Oil and Gas Industry

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Mr. Salmond: I was interested in the hon. Gentleman's remarks about a champion. Is he suggesting a new Statoil in the form of a Britoil or a Scotoil? That is a friendly question—I am genuinely interested in what he means.

Mr. Stewart: I am afraid of friendly questions from the hon. Gentleman. In terms of the structure of the market, it is important to have a UK champion and to develop an approach that is closely related to our UK continental shelf. I am not knocking existing companies such as BP and Shell—they have an important role to play—but we should consider examples from other countries in Europe and the rest of the world.

As I said, there are positive aspects for the future. We need to consider sub-sea technology, satellite work, standardisation and simplification. Pilot, the son of the oil and gas taskforce, is addressing those issues. It is arguable whether satellite work will provide employment for the fabrication industry. Probably it will not, but decommissioning and recommissioning probably will.

David Smith, the president of the UK Offshore Operators Association, recently commented on a new forecast concerning the UK's self-sufficiency in oil and gas, which he believes can be extended. He said:

    ``There are compelling reasons to invest here. The benefit of the established infrastructure, the UK's fiscal stability, together with the UK's track record, is that it offers investors swifter development times.''

The market is volatile, cyclical, global and dominated by multinational organisations and the Organisation of Petroleum Exporting Countries. Not even the Brahan seer—an earlier constituent of mine—could have predicted the current price of oil, but I can see a future for the fabrication industry in Scotland, especially in the highlands, based on diversification, exports and niche marketing, especially in pipeline work.

We must not forget investment in renewable energy sources such as offshore wind and wave power, which require exactly the same world-leading engineering skills that have been used to exploit North sea oil and gas. As Greenpeace has said, if the UK gets 10 per cent. of its electricity from offshore wind by 2010, 36,000 jobs could be created. That would more than make up for the losses in the fabrication sector. I believe that there is a future for fabrication and for the oil industry as a whole, which deserves our support and assistance.

Tory Governments squandered £130 billion of North sea oil revenues, which could have been used to rebuild Scotland, instead of funding the dole queues. This Government have worked hard to bring the industry together through Pilot, to encourage investment, to deliver training and to support diversification.

Perhaps the days of the giant rig buildings are gone. The future belongs to sub-sea tie-backs, extended reach wells and floating production vessels. The future belongs to fields such as Leodow, Golden Eye and Clair—the future is exciting. The oil and gas industry is crucial to this country in terms of jobs and investment. The Government are supporting the industry so that the black gold of the North sea and Atlantic will be an asset to Scotland not only today, but for generations yet unborn.

12.25 pm

Mr. Michael Connarty (Falkirk, East): I have heard many comments in this debate that I would have made myself.

I thank the Secretary of State for her analysis of progress in the industry, which is not only an upstream but a downstream industry. Like the hon. Member for West Aberdeenshire and Kincardine, I am involved with the all-party offshore oil and gas industry group, of which I am the secretary. I am also involved with the all-party chemical industry group, which includes downstream petrochemicals that are relevant to Grangemouth in my constituency, where 47 per cent. of North sea oil is refined and processed.

Hon. Members have already mentioned that oil and gas have had a big effect on the Scottish economy. When the Labour party formed the Government, I followed the debate about whether the Chancellor should be taxing the oil and gas industry. Along with other hon. Members, I lobbied heavily against that idea because, in the main, of oil selling at $10 a barrel. We were not against the principle of sharing revenues from a buoyant industry, but we wanted to ensure that nothing happened to damage an industry that seemed to be facing a serious slump.

I recently attended a BP seminar where the company pointed out that in the period between 1995 and 2000 its income in Scotland increased from £1.1 billion to £1.3 billion. That increase was despite the fact, which has already been mentioned, that when the Forties field began—I was in university at the time—people predicted that it would end by 1995, which would have given it a 30-year life. Steve Marshall of BP is now discussing a further 30 years of life for the field. That is because new technology has been developed in the oilfields. We do not need to put up another heavy platform, because horizontal drilling and 3D imaging allow us to find oil and gas deposits under large salt mushrooms and direct a drill bit to extract them, which would previously have been impossible. There is scope for future development in the North sea.

The problem is that growth has not been matched by increased employment. BP admitted that during that period direct and indirect employees probably decreased by about 10,000, which, in terms of North sea employment, is a high figure. There is a positive benefit, because overall we have 1 million more people in employment, which means that many skills have transferred. I welcome the fact that my hon. Friend the Member for Inverness, East, Nairn and Lochaber (Mr. Stewart) said that he anticipates that many former Barmac construction workers will go to the Caspian development from Scotland. One idea behind the oil and gas taskforce is that our technology and expertise can be sold abroad. It is not a bad thing that people will be taking those skills with them.

I have been struck by the way in which people work in the North sea. I first visited offshore in 1992, although I did not have to go through the experience of diving off a 10 ft platform. As a non-swimmer, I would have panicked if I had had to dive off a platform to find my way into an upturned boat. There has been a remarkable change between my first and most recent visits. When I recently examined one of the Shell fields with the all-party offshore oil and gas industry group, I discovered that a step change had been introduced. In the early 1990s, conflict was the order of the day on the issue of safety in the North sea. However, following the step change we met safety representatives, who used to be regarded by those on the rigs as antagonists, but who are now seen as part of the planning process. Safety is planned in because working safe also means working more efficiently, which means that companies obtain greater productivity and the work force feel engaged.

That step change has also come onshore. I have noticed that the partnership arrangements in Grangemouth are changing its atmosphere. When people lost their negotiating rights, they thought that only the law would reinstate them. Partnership has involved the work force and the way in which people work in the oil and gas industry, and some would say, cynically, that that is because the companies do not want a ballot on membership. The Prime Minister said at the Inverness conference that trade unions should seek the right to be involved in negotiations in the workplace. However, the step change has come onshore and partnership has developed a way of working that has been reported to me to be beneficial.

Those whose Sunday read is not the News of the World may have read The Scotsman on Monday with the headline, ``Scotland's corridor of death'', and a picture of Grangemouth. It was one of the worst pieces of reporting on a serious subject that I have ever seen in a national newspaper. It is not just jobs and profits that are important; the environment and health and safety are, too. The report in the News of the World, which continued in The Scotsman, gave the impression that people living within 40 miles of a petrochemical complex were in danger of getting cancer or other illnesses because of the chemical processes. For some reason, a link was made with an oil-fired power station in Northern Ireland, so the corridor was continuous. I am not playing down the need for the industry and environmental organisations continually to improve the monitoring of any flaring or effluents downstream or elsewhere. However, I was not contacted about the report--nor was anyone else involved in environmental health or the local health board--which was based on the statement of a retired general practitioner in Milford Haven. He may have had an interest in cancer clusters, but there was more concern than evidence, because no evidence has been produced.

The News of the World report stated that heavy sulphur oil from the middle east and Africa was used, but that is not used in the chemical refining process in Grangemouth. The oil comes down the pipeline from the Forties field. Dr. van Steenis said that there was no requirement to measure particles and particulates of 2.5 microns or less, but that they somehow get into people's biosystems from the atmosphere and can cause cancer. If there is evidence of small particles, we should look for them. It is not a question of disparaging his concern or putting down an opposing view. If there is anything to be concerned about, research should investigate how it affects the biosystem. However, we should not do that in an atmosphere of hysteria. The question is whether it is safe to live anywhere in the central belt of Scotland if the 40-mile corridor is threatening people's lives. If people lose confidence in oil and gas from the North sea, those who invest in it and advance the industry will also lose confidence. The article was not helpful to the industry and I hope that we can have serious discussion of and research into the concerns of Dr. van Steenis from Milford Haven, but not in an atmosphere of hysteria.

I have just returned from Brussels with the European Scrutiny Committee, which discussed with the environment directorate the sixth environmental programme for the European Union. The five elements that will be examined include the chemical industry and its effect on the environment. I share some of the concerns, which I have raised as chair of the all-party group on the chemical industry. There is evidence that if heavy low-valency polychlorinated biphenyls in the atmosphere are ingested, they may cause endocrine disruption and developmental problems in the foetus. Work on that has been done by Dr. Theo Colborn which the European Union will rightly examine.

Positive statements have been made about the industry and its future. Discussion of the way in which we raise revenue from the industry and how we spend it should be balanced and bipartisan. It is important to recognise that the industry is a fundamental part of the Scottish economy and provides great benefits. In my view, North sea oil is an east coast UK industry, not just a Scottish industry. For example, the all-party group on the offshore oil and gas industry was set up, and is chaired, by my hon. Friend the Member for Waveney (Mr. Blizzard). Moreover, the two fields most recently connected to the Forties network are south of the Scottish-English border. The previous Government decided to link them to the Forties field, and they are supplying much of the feedstock that will underpin the recent £500 million investment in Grangemouth. Although the industry benefits Scotland it also benefits the UK as a whole.

12.35 pm

 
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Prepared 28 March 2001