North Sea Oil and Gas Industry

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Mr. Salmond: Will the Minister give way?

Mr. Wilson: No. I should like to dwell on the Norwegian point in detail.

Mr. Salmond: On a point of order, Mr. Hood. Is it in order for a Minister to arrive late, miss part of the opening speech, and then refuse to give way to interventions that would enlighten him on the bits that he missed?

The Chairman: The hon. Gentleman is well aware that interventions are a matter for the Minister.

Mr. Wilson: Some things never change. The bogus Banff and Buchan point of order is alive and well—and tedious.

In the North sea, Norway is the other side of the same coin. The SNP has droned on since time immemorial that we should be more like Norway, but I have never found it to be a conclusive argument. What is the equivalent tax rate in Norway? It is not

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40 per cent., 50 per cent., 60 per cent., 70 per cent., or even 80 per cent., but somewhere around 85 to 88 per cent. Should we be more like Norway or not?

The hon. Member for West Aberdeenshire and Kincardine labours under a delusion if he thinks that Angola is different because the fuels are bigger. The figures compare like with like, and I am happy to supply them to the hon. Gentleman for his enlightenment. Tax take in most other countries is far higher than in the UK. The following figures are from IHS Energy Group consultants, and are based on a typical 100 million barrel oil field and on an oil price of $18 per barrel: Norway is 88 per cent.; US Gulf of Mexico is 66 per cent.; Canada is 70 per cent.; Angola is 80 per cent.; and Brazil is 65 per cent. The UK has gone up from 35 to 40 per cent. Those are comparative figures. If Liberal Democrat Members think that the UK tax regime is unreasonable, we must agree to disagree. There are no tricks in those figures; they compare like with like.

Sir Robert Smith: Does the Minister accept that those figures are from before the Budget? Two countries have changed their tax regime upwards: Venezuela and Argentina. They are not great examples for the UK economy. Russia has cut its tax to attract more investment. The UK has increased its tax, which must alter the differential investment climate.

Mr. Wilson: The hon. Gentleman is struggling. My point is that those figures compare like with like, so any response should do the same.

I turn to what the hon. Member for Banff and Buchan said about the licensing round, which he went out of his way to denigrate. It was a classic contribution from him because superficially he sounded authoritative and weighty. In fact, it was pure rubbish. His implication was that all previous licensing rounds had been great successes in relation to this one. That is simply untrue. In the latest licensing round, the 20th, the number of blocks initially applied for in the North sea represented about 13 per cent. of those offered. If, as the hon. Gentleman claimed, that is a disaster compared with the previous licensing round in the North sea, what must the figure have been for that round; 40 per cent., 50 per cent. or 60 per cent.? Not a bit of it. The answer is 10 per cent. It was lower than in this round, at the stage of initial applications.

Mr. Salmond: Why was there no press release? [Laughter.]

Mr. Wilson: Even at this advanced stage in his career, the hon. Gentleman must learn that some politicians do not live by press release alone.

Mr. Salmond: It is interesting that, for the first time ever, there was no DTI press release on the licensing round.

I gave the Committee the figures on exploration and appraisal drills. Does the Minister dispute that 112 wells were drilled in 1996 and only 51 last year? Will he shrug that off or accept it as a matter for concern? Will he now respond to the three positive suggestions that I

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made, which, within the changes to the tax regime, could preserve jobs in Scotland?

Mr. Wilson: With due respect, we must be careful with words. I have not brushed off the hon. Gentleman's argument about the licensing round, but exposed it as utterly fallacious. Everyone knows that there is less exploration going on because the North sea is a mature province and the opportunities are becoming fewer. That is why Pilot is seeking to maximise those opportunities and is working so hard in the fallow fields initiative. There is no surprise in those statistics; all we must do is work better.

I turn to the argument that was made about affairs being moved from London, which was the exact opposite of the truth. When the Aberdeen office opened in 1994, 40 staff were located there. There are now 84 staff located there—[Interruption.]

The Chairman: Order. I must ask the hon. Member for Banff and Buchan not to interrupt the Minister.

Mr. Wilson: Everybody in the oil industry believes that there should be two locations for the DTI oil and gas directorate, because some functions are better carried out in Aberdeen and others in London. On the point about shifting the balance, one thing that I have done, and taken pride in, in this job has been to create an organisation called Renewables UK, which will serve the whole country, feed off the synergies with the oil and gas industry and, hopefully, create many thousands of jobs in the new renewables industry. Where is it located? Not in London, but in Aberdeen, as part of the oil and gas directorate. Again, there has been no mention of that.

Angus Robertson: Will the Minister give way?

Mr. Wilson: No.

Moving on to investment, Opposition Members did not mention everything else that was in the Budget. They did not mention the package on first-year allowances, which will potentially lead to increased, not decreased, investment in the North sea. They did not mention consultation or the abolition of royalties. As a whole, and as many people in the oil industry have said, the package is balanced and, for some companies—particularly the independents—it could be beneficial.

We heard from the hon. Member for Galloway and Upper Nithsdale about the fall in the BP share price. Again, that is selective information because although it did go down, it then went back up again and has now come down slightly. It is quite evident that what has affected the BP share price is not the Budget, but the fluctuating price of oil in world markets and the current instability there. I discussed that in Pamplona the other day, where I had a good conversation with Lord Browne. His view on that is much more balanced than some that we have heard today.

On the new developments taking place, hon. Members will be familiar with the importance of BP's Magnus enhanced oil recovery project in the northern North sea. Under that, gas from BP's Foinaven and Schiehallion fields west of Shetland will be pumped to the Sullom Voe terminal in the Shetlands. I am delighted to say that that will result, in

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the next 10 days, in gas from west of Shetland being brought ashore to Sullom Voe for power generation. That will be the first gas to come onshore from west of Shetland. This is the first stage of the project. It will provide a valuable new source of indigenous UK gas, which will be routed through Sullom Voe and it will deliver environmental benefits through being available for use in power generation. That is further evidence of the major infrastructural investments being made in the UK Continental Shelf under the Government's regime.

I want to say something about the fabrication industry. Renewables UK feeds off the experience of the Offshore Supplies Office, which was established by a Labour Government in the 1970s when there was virtually no supply chain in the UK: unless the Government acted proactively, we would not obtain the manufacturing benefits of the North sea. The extraordinary success of the Offshore Supplies Office was achieved by raising the UK content in the hardware of the oil and gas industry to over 70 per cent. That is what I want to do with renewables too.

We cannot guarantee that every order will come to the UK, but we can ensure that our yards can compete, that they are aware of opportunities and that there is a level playing field. However, they must be competitive and able to win those orders, just as we would expect other countries to say that our companies can compete in their markets too—which they do.

Angus Robertson: The Minister makes a reasonable point that Governments cannot fix orders for companies, but can he give the people closely associated with the yard at Nigg an idea of the efforts that the Government are making to help them in the way that he has outlined to win contracts and stay in business?

Mr. Wilson: We have worked closely with BP to ensure—for instance in the Clair field—that there is complete fairness in assessing bids and throughout the process. However, we cannot direct a company to place an order at a particular yard. I think that everybody understands that. The advice that I receive from my officials is that we are satisfied with the way in which BP is conducting the competition for the Clair orders. I have no doubt that a substantial proportion of the work relating to Clair will stay in the UK. I cannot say which yards will get the work, but I am sure that UK companies will win a substantial share of the work associated with Clair.

In summary, I believe that there is a good story to tell. I do not believe that the doom and gloom merchants will be right. When companies make investment decisions they must take into account a range of considerations. There is no doubt that it is a hugely competitive market for investment. Many provinces in the world offer major reserves that can be exploited more cheaply than the North sea, but the North sea also has the attractions of a mature province. People know what is there and how to exploit it and I believe that they will continue to invest in the way that was proposed. I do not see the downturn in this industry predicted by Opposition Members.

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We must also ensure that we maintain the skills base in this industry. One problem that Pilot is also addressing is the ageing work force. We must send out messages that this is an attractive industry with good rewards and working conditions that have been transformed in recent years, and that it offers a long-term stable future to the young people coming into it. That in turn depends on ensuring that investment levels are maintained and new investments made. I assure the Committee that, through Pilot and our work with the industry, we shall continue to ensure that the climate exists to attract investment into the North sea.

I thank my hon. Friends, particularly my hon. Friend the Member for Aberdeen, Central for his measured remarks and his intelligent approach to the Budget and the environment that it will create.

Opposition Members should stop looking for doom and gloom, and stop looking five, 10 or 15 years ahead to find bad news stories for which they cannot be held accountable. They should look at the present and the positive achievements that have been made in the North sea, and they should draw their conclusions accordingly.

It being One o'clock, the motion for the Adjournment of the Committee lapsed, without Question put.

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