Chamber
Meeting of the Parliament 17 November 2011
17 Nov 2011 · S4 · Meeting of the Parliament
Item of business
Oil and Gas Sector
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 15 years. In the previous session of Parliament, Jamie Stone and I were the only members who had experience of working in the industry. I am not sure whether any of the new intake of MSPs has worked in the industry.
I welcome both the PricewaterhouseCoopers report and the motion, particularly the recognition of just how important it is to maintain and improve Aberdeen’s position as an energy hub. The report is right to stress that Aberdeen will not secure that role for the future without concerted effort and it will require extensive vision, collaboration and real improvements to the infrastructure and skills development opportunities that are on offer in the area. Organisations such as Aberdeen city and shire economic future—ACSEF—the Aberdeen and Grampian Chamber of Commerce and the higher education institutions in the area all recognise that and are working collaboratively to ensure that it happens.
The north-east colleges are collaborating more than ever before, not least with the signing of a federation agreement between Aberdeen and Banff and Buchan colleges. However, as Mark McDonald mentioned, the report states that we must encourage the energy industry to collaborate more with Aberdeen’s academic institutions to ensure that Aberdeen is home to the skills that the energy industry needs for the future. Lewis Macdonald and other north-east MSPs have been to briefings from our colleges and our universities in the past few weeks and we know that they are working hard to make that happen. A seamless education from technician training and apprenticeships through to PhDs and management skills can be provided by the academic institutions in the north-east if they work together.
That makes the first half of Lewis Macdonald’s amendment very relevant. Health and safety pervades everything that the oil industry does. Indeed, if anyone goes to an event sponsored by BP or the oil and gas industry they are given a little card that says to ensure that they hold on to the rails and not to carry anything when they are going down the stairs, particularly blunt instruments or glasses. Health and safety pervades everything that is done, even onshore, and it comes from the importance of health and safety offshore.
Quality of life and good infrastructure in the city are hugely important in making Aberdeen a world-class energy capital for the future. That highlights the importance of projects such as the Aberdeen western peripheral route, which cannot be overstated. The report is right to highlight the need to ensure that the long legal delays it has endured are avoided in future infrastructure projects. Encouraging greater air links to strategically important locations should also be a priority and there is a strong argument for devolving air passenger duty for just such a purpose. It is important that we all do as much as possible to ensure the viability and continuity of the new route from Aberdeen to Frankfurt.
The economic opportunities that are offered by the energy sector—both in oil and gas and in renewables—to Aberdeen are enormous and it is essential to the Scottish economy that efforts to secure them are fully supported. That brings me to the last line of the Government’s motion, which is perhaps one of the most telling recommendations in the PWC report. The North Sea oil and gas industry needs
“fiscal certainty and targeted incentives ... from the UK Government.”
Fiscal certainty and targeted incentives are, unfortunately, the direct opposite of what we got from Danny Alexander and the UK Government.
The UK Government’s tax raid on the oil and gas industry came without warning or consultation and, if anything, was the absolute antithesis of the fiscal certainty that the industry requires. The Scottish Government has called for a statutory consultation period before changes to oil and gas taxation take place in the future. Surely we should all agree that such a measure would go a long way towards giving the industry confidence that it will not unexpectedly be raided again in the future.
The tax increase made no recognition of the effort required, the costs of exploration and development or the variation in how profitable different fields are. Some months ago, the Scottish Government submitted proposals to mitigate the worst effects of the tax grab by calling for a rate of return allowance before a field is liable for the supplementary charge, an investment uplift allowance or an extension of the field allowance for small or technically challenging new fields.
Those measures would encourage the industry to continue investing in exploration and the development of new opportunities. The lack of response to those much-needed proposals has been deeply disappointing to many in the industry, particularly as around a quarter of the previously planned projects have been sufficiently affected by the UK Government’s actions to reduce the probability of them proceeding.
Significant investments in the North Sea have been announced since the increased tax bombshell was dropped, but they are in projects with the highest yields or the most investment already committed to them. The marginal fields are the most heavily affected. Oil & Gas UK has warned of a two-speed industry emerging on the UK continental shelf. Projects involving more than £12 billion of investment that could have led to £15 billion to £20 billion of tax revenues have been put in doubt as a result of the UK Government’s ill-considered actions.
A few years ago, a politician spoke out to condemn the then UK Government’s focus on squeezing out short-term revenue from the oil and gas industry at the expense of investment that was needed to get the most out of the North Sea. That politician was George Osborne. The contrast between his comments in 2007 and his actions as chancellor can only be considered as representing hypocrisy of the worst kind. I hope that he has invested £150-plus in buying Alex Kemp’s two volumes on the history of the oil and gas industry in the UK, and that he learns from them.
I support the motion.
15:51
I welcome both the PricewaterhouseCoopers report and the motion, particularly the recognition of just how important it is to maintain and improve Aberdeen’s position as an energy hub. The report is right to stress that Aberdeen will not secure that role for the future without concerted effort and it will require extensive vision, collaboration and real improvements to the infrastructure and skills development opportunities that are on offer in the area. Organisations such as Aberdeen city and shire economic future—ACSEF—the Aberdeen and Grampian Chamber of Commerce and the higher education institutions in the area all recognise that and are working collaboratively to ensure that it happens.
The north-east colleges are collaborating more than ever before, not least with the signing of a federation agreement between Aberdeen and Banff and Buchan colleges. However, as Mark McDonald mentioned, the report states that we must encourage the energy industry to collaborate more with Aberdeen’s academic institutions to ensure that Aberdeen is home to the skills that the energy industry needs for the future. Lewis Macdonald and other north-east MSPs have been to briefings from our colleges and our universities in the past few weeks and we know that they are working hard to make that happen. A seamless education from technician training and apprenticeships through to PhDs and management skills can be provided by the academic institutions in the north-east if they work together.
That makes the first half of Lewis Macdonald’s amendment very relevant. Health and safety pervades everything that the oil industry does. Indeed, if anyone goes to an event sponsored by BP or the oil and gas industry they are given a little card that says to ensure that they hold on to the rails and not to carry anything when they are going down the stairs, particularly blunt instruments or glasses. Health and safety pervades everything that is done, even onshore, and it comes from the importance of health and safety offshore.
Quality of life and good infrastructure in the city are hugely important in making Aberdeen a world-class energy capital for the future. That highlights the importance of projects such as the Aberdeen western peripheral route, which cannot be overstated. The report is right to highlight the need to ensure that the long legal delays it has endured are avoided in future infrastructure projects. Encouraging greater air links to strategically important locations should also be a priority and there is a strong argument for devolving air passenger duty for just such a purpose. It is important that we all do as much as possible to ensure the viability and continuity of the new route from Aberdeen to Frankfurt.
The economic opportunities that are offered by the energy sector—both in oil and gas and in renewables—to Aberdeen are enormous and it is essential to the Scottish economy that efforts to secure them are fully supported. That brings me to the last line of the Government’s motion, which is perhaps one of the most telling recommendations in the PWC report. The North Sea oil and gas industry needs
“fiscal certainty and targeted incentives ... from the UK Government.”
Fiscal certainty and targeted incentives are, unfortunately, the direct opposite of what we got from Danny Alexander and the UK Government.
The UK Government’s tax raid on the oil and gas industry came without warning or consultation and, if anything, was the absolute antithesis of the fiscal certainty that the industry requires. The Scottish Government has called for a statutory consultation period before changes to oil and gas taxation take place in the future. Surely we should all agree that such a measure would go a long way towards giving the industry confidence that it will not unexpectedly be raided again in the future.
The tax increase made no recognition of the effort required, the costs of exploration and development or the variation in how profitable different fields are. Some months ago, the Scottish Government submitted proposals to mitigate the worst effects of the tax grab by calling for a rate of return allowance before a field is liable for the supplementary charge, an investment uplift allowance or an extension of the field allowance for small or technically challenging new fields.
Those measures would encourage the industry to continue investing in exploration and the development of new opportunities. The lack of response to those much-needed proposals has been deeply disappointing to many in the industry, particularly as around a quarter of the previously planned projects have been sufficiently affected by the UK Government’s actions to reduce the probability of them proceeding.
Significant investments in the North Sea have been announced since the increased tax bombshell was dropped, but they are in projects with the highest yields or the most investment already committed to them. The marginal fields are the most heavily affected. Oil & Gas UK has warned of a two-speed industry emerging on the UK continental shelf. Projects involving more than £12 billion of investment that could have led to £15 billion to £20 billion of tax revenues have been put in doubt as a result of the UK Government’s ill-considered actions.
A few years ago, a politician spoke out to condemn the then UK Government’s focus on squeezing out short-term revenue from the oil and gas industry at the expense of investment that was needed to get the most out of the North Sea. That politician was George Osborne. The contrast between his comments in 2007 and his actions as chancellor can only be considered as representing hypocrisy of the worst kind. I hope that he has invested £150-plus in buying Alex Kemp’s two volumes on the history of the oil and gas industry in the UK, and that he learns from them.
I support the motion.
15:51
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?