Chamber
Meeting of the Parliament 09 January 2013
09 Jan 2013 · S4 · Meeting of the Parliament
Item of business
Oil and Gas Sector
I begin by agreeing with the broad tenor of the minister’s remarks and thanking Rhoda Grant for her observations on decommissioning, in particular. I agree with her central observations on safety.
In the regular discussions that the minister has with the industry—I am thinking of Dana Petroleum, in particular—perhaps he could have a wee word about geography. He cannot have been the only person who spotted its curious decision to give the Barra and Harris fields, which are 100 miles east of Unst, the names that it did. There are plenty of seabirds that fields have yet to be named after. During one of his many busy days, perhaps the minister could impress on the industry the need—not least for the benefit of his poor colleagues who represent the Western Isles—to get its geography a little more accurate.
I want to make three main points in support of my amendment. First, the offshore installations in the North Sea have now been with us for the best part of three to four decades. Every industry contact whom I meet—including the process engineer from the Forties field whom I met on the train from Aberdeen this morning—says that the most significant requirement is the constant need for re-engineering, reinvestment and the giving of attention to the fabric of oil rigs, gas platforms and every piece of kit out there. That is hardly surprising, given what has gone and what will go in the future.
Huge investment is needed, but it makes sense because, as the minister hinted, some of the major unplanned maintenance shutdowns during 2011, when production of gas and oil fell considerably—by 21 and 17 per cent respectively—were caused by the fabric challenges that the industry faces. It is in the interests of Government strategy here and in London, which is about enhancing recovery and maintaining the degree of progress that the minister talked about, for such unplanned shutdowns and unplanned maintenance to be limited to a large extent. That strongly supports the point that Rhoda Grant rightly made about safety. I meet plenty of safety reps at home and across Scotland who advocate the case for investment.
The need for such investment represents an enormously positive opportunity for the supply chain, not just in the north-east of Scotland but across Scotland and the rest of the UK. Given the state of the whole economy at the moment, the oil and gas sector is one of the highest growth areas. We should recognise that and support and encourage it. The issue comes down to jobs, businesses and success. We should strongly support investment in the fabric of the industry.
There is also a need for onshore fabric maintenance. Sullum Voe oil terminal was opened in 1978. At the tail end of last year, BP announced a £300 million reinvestment in the terminal, which Arthur Spence—the Shetlander who is in charge of the terminal—said to me on the phone this morning would secure the terminal into the 2040s. That means that it has the same potential lifetime as the one that the minister rightly identified for the entire industry. That is a very important commitment by BP, by the partners to the terminal, and indeed in the UK continental shelf overall.
The islands that I have pleasure in representing in Parliament have taken oil as part of our life for a long time. All my life, oil has been very much part of things. We deal with the risks as well—I could hardly fail to mention that on the 20th anniversary of the Braer. We also take the risks from west of Shetland. I recognise that for some, particularly in the environmental movement, there are huge challenges and they are right. I have been on an exploration drilling rig west of Shetland. The environmental and weather issues that will be confronted out there should not be underestimated. Rhoda Grant rightly mentioned helicopters and it is said that as regards helicopter transfers to Schiehallion and Foinaven the delays are far more than, for example, to an oil rig east of Aberdeen for all the obvious reasons.
In that context, I am disappointed that Chevron’s Rosebank gas pipeline option is to bypass Sullom Voe, but we hope to gain business from crude oil shuttle tankers at Sullom Voe. I am sure that the minister takes his role seriously in the context of the overall assessment, analysis and approval of oil and gas recovery plans and that when strategic decisions are taken about where pipelines are based they are taken on the basis of the best long-term interests of the entire industry.
On field extraction, I agree with the argument already made by members, not least because who would have envisaged a decade ago that horizontal drilling was possible. Now, we can be taken into control rooms and shown 3D maps of how it is done. Technology moves on and I cannot guess where it will go in the next 10 years but it will go further and further.
I thank the minister for his work in relation to decommissioning at Lerwick. It is not just about Lerwick, as Rhoda Grant rightly suggested. It is about every port in Scotland. There is so much work out there over the next 20 to 30 years that it will not just be one port—in that case, happily, in Shetland—that benefits, but many ports across Scotland.
Although decommissioning is moving back because of crude oil prices of $100 a barrel, there is no question but that it will be an important Scottish business in the future as well.
I move amendment S4M-05310.1, to insert at end:
“; notes the need for constant investment in North Sea oil and gas assets for personnel safety; further notes 43 offshore field transfer deals during 2012 between private and state-owned companies; appreciates the necessity of long-term certainty around the £30 billion decommissioning of oil and gas platforms, and recognises the decline in North Sea production from its peak of 137,099,000 tonnes in 1999 to 51,972,000 tonnes in 2011.”
15:12
In the regular discussions that the minister has with the industry—I am thinking of Dana Petroleum, in particular—perhaps he could have a wee word about geography. He cannot have been the only person who spotted its curious decision to give the Barra and Harris fields, which are 100 miles east of Unst, the names that it did. There are plenty of seabirds that fields have yet to be named after. During one of his many busy days, perhaps the minister could impress on the industry the need—not least for the benefit of his poor colleagues who represent the Western Isles—to get its geography a little more accurate.
I want to make three main points in support of my amendment. First, the offshore installations in the North Sea have now been with us for the best part of three to four decades. Every industry contact whom I meet—including the process engineer from the Forties field whom I met on the train from Aberdeen this morning—says that the most significant requirement is the constant need for re-engineering, reinvestment and the giving of attention to the fabric of oil rigs, gas platforms and every piece of kit out there. That is hardly surprising, given what has gone and what will go in the future.
Huge investment is needed, but it makes sense because, as the minister hinted, some of the major unplanned maintenance shutdowns during 2011, when production of gas and oil fell considerably—by 21 and 17 per cent respectively—were caused by the fabric challenges that the industry faces. It is in the interests of Government strategy here and in London, which is about enhancing recovery and maintaining the degree of progress that the minister talked about, for such unplanned shutdowns and unplanned maintenance to be limited to a large extent. That strongly supports the point that Rhoda Grant rightly made about safety. I meet plenty of safety reps at home and across Scotland who advocate the case for investment.
The need for such investment represents an enormously positive opportunity for the supply chain, not just in the north-east of Scotland but across Scotland and the rest of the UK. Given the state of the whole economy at the moment, the oil and gas sector is one of the highest growth areas. We should recognise that and support and encourage it. The issue comes down to jobs, businesses and success. We should strongly support investment in the fabric of the industry.
There is also a need for onshore fabric maintenance. Sullum Voe oil terminal was opened in 1978. At the tail end of last year, BP announced a £300 million reinvestment in the terminal, which Arthur Spence—the Shetlander who is in charge of the terminal—said to me on the phone this morning would secure the terminal into the 2040s. That means that it has the same potential lifetime as the one that the minister rightly identified for the entire industry. That is a very important commitment by BP, by the partners to the terminal, and indeed in the UK continental shelf overall.
The islands that I have pleasure in representing in Parliament have taken oil as part of our life for a long time. All my life, oil has been very much part of things. We deal with the risks as well—I could hardly fail to mention that on the 20th anniversary of the Braer. We also take the risks from west of Shetland. I recognise that for some, particularly in the environmental movement, there are huge challenges and they are right. I have been on an exploration drilling rig west of Shetland. The environmental and weather issues that will be confronted out there should not be underestimated. Rhoda Grant rightly mentioned helicopters and it is said that as regards helicopter transfers to Schiehallion and Foinaven the delays are far more than, for example, to an oil rig east of Aberdeen for all the obvious reasons.
In that context, I am disappointed that Chevron’s Rosebank gas pipeline option is to bypass Sullom Voe, but we hope to gain business from crude oil shuttle tankers at Sullom Voe. I am sure that the minister takes his role seriously in the context of the overall assessment, analysis and approval of oil and gas recovery plans and that when strategic decisions are taken about where pipelines are based they are taken on the basis of the best long-term interests of the entire industry.
On field extraction, I agree with the argument already made by members, not least because who would have envisaged a decade ago that horizontal drilling was possible. Now, we can be taken into control rooms and shown 3D maps of how it is done. Technology moves on and I cannot guess where it will go in the next 10 years but it will go further and further.
I thank the minister for his work in relation to decommissioning at Lerwick. It is not just about Lerwick, as Rhoda Grant rightly suggested. It is about every port in Scotland. There is so much work out there over the next 20 to 30 years that it will not just be one port—in that case, happily, in Shetland—that benefits, but many ports across Scotland.
Although decommissioning is moving back because of crude oil prices of $100 a barrel, there is no question but that it will be an important Scottish business in the future as well.
I move amendment S4M-05310.1, to insert at end:
“; notes the need for constant investment in North Sea oil and gas assets for personnel safety; further notes 43 offshore field transfer deals during 2012 between private and state-owned companies; appreciates the necessity of long-term certainty around the £30 billion decommissioning of oil and gas platforms, and recognises the decline in North Sea production from its peak of 137,099,000 tonnes in 1999 to 51,972,000 tonnes in 2011.”
15:12
References in this contribution
Motions, questions or amendments mentioned by their reference code.
In the same item of business
The Deputy Presiding Officer (Elaine Smith)
Lab
The next item of business is a debate on motion S4M-05310, in the name of Fergus Ewing, on oil and gas—the success and opportunities. The debate is oversubsc...
The Minister for Energy, Enterprise and Tourism (Fergus Ewing)
SNP
I welcome the opportunity to pay tribute to and recognise the success of Scotland’s oil and gas sector. The sector is one of Scotland’s biggest economic succ...
Neil Findlay (Lothian) (Lab)
Lab
Will the minister say what the current rate of UK corporation tax is on oil and gas and how much revenue would be lost if a 10 per cent rate were applied?
Fergus Ewing
SNP
I do not look at the figures in that way. I will deal with the tax issue in due course.Since large-scale production commenced in the North Sea in the 1970s, ...
Patrick Harvie (Glasgow) (Green)
Green
Will the minister take an intervention?
Fergus Ewing
SNP
Not just yet.Linking CCS with enhanced oil recovery could accelerate its development and unlock 3 billion barrels of hard-to-reach oil—worth £190 billion—fro...
Patrick Harvie
Green
I am sure that the minister will accept that even if CCS technology can be brought to maturity, it has no effective role to play in relation to the carbon em...
Fergus Ewing
SNP
No, I do not agree with that. It will allow huge reserves of oil to be extracted, which will be hugely beneficial. Frankly, I would have thought that the Gre...
Neil Findlay
Lab
Will the minister give way?
Fergus Ewing
SNP
I do not think so—I have too much to cover.We simply cannot afford to lose revenue on that scale, nor can we afford to lose the tax revenues, which I have de...
The Deputy Presiding Officer
Lab
Minister, you really must draw your remarks to a close.
Fergus Ewing
SNP
Ah, well. All I can say is that that figure must increase.I have not talked about skills, but we are working on the issue as we move towards the announcement...
The Deputy Presiding Officer
Lab
I am afraid that I must reiterate that we are very tight for time. I call Rhoda Grant to speak to and move amendment S4M-05310.2 in no more than 10 minutes.1...
Rhoda Grant (Highlands and Islands) (Lab)
Lab
I pay tribute to the workers who make the oil and gas industry a success. Many of them work onshore in back-up and planning roles but, given the real persona...
Fergus Ewing
SNP
I am happy to assure Rhoda Grant that, as far as decommissioning is concerned, Scotland will honour her responsibilities. On taxation, we recognise that stab...
Rhoda Grant
Lab
That proves the point about why we need stability and why the industry needs to know what the fiscal regime will be, should Scotland become independent of th...
Tavish Scott (Shetland Islands) (LD)
LD
I begin by agreeing with the broad tenor of the minister’s remarks and thanking Rhoda Grant for her observations on decommissioning, in particular. I agree w...
Patrick Harvie (Glasgow) (Green)
Green
I like to begin with a note of consensus when I can—Alex Johnstone looks sceptical already.I agree strongly with all three members who have spoken on the poi...
Mark McDonald (North East Scotland) (SNP)
SNP
I know that Mr Harvie and I have different opinions on economic growth, but what would be his message to the many constituents whom I represent whose livelih...
Patrick Harvie
Green
My argument would be one of transition, not about ending an industry and putting nothing in its place. It would be about transitioning to the renewables indu...
The Deputy Presiding Officer (John Scott)
Con
You must close, please.
Patrick Harvie
Green
The building of a Scottish public renewables company is the best priority that we could set. What a legacy to leave for future generations.I move amendment S...
Mary Scanlon (Highlands and Islands) (Con)
Con
I thank the minister, Fergus Ewing, for his measured approach and commend him for his positive and constructive partnership with the Westminster Government. ...
Stewart Stevenson (Banffshire and Buchan Coast) (SNP)
SNP
Yes, it is.
Mary Scanlon
Con
That is the sort of misinformation that the people of Scotland do not want in the lead-up to the referendum.
Mike MacKenzie (Highlands and Islands) (SNP)
SNP
Will the member give way?
The Deputy Presiding Officer
Con
The member is closing.
Mary Scanlon
Con
If Mr Stevenson would be quiet, I would find it easier to concentrate on my speech, Presiding Officer.
The Deputy Presiding Officer
Con
I am afraid that you must close, please.
Mary Scanlon
Con
In the lead-up to the referendum, it is worth noting that oil and gas revenues account for 0.7 per cent of UK gross domestic product, compared to 17.7 per ce...