A month ago, Energy castigated Labour MP Ed Miliband for not having visited Aberdeen since his appointment as Secretary of Energy and Climate Change in October 2008.
We asked whether he understood the strategic value of Europe’s Energy Capital in hydrocarbons and renewable energy, especially offshore.
Sufficiently chastened, the Miliband office attempted to make up for this serious oversight by sending him to the Granite City for less than 24 hours – late afternoon November 29 through to mid-afternoon the following day.
He left with a clear message from the leaders of the energy and wider business communities that North Sea oil&gas is massively important to Britain and, moreover, that heritage is also critical in Britain’s attempt at morphing into a low-carbon economy.
“We have a very important interest in maximising the contribution of indigenous oil&gas as a part of that transition,” Miliband insisted in an interview with Energy.
“What I’m saying is that, for some time to come, we have a real interest in making sure that we maximise production of oil&gas from indigenous sources; that’s how important the North Sea is. It is also consistent with and the lowest carbon way of making this transition possible.
“I think you’re also right to say there’s a wider potential for the industry to use the skills that exist on offshore wind and marine, specifically carbon capture and storage.”
Miliband rejected the idea that the objectives of the UK Treasury and his Department of Energy and Climate Change clashed.
“The Treasury’s objectives are for not only maximising tax revenue, but they are also in the proper functioning of our economy and having the most secure energy supplies that we can. I think that if you look at what (Chancellor) Alistair (Darling) did in terms of the Field Allowance in April, that was recognition of the importance of the industry.”
Even though there is a widely held feeling in the oil&gas industry that the Treasury does not understand, Miliband insisted that it does.
“The Field Allowance is a very important development for the industry to work with the Treasury on because it opens up the possibility of an understanding that we need different regimes for different fields … fields that are particularly difficult to development. I think that’s a very important recognition by the Treasury.”
Replying to criticism that the Field Allowance proposals are too narrow-cast, the reply was: “This is a dialogue the industry needs to have with the Treasury and through DECC.
“I’m not coming here to say that this is the tax measure that we’re going to implement because that’s not my job. It is to listen to the industry and facilitate discussion with the Treasury.”
So why didn’t Miliband travel to Aberdeen shortly after he became DECC secretary? He defended his position by saying that at least he had chaired two North Sea PILOT steering group meetings. However, preparations for the Copenhagen climate summit had eaten time, but at least ministers had visited.
“What matters is the substance of what we do. You saw in the Budget a real appreciation of the (oil&gas) industry and the role it plays. I’m determined to facilitate that dialogue and work with the industry for the benefit of the UK as a whole.”
Miliband said, too, that he understood the important role that the offshore industry can play in marine renewables. Indeed, during his visit, he encountered no fewer than six members of the private-public partnership, Aberdeen Renewable Energy Group, at a cross-industry lunch.
EU member states will shortly have phase three of the Emissions Trading Scheme foisted on them, despite the perceived failure of the prior two phases, primarily because of the lack of a floor to the market to prevent prices collapsing the way they have.
But what might the impact on the oil&gas industry be, given worry that up to 800million barrels oil equivalent may have to be left in the ground, according to Oil & Gas UK.
Miliband: “I think we’re still working on the criteria for the new ETS and the way it will affect the oil&gas industry.
“I think commission criteria, as they now stand, will mean that some of the fears of the industry won’t be realised in terms of their position. But this is still under discussion and will be settled during the course of 2010.
“Obviously, this is one of the issues that the industry has raised. At the same time, it is important that we make phase three of the ETS work. That’s the balance that we have to strike.”
But the problem for Miliband, whether dealing with ETS or other energy issues, is that Labour could lose the next general election. He doesn’t see it that way.
“I don’t accept that we have just a few months left in office. I don’t think it is right to take for granted the results of the next general election. As for the wider question of what can DECC do … it will continue to do what it has been doing … be an important voice and source of dialogue with the industry, especially about issues that we can directly act on; talk to the Treasury; but also work with the industry so it can project a confident future.”
But confidence is a fragile thing – and Miliband detected this during his fleeting visit to Aberdeen. Indeed, it was made clear to him that North Sea people worry about their industry being out of fashion – not green.
“My answer was that it is good that people have a conscience about climate change. The challenge for government and the industry is to say, ‘We are a part of that transition. We’re not the high-carbon source that must be put up with. We are part of this transition to low carbon. We are the bridge and we can be part of the low-carbon future, whether through carbon capture and storage (CCS) or skills being deployed in other areas like renewables’. The industry needs to project a more confident message.”
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