s oil and gas needs.
Since large-scale oil and gas production commenced in the North Sea in the 1970s, more than 39 billion barrels of oil equivalent have been extracted from the UK continental shelf. Although production levels might have peaked in 1999, the story does not end there—far from it. Indeed, 40 years after oil and gas pioneers in the North Sea first started to pump Scotland’s oil, the North Sea continues to produce 900 million barrels every year, and the story continues, with significant unharvested reserves remaining in the North Sea.
Forecasts from Professor Alex Kemp at the University of Aberdeen and others suggest that oil and gas production will continue at least until the 2040s. Oil & Gas UK—the trade representative body for the sector—estimates that between 15 billion and 24 billion barrels have yet to be recovered. That suggests that between 30 and 40 per cent of total oil and gas reserves by volume have still to be extracted. At current prices, those reserves could have a wholesale value of in excess of £1 trillion—which is a denomination that is not normally used in debates in the Parliament. Given that extraordinary potential, it is imperative that recovery of those reserves be maximised. I have enjoyed cordial relations with members of all parties in the Parliament on the shared pursuit of that objective.
In February this year, Oil & Gas UK published the results of its 2011 activity survey. The report makes good reading. The potential for new fields development is promising, with 67 possible new field developments reported. Confidence in the sector is fairly high, and levels of capital investment in the UK continental shelf are strong. There has been a series of recent commitments to the North Sea from leading oil and gas companies. There is more: looking to the longer term, the investment horizon in the UK continental shelf over the next decade and beyond is reported to have the potential to reach £70 billion.
Of course, much of the skill and the supply chain expertise in Scotland is now exported overseas. Of the nearly £16 billion-worth of oil and gas supply chain sales in 2009, 45 per cent—just under half—or £7.2 billion, was internationally based. That is a real tribute to the people who have worked in the industry over decades.
Over the years, Aberdeen has established itself as one of the world’s largest energy hubs. It has an enviable reputation around the world for engineering, innovation and excellence, especially in the subsea sector. Much of that skill and expertise has the potential to help to develop our emerging offshore wind sector as well, especially in design, installation and marine operations. I was pleased to note that that is recorded in the briefings that members have received for the debate from Oil & Gas UK and other bodies.
We have industrial and supply chain ability, research and development capacity and a highly skilled sector workforce that is second to none. It is clear that considerable opportunities remain in the North Sea and that the industry will remain an important part of the Scottish and UK economies for many decades to come. However, Government must play its part in supporting the opportunity by creating stable and effective support and incentive structures to help to make that happen.
I turn to some of the challenges. The Scottish Government recognises that we cannot take it for granted that development in the North Sea will happen without appropriate political and policy support. Strategic forums—such as the Scottish energy advisory board, which the First Minister co-chairs, the oil and gas industry advisory group, which I co-chair with Melfort Campbell and which was established by the Scottish Government, and the PILOT group, which it is chaired by Chris Huhne and which I attend on behalf of the Scottish Government—bring together the UK Government, the Scottish Government and the wider oil and gas industry to work together.
The industry is also a major source of investment: BP’s recent announcement of a programme of investment of almost £10 billion in North Sea oil and gas in the next five years is terrific news for Scotland. The industry is also a major source of tax revenue and has provided more than £300 billion in tax revenues to the UK Government over the years. The industry also supplies the majority of the UK’s oil and gas needs.
Since large-scale oil and gas production commenced in the North Sea in the 1970s, more than 39 billion barrels of oil equivalent have been extracted from the UK continental shelf. Although production levels might have peaked in 1999, the story does not end there—far from it. Indeed, 40 years after oil and gas pioneers in the North Sea first started to pump Scotland’s oil, the North Sea continues to produce 900 million barrels every year, and the story continues, with significant unharvested reserves remaining in the North Sea.
Forecasts from Professor Alex Kemp at the University of Aberdeen and others suggest that oil and gas production will continue at least until the 2040s. Oil & Gas UK—the trade representative body for the sector—estimates that between 15 billion and 24 billion barrels have yet to be recovered. That suggests that between 30 and 40 per cent of total oil and gas reserves by volume have still to be extracted. At current prices, those reserves could have a wholesale value of in excess of £1 trillion—which is a denomination that is not normally used in debates in the Parliament. Given that extraordinary potential, it is imperative that recovery of those reserves be maximised. I have enjoyed cordial relations with members of all parties in the Parliament on the shared pursuit of that objective.
In February this year, Oil & Gas UK published the results of its 2011 activity survey. The report makes good reading. The potential for new fields development is promising, with 67 possible new field developments reported. Confidence in the sector is fairly high, and levels of capital investment in the UK continental shelf are strong. There has been a series of recent commitments to the North Sea from leading oil and gas companies. There is more: looking to the longer term, the investment horizon in the UK continental shelf over the next decade and beyond is reported to have the potential to reach £70 billion.
Of course, much of the skill and the supply chain expertise in Scotland is now exported overseas. Of the nearly £16 billion-worth of oil and gas supply chain sales in 2009, 45 per cent—just under half—or £7.2 billion, was internationally based. That is a real tribute to the people who have worked in the industry over decades.
Over the years, Aberdeen has established itself as one of the world’s largest energy hubs. It has an enviable reputation around the world for engineering, innovation and excellence, especially in the subsea sector. Much of that skill and expertise has the potential to help to develop our emerging offshore wind sector as well, especially in design, installation and marine operations. I was pleased to note that that is recorded in the briefings that members have received for the debate from Oil & Gas UK and other bodies.
We have industrial and supply chain ability, research and development capacity and a highly skilled sector workforce that is second to none. It is clear that considerable opportunities remain in the North Sea and that the industry will remain an important part of the Scottish and UK economies for many decades to come. However, Government must play its part in supporting the opportunity by creating stable and effective support and incentive structures to help to make that happen.
I turn to some of the challenges. The Scottish Government recognises that we cannot take it for granted that development in the North Sea will happen without appropriate political and policy support. Strategic forums—such as the Scottish energy advisory board, which the First Minister co-chairs, the oil and gas industry advisory group, which I co-chair with Melfort Campbell and which was established by the Scottish Government, and the PILOT group, which it is chaired by Chris Huhne and which I attend on behalf of the Scottish Government—bring together the UK Government, the Scottish Government and the wider oil and gas industry to work together.
In the same item of business
The Deputy Presiding Officer (John Scott)
Con
The next item of business is a debate on motion S4M-01349, in the name of Fergus Ewing, on the oil and gas framework.14:58
The Minister for Energy, Enterprise and Tourism (Fergus Ewing)
SNP
Thank you for accommodating this important debate, Presiding Officer. I welcome the opportunity to acknowledge the success of Scotland’s oil and gas sector, ...
Tavish Scott (Shetland Islands) (LD)
LD
Will the minister give way?
Fergus Ewing
SNP
Certainly.
The Deputy Presiding Officer
Con
Liam—
Tavish Scott
LD
I am Tavish Scott, not Liam McArthur.Does the minister recognise that one of the major economic opportunities over the next 15 to 20 years will be in decommi...
Fergus Ewing
SNP
I welcome Tavish Scott’s point; he is absolutely right that decommissioning will present considerable opportunities for Scotland. Just yesterday we received ...
The Deputy Presiding Officer
Con
I am sure that we should be reassured, minister. Perhaps you would like to move on.
Fergus Ewing
SNP
Thank you, Presiding Officer.Access to finance is as much an issue in the oil and gas industry as it is in other industries, and oil companies are finding it...
David Stewart (Highlands and Islands) (Lab)
Lab
I am grateful to the minister for giving way because he is “that sort of minister”.My point is on fallow fields, which—as the minister will be aware—are fiel...
Fergus Ewing
SNP
That is one of a number of factors that concern all members across all parties. I cannot speak for Chris Huhne, but I think that the UK Government is apprise...
The Deputy Presiding Officer
Con
You can have a little more time, if you wish.
Fergus Ewing
SNP
That is very generous of you, Presiding Officer. You are that sort of Presiding Officer.
The Deputy Presiding Officer
Con
That depends on the day.
Fergus Ewing
SNP
Thank you, Presiding Officer. Technological excellence, robust supply chains, a skilled workforce and making best use of the existing onshore and offshore oi...
The Deputy Presiding Officer
Con
My pleasure. Could you please move the motion?
Fergus Ewing
SNP
I move,That the Parliament recognises the continued importance of Scotland’s oil and gas sector to the Scottish and UK economies, its support for 196,000 job...
The Deputy Presiding Officer
Con
Thank you. I call Lewis Macdonald, who has a generous nine minutes.15:12
Lewis Macdonald (North East Scotland) (Lab)
Lab
North Sea oil and gas have now been with us for a working lifetime. Other members, like me, will know people who have retired from the industry, having joine...
Maureen Watt (Aberdeen South and North Kincardine) (SNP)
SNP
I thank the member for recognising the future of the oil and gas industry. Is it not regrettable that in the second session of this Parliament his ministers—...
Lewis Macdonald
SNP
To be frank, what I regret is that after the minister’s constructive opening—and invitation for us to have a consensual and constructive debate—Maureen Watt ...
Gavin Brown (Lothian) (Con)
Con
We have had an excellent start to the debate. The minister’s speech was ministerial and helpful as opposed to partisan, and Lewis Macdonald’s speech was well...
Mark McDonald (North East Scotland) (SNP)
SNP
I note that the member’s amendment would delete all reference to the PWC report. What aspect of that report does he disagree with so fundamentally that he se...
Gavin Brown
Con
In the main, it is an excellent report, about 95 per cent of which I could probably sign up to immediately. There were a couple of issues to do with proposed...
The Deputy Presiding Officer (Elaine Smith)
Lab
We move to the open debate. I can allow speeches of up to seven minutes.15:29
Mark McDonald (North East Scotland) (SNP)
SNP
In June, I had a members’ business debate on oil and gas taxation. It was a constructive debate, which was handled constructively by all parties across the c...
Sarah Boyack (Lothian) (Lab)
Lab
I apologise that I will have to leave for a brief period for a prior commitment with a constituent, although I will be back for the closing speeches.I join c...
Maureen Watt (Aberdeen South and North Kincardine) (SNP)
SNP
I welcome this debate, because oil and gas is a subject that is very close to my heart; I worked in the industry and went offshore as part of my job for some...
Tavish Scott (Shetland Islands) (LD)
LD
A number of weeks ago, Oil & Gas UK and the French company Total organised a parliamentary visit to the Elgin-Franklin field, which is east of Aberdeen. In o...
Mark McDonald
SNP
Will the member take an intervention?