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Energy Strategy (Scotland)

12.30 pm

Miss Anne Begg (Aberdeen, South): I am delighted to be here to discuss the Government's energy strategy review in Scotland, and pleased that I have secured an Adjournment debate on such an important subject.

The subject is huge and could easily fill an hour and a half of debate, but we have only half an hour. It is probably too big for me to do it justice in that time, so I will begin by saying what I will not be talking about, because the energy strategy review has many aspects and there will not be time to cover them all. I do not want anybody to leave the debate thinking that I am not aware of all the issues. For instance, I will not speak about the future role of nuclear power in Scotland, although that is an important issue. Nuclear power stations will soon be nearing the end of their cycle, and decisions will have to be made about what will replace them and whether new stations will be built. That subject would be enough for an Adjournment debate, and may be picked up by another hon. Member. I will not be saying a great deal about electricity generation, transmission or supply, either—the mechanics of how electricity gets into our homes. That, too, is a big issue and is important in any strategy review. Nor will I talk about the future of coal, or about what will happen to the coal communities that are still struggling with difficulties created by the downturn in that industry.

In such a short debate I want to focus my attention, and as I am an Aberdeen MP it will come as no surprise that I will concentrate predominantly on the oil and gas industry, and on the role of Aberdeen. The oil and gas industry will be crucial not only in the energy strategy for Scotland and the rest of the United Kingdom, but for Aberdeen's economy, which is vibrant thanks to the prosperity created by the industry. It is vital to how the future of Aberdeen develops. Any energy strategy must take into account not only the short-term but the long-term needs of the industry. Aberdeen has an important part to play in the long-term future of energy needs, which will be predominantly concerned with sustainable and renewable energy. My contribution will therefore be made in two parts, examining first the role of oil and gas now and in the near future, and then Aberdeen's role in future energy needs through renewables.

First I will deal with oil and gas. My advice to the Government is: do not write them off. Much has been written in the newspapers recently about the idea that that industry is on a downturn and nearing the end of its life. I remember when I first went to Aberdeen to begin university in the early 1970s and the oil industry had just arrived. At that time the lifespan of the industry was declared to be 10 years and at the most 15—or if we were really lucky it might last for 20 years. We were told to make the best of it, because prosperity would not last. Some 30 years down the line the oil and gas are still flowing. As many reserves on the UK continental shelf in the North sea are known about now as in the mid to late 1970s. There is as much oil for recovery there as there was in the original 1970s projections, even without taking into account the exciting developments west of Shetland.

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An exhibition is held biannually in Aberdeen, and the mood at the recent 2001 Offshore Europe exhibition was incredibly upbeat and positive. The elaborateness of the displays showed that the industry was in good heart, and some operators and contractors made spectacular presentations. That is a good barometer indicating that the operators and contractors in the oil industry feel that there is a future in the North sea.

The oil industry is still a major employer in the Scottish economy. Various figures are bandied about concerning the numbers employed. The submission from the Scotland Office to the energy review mentions 100,000 jobs directly or indirectly related to the industry. Those employed directly in the oil and gas industry, however, total 41,000 this year. That is down from the figure for those working in the industry in 1996, which was 46,000. According to the oil and gas prospectus—the 2001 update produced jointly by Aberdeen city council and Aberdeenshire council—total employment in the oil and gas industry is projected to drop to 37,000 in 2011 and to 32,000 in 2016. Fewer people will be working in the industry, but I contend that 32,000 jobs still form a sizeable part of any economy.

The interesting development, however, is in the numbers working offshore. That figure is due to drop even more severely than total employment. This year, about 18,000 people work offshore on the UK continental shelf—down from 21,200 in 1996—and by 2016 the figure is projected to drop to 12,000. Why is the drop in the number of people working offshore worse than that in the oil and gas industry as a whole? It is partly caused by new technologies. As those come in, and as fields mature, fewer people are needed to work on the inhospitable terrain of the North sea oil platforms. In fine weather, working on a platform is very pleasant, but in less fine weather it is a hard job. However, modern platforms are quite luxurious and a lot better than the original ones. I have visited the Miller platform, for which I thank BP. It was an experience like no other in my life. If anyone here has never been offshore, I would advise them to try it.

The number of fields in production is increasing. There were 87 in 1996, and the projection for 2016 is 115. Again, that is all to do with new developments and new technology. There have been improvements in oil recovery, in the North sea in particular. New technology is such that fields that were previously difficult to operate are now in development. We knew that oil and gas were there, but could not get them out until now. The rise in oil prices has made it possible to recover some fields that were in mothballs—if I may use that term. I am wary of mentioning particular operations in case I miss some out, but I was recently at the interesting inauguration of the Franklyn Elgin field by TotalFinaElf. That was a difficult gas field to develop because of the heat and pressure that the gas was under.

When I did my Industry and Parliament Trust with Chevron in 1998, the price of oil was as low as $10 or $12 a barrel. Decisions had to be made about a difficult field, the Clare field, which was a joint venture between Chevron and several other operators, predominant among which was BP. I sat in on the meeting at which they decided not to proceed with that development. It was a sad day because years of work had gone into the project, but the oil price meant that it was unsustainable

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at the time. I am glad to say that, because of the higher price of oil, the Clare field is now going ahead. Those are just two examples, and they are not the only ones, of how difficult marginal fields can now be exploited.

We now have better recovery of oil and gas. Where fields have been decommissioned or are nearing decommissioning, operators such as Talisman have come in and bought up some of the licences. Such operators are now recovering oil and gas—especially oil—from areas that were thought to be nearing the end of their lifespan. The lifespan of many fields has been extended.

Mr. Alistair Carmichael (Orkney and Shetland): Does the hon. Lady agree that there is a prospect of the industry's provision of jobs in constituencies such as mine having a particularly long tail if we can get into the decommissioning market? If we can bring installations back on shore and decommission them in an environmentally friendly way, that will continue to provide employment. Is it not time that the Scotland Office or the Department of Trade and Industry gave some encouragement to ensure that we are in that market, which should not go to Scandinavian countries alone?

Miss Begg : I did not intend to talk about decommissioning, because I want to be optimistic. Many fields that were set for decommissioning have not been decommissioned. Indeed, some small operators that have not yet extracted any oil out of the ground are currently looking to buy up licences that have already been classed as redundant. The oil industry has a long-term future. The hon. Gentleman is correct to say that there will be an issue about who gets the decommissioning work , which we must ensure is done in an environmentally friendly way.

It is important that businesses, operators and contractors in both Aberdeen and the rest of the north-east are part of the oil industry's future. We are already seeing much of the expertise that has been developed in the North sea being exported abroad. Many Aberdeen companies are already operating in a global market. That is the short-term future of the oil industry. However, if Aberdeen is to continue to sustain its economy, it must not only look beyond the oil industry, but consider how it can use its expertise in new energy technologies. There are new imperatives affecting the energy industry, such as environmental pressure, which the hon. Gentleman mentioned. Environmental pressures will ensure that we deliver energy in a sustainable way that does not ruin our environment, but it is also important that we have cheap energy. If the oil price continues to rise we may reach a stage where it becomes unsustainable as a fuel because it is both expensive and environmentally unacceptable.

Aberdeen needs to be ready. The Government need to be aware of Aberdeen's expertise, and Aberdeen's companies and businesses operating in the energy market need to prepare for developments. It is important that we start to address these issues now so that we do not miss the boat. There are two reasons why we must consider environmental imperatives. First, we need to make oil and gas cleaner fuels so that they will continue to be used in the future—something that we are beginning to see with the production of liquefied

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petroleum gas. I am very interested in liquid gas, which a company in my constituency, PCG, is developing with the government of Western Australia. Gas is turned into a liquid that can be used in diesel engines, which will be a cleaner fuel.

However, the aim is not only to make oil and gas cleaner fuels, but to develop renewable energies. Scotland is well placed to investigate the development of renewable energy sources. We have already led the world in the development of hydro-electricity, which has provided more than 10 per cent. of Scotland's energy needs over the past few decades, and our weather and geography lend themselves very well to the development of wave and wind power. I put in a plea on behalf of the technologies that are needed for offshore wind energy, many of which have already been used to develop the offshore oil industry.

I am not saying that Aberdeen should have offshore wind farms along its coast—it is not suitable, because much shallower water is required; nor that wave power is necessarily right on the east coast— it is more likely to be developed on the west coast or in the Moray firth. The role that I envisage for Aberdeen is that of a centre of excellence, knowledge and expertise. We have two universities—the university of Aberdeen and Robert Gordon university—which are already doing exciting development work on all aspects of energy. We have companies that are beginning to look to future development: major operators such as Shell, which is working on offshore wind, and BP, which is working on solar energy. I want that development to happen in Aberdeen, and to ensure that it is not exported abroad. I know that the Danes are far ahead of us in developing offshore wind energy. That is why my plea is for us to get involved now, so that as the oil industry moves onward and outward, and perhaps becomes less sustainable, the expertise in Aberdeen can be put to good use in other areas of energy production.

Mr. Russell Brown (Dumfries): Far be it from me to disagree with my hon. Friend and to say that Aberdeen should not be a centre of excellence. I fully support the whole principle of developing renewables; anyone who does not is surely somewhat foolhardy. However, does she not think that while the gas and oil industries have been developing over the past 20 or 30 years, we may have missed the boat in terms of research and development into renewables, and that we should have been concentrating more time and effort on that?

Miss Begg : I would love to be able to rewrite history. Perhaps my hon. Friend has a point and we should have been thinking about that sooner, but it is not too late—although it may be soon—provided that we get on the bus now. We should remember that during the industrial revolution Britain appeared to be way ahead of all the other European countries, but Germany introduced the newer technologies while Britain was using the older technologies, and stole a march on us. That may be the case with some renewables—certainly, research has gone down several blind alleys in developing wind and wave power.

Now is the right time to get into renewables and to ensure that the expertise that has been developed over the years in Aberdeen is used. Those brains should be

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used to look into solutions for renewables. For example, in the development of wind power, it is important to get windmills right in terms of gearing and size, and in using new material that makes them light but strong enough not to break in winds of varying strengths. That is a difficult relationship to get right, and there is work to be done on it. I do not want to suggest that there are just one two areas of possibility; things will be happening in Aberdeen and elsewhere that I have not heard about and cannot dream of, but which are none the less very important.

My message to the Government on the energy strategy is that the future of Aberdeen and the north-east could be bright. To the doom and gloom merchants who say that it will all end in tears and the oil will soon run out, my answer is no, it still has some time to go—and even when it does run out we will be well poised to create a sustainable economy through diversification into other energy sectors.

I want Aberdeen to change from the oil capital of Europe into the energy capital of Europe. With Government support, the help of the various operators and the expertise that we have in Aberdeen, I am sure that we can achieve that.

12.50 pm

The Minister of State, Scotland Office (Mr. George Foulkes ): I sincerely congratulate my hon. Friend the Member for Aberdeen, South (Miss Begg) on securing a debate on a very important topic. I agree that it deserves more than half an hour, and I hope that we will find other opportunities to debate it.

I visited Aberdeen during the general election campaign, and I enjoyed my visit. I said then that my hon. Friend is one of the best constituency Members in the House of Commons. Fortunately, the electorate of Aberdeen, South recognised that, and she has demonstrated it again today. The way to represent one's constituents is to secure a debate and argue one's case forcefully, as my hon. Friend did, rather than tabling 250 questions for written answer. Such round robins, costing £30,000, are a waste of public money. One such question asked how many photographers the Scotland Office has spent money on, and the cost in real terms since 1995. That is the kind of rubbish that we get from the immature representatives of the Scottish National party. I wish that they would take a leaf out of the book of my hon. Friend the Member for Aberdeen, South, who is a really good representative of her constituents.

As my hon. Friend knows, the United Kingdom Government remain responsible for the entire area of reserved issues, of which energy is one. Although energy is reserved to this Parliament, we all recognise that it impinges on a number of devolved responsibilities, not least the energy sector's significance in relation to jobs, as my hon. Friend said. As we pointed out in our submission to the review, there are 100,000 oil-related jobs in Scotland, and three of Scotland's top 10 companies are electricity generators and suppliers. That shows the importance of the sector in Scotland. Although energy policy is reserved, environmental issues are devolved, as are the promotion of renewable energy, energy efficiency, consents for new power stations, overhead lines and gas pipelines. That is why we in the Scotland Office have been working very closely with our colleagues in the Scottish Executive—officials and Ministers—on the entire energy review.

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The energy review is an important part of the Government's energy strategy. Some journalists have said that we are conducting the review in secret. Nothing could be further from the truth. In fact, all the submissions and minutes of meetings held so far are published on the web. We cannot be more open than that. Everyone can read about exactly what we are doing and the way we are doing it. We have had more than 400 substantive submissions and a couple of hundred insubstantial ones, including one from the SNP that did not say anything new. I had better not go on, as I might be accused of being a "Nat-basher"—[Interruption.] Ah, it worked.

Mr. Michael Weir (Angus): Speaking as one of the alleged immature representatives, I ask the Minister to deal with the issue and explain the Government's thoughts, particularly on renewable energy, and the way forward. The hon. Member for Aberdeen, South gave a very good speech on the oil industry, which I am interested in as it affects my constituency too. However, we must look beyond that to renewables. What are the Government's proposals for renewable energy? Do they intend to go down the nuclear road, as has recently been suggested?

Mr. Foulkes : I am happy to reply to that—a reply that will cost absolutely nothing. I share the vision that my hon. Friend the Member for Aberdeen, South set out, in which we build on the oil and gas industry. Aberdeen is recognised as the oil capital of Europe. In the light of the expertise, technology and skills of those in and around Aberdeen, including Robert Gordon and Aberdeen universities, we can see the potential that my hon. Friend describes for Aberdeen to become the energy capital of Europe, including renewables.

My hon. Friend the Member for Dumfries (Mr. Brown) asked my hon. Friend the Member for Aberdeen, South whether we had missed the renewables bus. That was the case until just over four years ago, but we saw the bus and got on it quickly. Matters have moved dramatically since then.

Renewables are vital and the Scottish oil and gas industry has much to be proud of. Aberdeen and Scotland as a whole have concentrated on people's skills and made a major contribution to the British economy. That is why PILOT was set up—it was formerly the oil and gas industry taskforce—of which I am a member, as well as being a member of the energy review. The vision of that taskforce is the United Kingdom oil and gas industry and Government working in partnership to deliver quicker, smarter and sustainable energy solutions for the new century. A number of taskforces have been set up within PILOT to help to achieve that vision. One is the oil and gas industry fabrication support group, which has identified significant opportunities for new businesses through diversification, one being energy from renewable sources. The skills of the oil and gas industry are being used to move into renewables, particularly onshore wind. I have seen Scottish Power's wonderful new development at New Cumnock in my constituency. The

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factory at Campbeltown will build the wind generators to which my hon. Friend referred and provide much-needed jobs. The development includes onshore wind, offshore wind and tidal stream turbines. I made a fascinating visit to Islay and saw one of the pilot schemes for wave generation, which provides the opportunity for large-scale development. Scotland is reported to contain 23 per cent. of the wind energy of Europe and it feels like it from time to time, especially in Orkney and Shetland which I visited recently.

Mr. Carmichael : As the Member representing Orkney, may I invite the Minister to return to Stromness in the near future to see for himself the excellent work that is being done at the marine energy test centre, which has been established there as a result of Scottish Executive and Highlands and Islands Enterprise initiatives?

Mr. Foulkes : Of course, I shall take up that offer. I welcome the chance to visit Orkney and Shetland, which are my only overseas visits since I changed my job.

Scotland, with its large natural assets, is favourably placed to make faster progress on renewables. We are already seeing progress, the obvious example being AMEC Border Wind. AMEC is one of the first oil and gas contractors to diversify into wind energy in response to the Government's target on renewables. The renewables obligation has made a substantial difference to the development of renewables with £800 million going to the renewables industry through the renewables obligation. That is a substantial contribution.

Another example is Agip (UK), which provides backing for Wavegen, whose generator I saw in Islay. We are keen to encourage further development along those lines. However, we face a number of challenges in the energy review. I do not have time to go into them all today, but I would welcome an opportunity to discuss the matter in more detail. We must focus on the tensions between energy policy and environmental objectives, which is a classic dilemma.

The future role of nuclear energy must be discussed because 45 per cent. of electricity in Scotland comes from nuclear generation. The two nuclear power stations have a finite life and we must work out how they will be replaced. We must all face up to that, including the nationalists, or the lights will go out all over Scotland and the United Kingdom and our constituents would not thank us for that. We need to achieve security and diversity of energy supply. We need to look at the future of the oil and gas sector, and the ways in which we can encourage the opening up of a marginal field. We need to look at the significance of transport as an energy consumer, and the need to tackle fuel poverty. That is something that, in terms of our poverty eradication agenda, we must not forget.

That is the purpose of the energy review. A meeting will take place tomorrow, which I shall attend, and we aim to report by the end of the year. I hope that all hon. Members present will find another opportunity to debate this matter, which is vital to Scotland and to Britain.

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