§ 3. Miss Anne Begg (Aberdeen, South) (Lab)If she will make a statement on her Department's initiatives to stimulate levels of North sea exploration drilling. [163435]
§ The Minister for Energy, E-Commerce and Postal Services (Mr. Stephen Timms)We have taken a number of important steps to help, including introducing new types of licence to increase exploration levels, and increasing the data available to the industry. Through PILOT, the Government/industry oil and gas forum, we have been working to ensure activity in previously fallow areas, and we are making good progress on that. In addition, my right hon. Friend the Chancellor of the Exchequer is introducing an exploration expenditure supplement to stimulate exploration by new entrants to the North sea.
§ Miss BeggI welcome the announcement in last week's Budget on encouraging exploration, but I am sure that my hon. Friend is well aware that there is nervousness in the North sea area that there is not enough exploration. If exploration does not happen, either on known reserves or to find new reserves, the future of the oil and gas industry in the North sea will not be as rosy as we all hope. Will my hon. Friend make sure that the Government, either through the Treasury or through his Department, do everything that they can to ensure that extra exploration is encouraged, whether through the exchanging of licences or changing the nature of licences, to make sure that new entrants and existing operators have the chance to explore as much as they can?
§ Mr. TimmsI certainly agree with my hon. Friend, and as she knows, there could easily still be as much oil and gas in the North sea as we have extracted in the past few decades. It is essential that we fully exploit those resources not only to benefit her constituents, but to benefit the economy as a whole. We are working very hard in that regard and there are some very encouraging signs. However, I am aware of the concerns that exist in the industry, and I met the United Kingdom Offshore Operators Association recently to discuss them.
My hon. Friend may have seen this morning's report by 3i, which shows sharply increased asset disposals from the big oil companies that create major new opportunities for drilling. That is expected to make a very important contribution over the next few years. Moreover, my Department's latest survey of drilling intentions, which was also published today, shows that drilling expectations for the coming year are 30 per cent. higher than a year ago. So there are encouraging signs, but I agree with my hon. Friend that we need to work very hard with the industry to make sure that those positive signs become full grown.
§ Sir Robert Smith (West Aberdeenshire and Kincardine) (LD)Do the figures for drilling intentions relate to development drilling—the expanding of 1046 existing reserves—or to the new frontier exploration that will unlock the other half of the oil reserves that the Minister says we have yet to extract? There is real nervousness in the north-east of Scotland because, despite a long and sustained run of high oil prices, we are still not seeing the activity that we would expect. We urge the Government to look again at how to incentivise the exploration that would unlock the key to those reserves.
§ Mr. TimmsAgain, I agree that this issue is important, and the figures that I gave cover drilling of all kinds. The hon. Gentleman will doubtless have heard the announcement concerning the frontier licence in the current 22nd offshore round, which will encourage drilling in areas west of Shetland in particular. It is a long time since there has been much exploration in those areas, and we certainly want to see more.
On fiscal incentives, I should point out to the hon. Gentleman that the Treasury works very closely with us through PILOT, the oil and gas industry taskforce, and that there have been big improvements, such as the abolition of royalties and the ending of petroleum revenue tax on new third-party tariff business relating to pipelines and other infrastructure. However, all these matters will be kept closely under review.