Europe's Energy Capital (Aberdeen)
The final item of business is a members' business debate on motion S1M-2472, in the name of Richard Lochhead, on promoting Aberdeen as Europe's energy capital.
Motion debated,
That the Parliament recognises the City of Aberdeen's role as Europe's oil and gas capital and the long-term contribution that the offshore sector will continue to make to the Scottish economy; believes that every effort should be made to ensure that the city evolves into Europe's "Energy Capital" thereby benefiting from the industry's enormous economic and environmental potential that can place Scotland in the vanguard of renewable energy business internationally; considers that the Scottish Executive should produce specific strategies aimed at supporting Scotland's oil and gas sector and renewable energy sector that also promote Aberdeen as Europe's energy capital, and further considers that the Executive should promote measures to ensure that, as far as possible, the new energy revolution is driven by indigenous interests.
First, I thank the colleagues who supported my motion and the many companies, academics and agencies that sent me their views for this debate. The motion's aim is to secure Government support for the oil industry's long-term future and to help Europe's oil capital, the city of Aberdeen, move with the times, diversify and evolve into Europe's energy capital.
Scotland possesses expertise in all aspects of energy and much of the world's leading offshore expertise is based in Aberdeen. The city is already considered to be Europe's oil capital. A number of offshore-related indigenous companies have acquired international reputations and many multinationals have based their European headquarters in the north-east. Aberdeen founded the world energy cities partnership with Houston, Stavanger and Calgary and is the only UK member. Furthermore, the city hosts "Offshore Europe", which is a premier event on the international industry calendar, and was attended last year by 77 countries. Finally, in June, the internationally respected and Aberdeen-based Alex Kemp will host the annual conference of the International Association for Energy Economics.
With Government support, the North sea will have a secure future for decades to come. There is no better illustration of that than this week's news that Argyll, the province's oldest field, will again produce oil after local company Tuscan Energy was awarded the licence. The discovery of the magnitude of reserves in the Buzzard field that will come on-stream in 2004 is more good news.
There are 121 fields in production in the North sea with nine under development, and in the next 10 years up to 110 more fields will be developed. The head of an oil major recently told me that the North sea will produce oil and gas for at least another 60 years.
Looking to the long term and the impact of the province's maturity and of new technology on job levels in the oil and gas sector, the north-east is rightly looking overseas for new business and is beginning to diversify. Renewable energy is the logical next step for the region. Aberdeen is increasingly being viewed as an energy city and has the critical mass to evolve into Europe's energy capital. "All-Energy Opportunities 2002" is an event being held in Aberdeen to stimulate diversification by the industry into European renewable energy opportunities alongside the continuation of its existing core business. The event's organisers said that Aberdeen is the ideal location, because of
"the skills of SMEs developed over many years of service to the offshore industry. Their expertise will be vital in the development of renewable technology and will help to maintain Scotland, and Aberdeen in particular, as the epicentre for the R&D, manufacturing and maintenance requirements of this growing industry."
A renewables action plan is now being developed in Aberdeen. Positioning Aberdeen as a vibrant, multi-energy centre is the key to unlocking environmental and economic opportunities for the whole of Scotland, as illustrated by Aberdeen-based AMEC's involvement in the ambitious wind farm project on the island of Lewis. Renewable energy is a 21st century opportunity that Scotland must grasp and hold on to. North-east companies have all the skills and experience that are required to build a renewables industry. The universities house some of the finest brains in renewables technology. The Robert Gordon University is recognised as a world leader in marine energy research and is now collaborating with the University of Aberdeen to develop renewables technology. More than 40 years' experience of taming the North sea and extracting oil and gas will be vital in developing offshore wind, wave and tidal energy projects.
There are several ways in which the Government can support Aberdeen's bid to become Europe's energy capital. All the correspondence that I have received refers to the desperate need to improve the region's transport infrastructure. There is enormous frustration over the slow progress in the building of a western peripheral route around Aberdeen and in the expansion of the region's rail and air services. Patience is running out, and those issues must be catapulted to the top of the Executive's agenda.
Another area where the Parliament has power is in training and skills development. Ensuring that development is one of the biggest challenges that faces the industry, and many people have suggested that they want more intervention from the Government to complement the work that is being done through industry initiatives such as the Offshore Petroleum Industry Training Organisation, to attract engineering students to the industry. That links in with the demand for more effort to promote research and development in partnership with the industry and with local further and higher education sectors.
A campaign throughout the past decade has brought some UK oil and gas directorate jobs north of the border. Now that we have our own Government, it is time for us to step up that campaign to bring the jobs that remain in London to Scotland. The Scottish Government can set an example by transferring its energy section to Aberdeen, in line with its policy to disperse civil service jobs. The Government should explore ways in which locally-owned companies can be given more opportunities to benefit from existing and new offshore opportunities. The minister should throw his weight behind local efforts to officially designate Aberdeen as a centre of excellence for energy. The Executive could illustrate its support by offering to chair a summit in the near future, involving all stakeholders, to drive forward the city's bid.
My colleague, Brian Adam, would have been here to develop that case but for a family funeral.
The Scottish Government should express support for, and offer assistance towards, the establishment of a Scottish energy institute in Aberdeen, which would bring together all the relevant public sector, academic and private sector players under the same roof. That concept has widespread support and would provide a focal point for international business. It would establish a one-stop shop for overseas businesses and governments that wanted to access the industry's expertise. There would be no better illustration of the Government's commitment to Aberdeen and the north-east.
Supporting those initiatives with ministerial backing and investment would bring enormous benefits to the north-east and Scotland for decades to come. We must turn vision into reality so that, in years to come, when people around the world think of energy, they will think of Scotland and Aberdeen. That will benefit the economy and the nation's international standing.
Since 1965, the industry has reinvested £200 billion of its surpluses in the sector. In the same period, the Government in Westminster has acquired nearly £170 billion in taxation. Perhaps it is now time to reinvest some of that cash in the economy of the north-east.
The United Kingdom Offshore Operators Association, the industry body, told me that, although 90 per cent of UK oil production is in Scottish waters, as is 52 per cent of gas, the reason why 26 per cent of oil jobs are located in the London area is because the decision makers are down there. If we moved the decision making to Scotland, thousands of jobs would follow.
Of course, for that to happen, Scotland needs independence. If we do not have independence, we will not hold the key to the economic benefits of the energy industry. Until that day comes, it falls on the Parliament and the Executive to take every action to make the most of any opportunities. I urge the minister to respond positively to the many ideas that will be raised in today's debate.
Twelve members wish to speak. That might require the debate to be extended but we can review the situation later on. I ask members to keep their speeches under four minutes.
Given this week's excellent news, this is a timely debate. I thank Mr Lochhead for securing it.
The UK oil and gas industry is a huge and continuing success story. Today, we heard about the discovery by PanCanadian Energy of twice the expected oil reserves in the Buzzard field and yesterday, Brian Wilson, the UK Minister of State for Industry, Energy and the Environment, announced the reopening of the Argyll field—an excellent example of small UK companies using innovative drilling and production technologies that allow the extraction of previously inaccessible oil reserves.
The past year has seen increasing optimism as the oil price has risen, with increased investment across the UK continental shelf. Plans such as BP's rebuilding of its Aberdeen headquarters send clear signals about the long-term future of the oil and gas industry that is evolving into an energy industry in Aberdeen. The North sea is a mature and relatively high-cost province with the remaining 50 per cent of oil reserves in smaller fields. However, it remains globally competitive and is an attractive place for continued investment. We need to be clear about why that is.
Will the member give way?
No, thanks.
One reason is an attractive fiscal regime and another is the fact that the UK has the most stable political environment in the world. That is a powerful inducement for the oil industry. Also important is the decisive and successful action taken by UK and Scottish ministers in establishing the oil and gas task force, which is now called Pilot, during the oil price downturn in 1998-99. Pilot has been widely recognised by the industry as being an extremely effective Government and industry collaboration with a clear strategic vision. I welcome the commitment of the Minister for Enterprise, Transport and Lifelong Learning and her deputy to Pilot and their support of the industry. So successful has the Pilot strategic model been that it was recently used as a template for a similar body for the electronics industry.
Other factors continue to favour the UK. One is the extensive infrastructure that we have in the North sea, together with the expertise on and offshore and the service industry that, although it is based across the UK, is focused on Aberdeen. The oil and gas industry will continue to be important to Aberdeen, Scotland and the UK for several decades to come.
Will the member take an intervention?
No thanks.
Aberdeen is the pre-eminent location for oil and gas in the UK and Europe. However, it must continue to build its reputation globally. That effort will include building international alliances and I congratulate Margaret Smith, the lord provost of Aberdeen, on being a superb ambassador for Aberdeen in her role as president of the world energy cities partnership, a position that she uses to help secure Aberdeen's long-term future.
Of course, we must diversify into renewable technologies. Some, such as tidal stream, fit with the skill set that we have in the oil and gas industry in Aberdeen. As Richard Lochhead said, key research is taking place in places such as the Robert Gordon University. Developing technology institutes in emerging sectors—which has already taken place in areas such as Wales—will play a vital role in developing Scotland's economy. I hope that we will have one on energy. I support the proposals from the universities and the industry to develop specialised institutes in Aberdeen.
I share the broad sentiments of Richard Lochhead's motion, which, I noticed, was well trailed in The Press and Journal, that very well-informed local newspaper in the north-east, last Saturday. I have it in front of me. It was a useful introduction to this evening's debate.
I also agree with the point about "Offshore Europe". I have attended a number of those exhibitions. There is nothing better than a night out in Aberdeen with the Shetland contingent. One would be advised not to go on a night out with the Shetland contingent after "Offshore Europe", but it is still an important lesson, not only in the night life of Aberdeen, but in matters to do with oil.
I will sweep up Elaine Thomson's remarks about the good things that have happened of late. From my constituency point of view and from a general Scottish and UK point of view, the announcement of the development of the Clair field is one of the more important announcements in the past few months.
I will pick up on one aspect of the motion—renewable energy—and follow on to some extent from Alasdair Morrison's debate last night, which considered renewable energy from his constituency point of view. I will raise a further matter of oil and gas development in the North sea—the medium-term and long-term decommissioning of oil rigs. There is a great deal of activity in the decommissioning industry, particularly in oil companies, engineering companies and marine operators. In my constituency, the Shetland Decommissioning Company Ltd is determined to get a hold of that work as it develops. I take some personal satisfaction from that, because from the time that I was the chairman of the Lerwick Harbour Trust, we have worked hard at home on reinvestment and reinvestment again in deepwater quays, heavy lift facilities and other necessary shore-side businesses to ensure that, when that development of policy arrives and the oil industry starts to take strategic steps on decommissioning, Shetland will be able to catch part of that work.
Progress has been slow, but some projects are now beginning to move—as the cross-party group on oil and gas, which Elaine Thomson chairs, will know. The Phillips Petroleum Company UK Ltd's Maureen platform was recently refloated and towed to Norway for interim storage until disposal begins in the early part of next year. Aker Maritime, the main contractor on that job, provides not only expertise, but an opportunity for links with companies such as the Shetland Decommissioning Company, which can then build its experience in executing such works.
Similarly, Kerr-McGee North Sea (UK) Ltd's Hutton tension-leg platform is due to be removed from site by 2003. The decommissioning of that platform is expected to be based around subsea structures, pipelines and tethers. The Shetland Decommissioning Company is also heavily involved in that work. That is an illustration, if Richard Lochhead's wider point is to be made, of the need for ministers in Scotland and in London to be well apprised of that work and for the ability of domestic and indigenous companies to seek to grab some of that work.
Phillips's vast Ekofisk platforms are likely to be removed using the new-generation heavy lift platform techniques. I understand that a feasibility study into that technology was commissioned. If the minister is up to speed on that point, I ask him to tell us how that is proceeding and to develop the argument in his closing speech.
The other important offshore development concerns TotalFinaElf's Frigg field, which is now subject to public consultation. It is a vast development. Six platforms are being decommissioned, three of which are in the UK sector and three of which are in the Norwegian sector. Platform removal is expected to commence in 2006. That is some time away, but the point is that domestic Scottish companies, including the one that I mentioned in my constituency, need to be up to speed with contacts and ensure that they are aware of the opportunities so that they can build up that work.
The dependence in my constituency, in Aberdeen and in the north-east generally on the oil and gas industry is heavy. I urge ministers to take full account of the decommissioning opportunities so that Scottish businesses can take advantage of the renewable options that Mr Lochhead mentions in his motion.
As Scotland is the only European Union member that is an oil producer, of course Aberdeen qualifies to be the European oil capital. There can be no competition, surely.
I will talk about access, as someone who spent 24 years trying to get to the European Parliament.
When direct flights between Inverness and Heathrow were stopped, Aberdeen was the obvious alternative. I live in Elgin and the journey there from Aberdeen takes only an hour and a half at night. However, the journey to Aberdeen takes two and a half hours in the morning, which means that I may not even have got there in time for the early plane. I had to leave at about half past four in the morning, because of the singularly dreadful road and the amount of traffic on it. The delay in the early morning is phenomenal. When one considers the wealth that has been generated by the oil industry, is not it rather sad that the access road should be in that state?
The flight connections were such that it seemed that no one had worked out a way in which people who wanted to travel on from their first port of call in Europe could connect to other airports in Europe. For example, if my early morning plane arrived in Amsterdam late—that is, if I managed to make that flight at all—I might not get the next connection, which was very tight. I had to do a four-minute mile, which is not easy at my age. If I missed that connection, I had to wait six hours in Amsterdam airport, which was not a pleasant experience. Perhaps I was not meant to live in the north of Scotland and be a member of the European Parliament. When I went home at weekends, I had to give up my Sundays, although I do not suppose that anyone is going to weep for me over that. However, Sundays are very precious to MEPs, who have little leisure time, and giving up my Sundays to get to the European Parliament was one of the worst things.
To make matters worse, recently the road between Elgin and Aberdeen was blocked, on and off, for a week. I know that that is true because my neighbours' children, who are at university in Aberdeen, could not get back. They tried several times but were stopped by the police at Keith. Aberdeen is the European oil capital, but it has such awful road maintenance and roadblocks that people cannot even reach it.
Over the years, people have often predicted, with a lot of doom and gloom, that the oil supplies will run out, yet we have been reading good news recently about the Argyll and Buzzard fields, which are 75 miles north-east of Aberdeen. It is ironic that the transport infrastructure in our oil capital is not better, despite the hundreds of millions of pounds that have been generated.
Like my party, I sometimes look with envy over the sea at independent countries with Governments. At the moment, I am thinking of Norway, which is on the same sea—the North sea—and has the same oil companies as Scotland. In the Norwegian sector, all the companies recognise unions. That is not the case in the Scottish sector, which in my view is tragic. In Norway, a substantial oil fund was created to benefit Norwegians and there was a policy of slow extraction. Our oil wealth—as we all know—is squandered to keep bankrupt Britain from going bankrupt. If ever there was a good reason for independence, our energy sufficiency must be it.
I congratulate Richard Lochhead on securing an important debate. I will focus on the topic at hand rather than drifting off into other things. I thought that it was a bit of a shame—when we seek to encourage outside investment instead of relying wholly on a possible build-up of the indigenous base—that the Scottish National Party threw independence into the debate.
I want to encourage the minister and his colleagues to remind the Chancellor of the Exchequer that we need fiscal stability for the oil sector in the UK. It is a vital way of encouraging investment and confidence. In Aberdeen we have some of the building blocks to make the city truly the energy capital of Europe. So far we have had the critical mass of the oil and gas industry, there is an excellent offshore support base in the harbour and the development of the UK bases of many multinational companies in and around Aberdeen has already taken place.
In response to Richard Lochhead's comment about jobs going to London, I remind him that London is a financial centre that has good communications. Only the corporate affairs people tend to be based down there; the people who do the business are in the city of Aberdeen. We want to improve the city's skillsbase. There has been a great advance in the number of small to medium enterprises that are involved in the technology that has developed on the back of oil and gas. Our software sector is also doing well.
I give way to Fergus Ewing, provided that he is brief.
Following the recent release of information under the 30-year rule, we learned that Prime Minister Heath's Cabinet in 1971 rejected the proposal to set up an oil fund to benefit future Scottish generations. Does David Davidson regret that decision?
Well, I was not aware of the decision at the time, but there are more ways of doing things than just by taxing everything.
The city already has the building blocks. As has been said, we have two excellent universities, which are very active in their sector, but the Executive needs to change the rules for the funding of research and development in universities. We need to allow a mix of funding, as has been called for by the oil companies. I believe that, in this chamber, Wendy Alexander has agreed with me that that issue should be considered. There is a need to be able to mix the two lots of money to ensure that universities are involved, not only in consultancy work but in active research and development for the industry.
Aberdeen is a wonderful area in which to live. We have wonderful education both in our public and private schools. We also have a further education sector. However, one of our problems is a difficulty in encouraging apprenticeships to provide the new skills base that is needed for the oil and gas industry. Money follows students into colleges but, although the money can go to the colleges, it does not go to the people who provide expensive apprenticeship and training facilities within their own companies.
Let me turn briefly to the problems. I am keen on renewable energy, but the proper provision of that is not so much about where as about whether things can actually be built. It is important that we realise that there is now a shortage of engineers for oil and gas. If we are to make the most of renewable energy development—be that the creation of subsea turbines or the building of wind farms or whatever—we need more engineers, as we certainly do not have enough to go round. The Executive must take that issue on board as part of its responsibilities on skill development.
I echo Winnie Ewing's comment that Aberdeen does not have enough direct international flights. As the city is so important to the Scottish economy, it needs a sustainable and developing economy. Sustainability is the name of the game—and I do not say that simply to suit Robin Harper, who is present. We need to examine the costs that prevent companies from landing aeroplanes directly into Aberdeen. If the Executive is able to help Inverness airport by examining that situation, perhaps it might care to become more actively involved with Scotland's airport operators and flight providers to further develop Aberdeen's airport.
That Scotland's third city lacks a modern transport infrastructure is beyond a joke. The place is clogged up. The lack of a peripheral bypass is preventing access to development land that needs to be freed up. I have a further plea, which is that the railhead at Guild Street that is adjacent to the harbour must be maintained and developed. If our oil industry is to move into other aspects of engineering, people need to be able to move freight by sea and have direct access to the port. I hope that the minister will respond to that.
I am delighted to support the motion to promote the city from which I came. In many ways, I just wish that the exterior world realised that Aberdeen is a good base to come and do business. I hope and pray that the Executive begins to realise that the city is one of the drivers of the Scottish economy.
I want to pick up where David Davidson left off by saying a little about Aberdeen and the north-east. One of the area's strengths is the breadth and the depth of the expertise that it has available.
The area has always been vibrant. Perhaps people became aware of Aberdeen only with the coming of oil, but long before that, since the middle ages, Aberdeen and the north-east has been a vibrant and prosperous area. Our industries have included fishing, farming, whaling and trade across the North sea to the Baltic, not to mention textiles, paper, granite and marine engineering. We supplied half of the country's clippers in the days when the tea trade was one of the major economic drivers. We have also had a tremendous pool of academic expertise: Aberdeen had two universities when the whole of England had only two universities.
Aberdeen's universities combined, but we again have a second one now since the Robert Gordon's Institute of Technology became a university. So we have an ancient university and a modern, technical university. In the Macaulay Land Use Research Institute, in the Rowett Research Institute, and in the marine laboratory, we have world centres of excellence. One of those daft statistics that is not generally known but that sometimes crops up is that the percentage of PhDs per capita is higher in Aberdeen than in any other place in the UK, outwith Cambridge. We have a huge pool of expertise in the north-east to draw on. We had that before oil came.
Oil has been good for the north-east. It has brought prosperity and an influx of new blood. It has created new partnerships for what has always been an outward-looking city. It is calculated that we will have another 40 to 60 years of North sea oil. However, Aberdeen is already exporting the technical expertise that it has built up in the industry—in oil exploration and development.
It is striking how well such expertise can transfer to the renewable energy sector. Last night's debate highlighted the fact that renewable energy is the industry of the future and is about to move from anorak status to big-business status. Aberdeen has the technical, managerial and academic capacity to cope with the potentially huge developments in the renewable energy sector.
A whole industry, centred on Aberdeen, has spent 30 years making things work in the North sea, supporting and supplying offshore installations. We have—on tap, as it were—design, process and structural engineers; fabrication, piling, drilling and construction skills; and lifting equipment, control systems and cable connections. You name it, we know about it. We also have management skills—in project management and risk analysis in an offshore environment.
What has to be added is the support and encouragement of Government. There has to be an awareness of the potential in the north-east, and a willingness to direct resources to exploit that potential to the full—not only to the benefit of the north-east, but to the benefit of all Scotland and the UK.
It seems to be a convention that motions for members' business debates are relatively uncontroversial. It is good that there is support for the motion across the chamber. Or is there? Not one Labour member—members would not expect ministers to be included in my criticism—has signed the motion and the only Labour member who has so far contributed to the debate did not indicate whether she supported it. That is a shame. She represents an oil constituency and is convener of the cross-party oil and gas group in the Parliament. The Labour response may tell us more about Labour whips than about anything else.
Will the member give way?
No. The member would not take my intervention when I wished to make that point to her, so I will not take her intervention now. In future, Labour members should consider the merits of a motion and then sign or not sign.
Let us turn to the substance of the motion. When I went to Aberdeen in the 1960s as a student, it was a very different place from the place it is now. When I first flew from Aberdeen, the airport consisted of two Nissen huts. In the hour and 40 minutes that I spent at the airport, only one flight other than mine departed.
This debate is not only about Aberdeen. The prosperity that oil and gas have brought to Aberdeen spills out across Aberdeenshire and further into the north-east. My constituency is a big beneficiary of the oil and gas industry in Aberdeen. Fifty per cent of the UK's oil and gas comes ashore at St Fergus; Peterhead is the biggest oil service base in Europe and perhaps the world; a large amount of the UK's oil comes ashore at the Cruden bay terminal at Whinnyfold; and Transco has just completed a major upgrade to the gas infrastructure with a pipeline from St Fergus to Garlogie, just outside Aberdeen. Energy success in Aberdeen is success for an area much larger than the city. This year, the industry may contribute £3.3 billion to public finances.
Richard Lochhead talked about independence and immediately the cry went up that that was an irrelevance. Curiously, the more independence is ignored, and the more we fail to act independently in defence of our industries, the more compelling is the argument for independence. One of the little wrinkles of the settlement that was made in the UK Parliament's legislation is that Scotland gets no guaranteed share of the revenue. Curiously enough, however, the Isle of Man does—those are the benefits of an independent legislature that is determined to stand up for its economy at a time when it really matters.
What do we need to ensure that Aberdeen continues to grow in importance as Europe's energy capital? We need investment, not just warm words. For example, my constituency is one of the few mainland constituencies with no railway—Peterhead is the biggest town in Scotland with no station and Fraserburgh may be the second biggest. There are 20 lorries a day, carrying 10 to 20 tonnes, on the road between Peterhead and Aberdeen—we have no railway and no other option.
The western peripheral route is important not just to Aberdeen and the continuing prosperity of the city as an energy capital, but to the hinterland. Aberdeen's prosperity can lead to Scotland's prosperity. The motion neatly encapsulates what we require in Aberdeen and the north-east. I commend Richard Lochhead for bringing it to our attention.
I am happy to endorse the sentiment expressed in the motion on the city of Aberdeen. As Winnie Ewing pointed out, Aberdeen's place as Europe's oil and gas capital is assured—it has no rival. The city of Aberdeen is known right across the world as a centre of excellence, as Elaine Thomson and other members have suggested.
For about 10 months, I was vice-chair of Pilot, the oil and gas industry and Government task group. At that time, I met a great number of oil representatives from a whole host of companies. They reinforced several points. First, oil and gas are not sunset industries. The industry representatives made a series of points specifically about training. They have grave concerns about the average age—47—of technicians in the oil industry and expect the Scottish Executive and our colleagues at Westminster to work through Pilot in order to unravel those challenges.
I warmly embrace consensus politics, as Andrew Wilson well knows. I can assure Stewart Stevenson that, in those 10 short months, I did not meet one oil executive who mentioned independence. People wanted us to tackle and unravel several issues. In particular, they wanted to promote opportunity in the industry and to work with colleges and universities to ensure that the brightest and best embrace a sensational industry that affords many opportunities to many people.
In that respect, the oil and gas industries could learn a lot from the people who promote the merchant navy. The years from 1979 to 1999, when recruitment stagnated, were bleak for the merchant navy. Thankfully, the change in the taxation regime means that young men are now going into lucrative and challenging careers in the merchant navy. The oil and gas industry can learn from that.
I want to move away from the east coast. I make no apology for that. My colleague from the Shetland isles, Tavish Scott, rightly highlighted the success of his constituency over many years. The technology is improving greatly and oil fields that would have been overlooked are being exploited. Thankfully, the technology is advancing and exploration is moving further west, particularly west of Shetland and off the Hebrides. I urge my friend the minister, the next time that he visits Lewis—the island of his birth, which nurtured him during his formative years—to meet the Western Isles oil group. That group, along with several colleagues, has been working to learn from Shetland how the Western Isles can play a part in the development of oil and gas fields west of the Hebrides. I need not remind the minister that there are two airports in the area—one in Stornoway and one in Benbecula. There are other facilities, such as the Arnish yard, which featured prominently in last night's debate on renewables.
Finally, I invite the minister to visit us as soon as possible. I remind him—although perhaps he does not need reminding—that many of my constituents travel through the wonderful city of Aberdeen to work in the North sea. I hope that many of them will soon be working west of the Hebrides.
At this stage, I am minded to accept a motion to extend the business to 6.10 pm, if anyone is willing to move such a motion.
Motion moved,
That the debate be extended until 6.10 pm.—[Richard Lochhead.]
Motion agreed to.
I, too, congratulate Richard Lochhead on securing this timely and important debate. The north-east of Scotland is well served by many of its representatives who, like Richard Lochhead, are strong advocates for the area in the Parliament.
Before I move on to my substantive comments, I will address one or two points that have been raised in the debate. The first is Elaine Thomson's important point about the need for tax stability in the oil and gas sector, which has a high-cost regime and is sensitive to movements in oil taxation. The industry was not well served in the first two years of the London Labour Administration by Gordon Brown's first budget. That budget set up a review of North sea oil and gas taxation, which led to great uncertainty and investment problems. We welcome the fact that the issue has been resolved.
Secondly, Elaine Thomson commented that Britain had the most stable political regime in the world. I will not contradict that, but I would like that boast to be substantiated. Perhaps she means that, regardless of the fact that Governments change, policies do not. If that is stability, she can keep it.
On the substance of the debate, it is important that we secure long-term benefits from the oil and gas industry in Scotland, not just for Aberdeen and the north-east, but for the nation. A curious and, for me, frustrating part of Scottish public and political life over the past three decades has been that we have employed a strange Scottish cringe, so that, whenever anything good happens to us, 70 per cent of the political class jumps up and denies that that thing exists.
The idea was that a windfall such as North sea oil would give us the crazy idea that we might be well positioned to govern ourselves. Fergus Ewing made some important points. The revelations of recent weeks under the 30-year rule are also important. The former Labour leader, the late John Smith, was a strong advocate in Cabinet and in opposition of the argument for a Scottish oil investment fund. Cabinet papers are explicit about the fact that such a fund was rejected on the ground that it would stoke the argument for Scottish independence. It is absolutely shocking that the obsessions of the London parties put a halt to the constitutional advance of Scotland and got in the way of the best interests of long-term stability and benefits for the people of Scotland.
No one who did what I did in spring 2000—I went to Norway and spent time with the officials who are in charge of the Norwegian oil fund—could fail to come away with the sense that objections to such a fund are a no-brainer. Such a fund should and must be created. As Nora Radcliffe said, there are significant oil and gas revenues still to be enjoyed. There is at least as much resource to be extracted as we have taken out, so it is not too late. At worst, we are at the halfway stage. We should be arguing for what we can do.
Richard Lochhead's motion is excellent for Aberdeen, but let us look beyond the city to the national tax benefits that we can draw from the windfall of North sea oil. The simple idea of the fund is that in good times we take oil-driven surpluses and invest them rather than spend them—we invest rather than consume. In the longer term, we would be able to draw an income from what is effectively a national pension fund from oil. The idea is so simple that it has been copied almost everywhere in the world, with the one exception of Britain, which has squandered and consumed in one generation a resource that took millions of years to build up. That is an unforgivable piece of Britain's post-war history. Historians will not look kindly on the Governments of the time for allowing that to happen.
We have an opportunity to prosecute an argument that can reverse the failures of the past and invest the oil-driven surpluses for the future. No one can predict what oil prices will be next week, let alone next year, so we have to protect our public finances from the vagaries and variations of those prices. That is why we prosecute the idea of an oil investment fund. No one else has the solution to the problem. I hope that mine is a useful contribution to the debate.
In summation, Richard Lochhead and others are to be congratulated on their strong advocacy of the needs of the north-east, and Aberdeen in particular. As with Alasdair Morrison's motion last night, the Parliament has shown its worth in representing all parts of Scotland, which people in London would do well to recognise.
I thank Richard Lochhead for securing this worthwhile debate. It is absolutely right to say that Aberdeen is the energy capital of Europe.
A great many of my constituents in West Aberdeenshire and Kincardine work in the energy capital of Europe. Every day they commute in and out of the city. Before being elected to the Parliament, I did so myself—from west Aberdeenshire every day, by car, in and out of the city of Aberdeen, the energy capital of Europe.
Much is needed to change the ideal of what we should have as the energy capital of Europe into a reality. There are a lot of things that Aberdeen does not have as the energy capital of Europe. As has been said, Aberdeen does not have a proper transport infrastructure. Aberdeen City Council, Aberdeenshire Council, the chamber of commerce and Scottish Enterprise Grampian have a plan for an integrated transport system. There is cross-party co-operation for that plan among all the political parties in the north-east.
However, we do not have action. The motion says:
"the Scottish Executive should produce specific strategies aimed at supporting Scotland's oil and gas sector and renewable energy sector that also promote Aberdeen as Europe's energy capital".
One thing that the Scottish Executive could do to promote Aberdeen as the oil and energy capital of Europe is to ensure that there is a proper integrated transport system. I am not just talking about the western peripheral route; I am talking about a modern rail commuter link that runs from Inverurie in the north to Stonehaven, in my constituency, in the south. I am also talking about reopening stations such as the one at Laurencekirk. It is a crying shame that Laurencekirk station was closed in the first place; it is ridiculous that we cannot get it reopened.
All those measures are necessary and we need more than warm words from the minister. In Lewis Macdonald, we have a minister who represents part of the city of Aberdeen. We expect a great deal from him as the Deputy Minister for Enterprise, Transport and Lifelong Learning. He is the ideal man in the ideal position to produce the goods. If the goods cannot be produced now, something is wrong. I am sure that nobody needs to persuade Lewis Macdonald of the rightness of Aberdeen's case, which I am sure he will argue vociferously in the Cabinet. It is not as though the north-east gets more of its fair share of Scottish expenditure in the first place or is crying out for something that it should not get. Places such as Glasgow and Edinburgh have their problems, but none has such a bad transport infrastructure as Aberdeen has.
We do not get a fair proportion of Executive funding. Lewis Macdonald was not present to hear my comments on that in last week's debate on the Executive's priorities, when I said that the north-east gets only 90 per cent of average funding on health, only 88 per cent of average funding for local government and only 85 per cent of average funding for its police service. The north-east does not get its fair share, no matter how one looks at it. All political parties in the north-east ask for a major initiative from the Executive. We have the plan, but we need action.
I will talk briefly about three things: research, renewables and a long-term strategy for Aberdeen. We had good speeches about what services Aberdeen needs to become, and sustain a position as, an energy capital, but I want to talk about what should happen in Aberdeen in the immediate and distant future.
Richard Lochhead, whom I congratulate on lodging the motion, talked about renewables. I have been up to Aberdeen. In fact, when I first went to Aberdeen to go to university in 1958, the train fare from London cost me £4 17s 6d and the journey took 16 hours.
The long-term future for oil companies is in becoming energy companies. That will help Aberdeen to become an energy capital. The figures that I have show that oil production is peaking. In the next 30 to 40 years, it will decline. That is not because not much oil will be left, but because it will become less economic to extract it.
I will not mention names, but I have talked to several oil companies. At one company, I addressed 60 engineers who were interested in becoming involved in renewables. The technical people in oil companies wish to become involved in developing renewables and would be delighted if their companies moved in that direction.
The Executive is not giving renewables full-scale backing and must speed up. The centre for economic renewable power delivery in Glasgow is funded mainly by British Energy and Scottish Enterprise. The Executive puts in £20,000 a year—the salary of one person—to that so-called energy centre.
Not a penny from the Executive goes into the renewables obligation Scotland. Everybody thinks that it has Government funding, somehow or other, but it does not. It is funded from our pockets—from our electricity bills.
The Executive could do much more to encourage research on renewables. I put in a word for Heriot-Watt University's centre on Orkney. Continuing development of renewables should take place on Orkney.
David Davidson talked about engineers. Throughout Scotland, every engineer to whom I have spoken in the past couple of years has said that it is terribly difficult to interest Scottish children in engineering courses. I know that from my time as a school guidance teacher. The Executive must address that. It must help universities to recruit students to study engineering and show how important that will be to Scotland.
David Davidson also talked about the structure for research applications and the way in which research grants are awarded. It is difficult to obtain money for blue-sky research, but we must keep that avenue open. Research cannot always be conducted into established matters to which we are beginning to know the answers. Our universities must have the opportunity for creativity with renewables.
Not for the first time, I thoroughly endorse the sentiments that Robin Harper has expressed. I recently met an engineer who received his training in John Brown's shipyards and who has now, like many, diversified into the oil industry. He mentioned the point that Robin Harper made: the low number of engineers who are being trained will mean a serious shortage. Scottish engineers have a reputation that is second to none.
I congratulate Richard Lochhead on securing the debate and on the coherent and comprehensive way in which he put the case, as did many members of all parties. Benefits and work spread from Aberdeen to all parts of Scotland. In Grantown-on-Spey in my constituency, McKellar Engineering has had a period of terrific growth and success that has made it one of the largest private sector employers there. It operates in high technology. The problem for the company's staff is travelling from Grantown-on-Spey to Aberdeen. A slight difficulty is caused by the interposition of the Cairngorm mountains, which make the journey challenging, and by the use of a road that can charitably be described as a goat track. I wonder whether Houston, Texas is restricted to a two-lane carriageway. Somehow, I doubt it.
Nothing has happened for decades about that matter. It beggars belief for any of the unionist parties to defend their pathetic record of consistent betrayal of Scotland's interests by failing to invest in Scotland's youth and infrastructure. I appreciate that that point may be considered slightly partisan, but that does not make it untrue.
Alasdair Morrison attempted to deal with that point. He said that oil executives do not talk about independence. I wonder whether he has asked them about it. Quite a few oil executives have expressed private concerns to me. The truth is prosaic and simple. If oil companies operate in countries such as Iran, Iraq and Azerbaijan, does the member think for one nanosecond that they would hesitate to operate in a peaceful, democratic, modern, middle-sized and wealthy European country?
Will the member give way?
I will follow the member's honourable precedent of not taking interventions.
Do we think that gentlemen like John D Rockefeller, Calouste Gulbenkian or T Boone Pickens are going to be the slightest bit worried if they have to deal with the Chancellor of the Exchequer of an independent Scotland, as I hope will soon be the case?
Will the member give way?
I am happy to reciprocate.
Thank you.
Perhaps it is time for Fergus Ewing's party to come clean on its future policy on oil taxation and distribution?
Every oil-producing company has a policy of securing the maximum possible advantage from oil for its country. In the second part of the 20th century, the politics of oil shifted. The power shifted from the oil companies to the oil-producing and exporting countries. An organisation was set up, not by an Arabian country, but by Venezuela. That shows that Scotland could play its part in that organisation.
The answer to Mr Davidson's question is that Britain extracted a fairly high marginal tax rate. In 1985, Saudi Arabian oil production fell below that of North sea production. A senior oil executive told me that it was the Tory chancellor of the time who struck a very tough deal with the oil companies. That is the approach that I would advocate for the Scottish Government and for every Government. I hope that that answers Mr Davidson's question.
I am happy to endorse the motion.
In as much as any parliamentarian can be an interloper, I might seem to be one in the debate. However, I would like to scotch that early on. A large number of my constituents are involved in oil and gas-related industries, which are industries that are of vital strategic importance to Scotland and the rest of the United Kingdom.
As a young solicitor, before being called to the bar, I was honoured to act for what is now Amicus but was then the Amalgamated Engineering and Electrical Union. My duties involved me frequently haring up—in case anyone is listening, driving at major speed up—the A9 to McDermott at Ardersier. I was conscious of the real significance of jobs to workers in that work force and for the retention of skilled jobs in the area and for the future of the industry.
One of the most depressing aspects of my professional life was giving advice to survivors of the Piper Alpha tragedy and to widows and dependants of those who suffered in that tragedy. At that time, a large number of members of our union had to keep their membership secret. They carried their union cards in their back pockets. That was because some of the oil companies, encouraged and abetted by the attitudes of our own Government and others towards trade unions, required them to keep their membership secret. I am thankful that we are beginning to put that behind us. We see increasing offshore recognition agreements, not least with the AEEU and MSF, which are the constituent components of my trade union.
I was pleased to hear almost all speeches. In particular, I was pleased to hear Robin Harper's mention of renewables and efficiencies, as they are aspects that were missing in the debate. Perhaps we do not give sufficient attention to the importance of energy efficiency and technology. Renewable energy is perhaps one of our biggest energy sources, although not one that is going to displace supply.
In meetings of the Enterprise and Lifelong Learning Committee, I am constantly ear-bashed by Elaine Thomson about skills and training. I am astonished that I have not been ear-bashed today, but I suspect that she feels that she has given us enough on that front. I was struck by the evidence on skills and training that was given recently to the committee by Amanda Harvie, from the Aberdeen and Grampian Chamber of Commerce. Much of what Amanda said could apply throughout Scotland, but her expertise was on skills shortages in Aberdeen and its region. She made a cogent and compelling argument for getting children acquainted with the notion of engineering as a future career and getting universities, and society generally, to validate and improve the status that we give to those entering engineering. That is an important point.
Although I endorse the sentiment of the motion, when we consider only places we forget the importance of people. We need to consider what can be done. That is a matter for constituency members and others who are interested in what can be done to make Aberdeen and its region a vital and interesting place for skilled workers and jobs.
I commend the work that was done by Alasdair Morrison as vice-chair of Pilot; I am sure that he will find a sterling continuation of his work by Lewis Macdonald. We are constantly reminded of London Labour. Brian Wilson spends some time in London, but we should not overlook that he has the interests of the industry at heart and is happier to make his way back over the border, weary and having done the work on behalf of the people in the task force.
I congratulate Richard Lochhead on securing the debate. I am grateful for the opportunity to address some of the ways in which we can secure a continuing, prominent role for Aberdeen and its people in global energy industries, now and for a long time to come. A number of members have reminded us of the importance of that role over the past 30 years. Aberdeen is the acknowledged oil and gas capital of Europe. About 40,000 people are directly employed in the oil and gas industry in the north-east. As has been made clear this week, there is still as much oil and gas under the North sea as has been exploited already. There is no doubt that the industry will continue to make a major contribution to the economy of Scotland and the UK for many years to come.
A number of members dwelt at length on their views on the devolution settlement and made some suggestions on that. They are entitled to those views, which are well known, but I want to focus on the issues that arise in areas for which Scottish ministers are responsible.
I agree that modern transport and telecommunications are of great importance to the future of Aberdeen and the oil and gas industry. I have no doubt that many of those in the chamber will gather again to debate those issues at more length in future—I will be happy to respond to such a debate. Suffice it to say that ministers will continue to work with NESTRANS—the north-east Scotland transport partnership, which comprises the north-east's local councils and businesses—as the partnership takes forward its proposals for a modern transport system. The Executive will continue to recognise the importance of the link between energy and transport.
Focusing on energy issues, there is no doubt that there are challenges ahead—in particular the challenge of skills shortages—as the technology of the industry develops. That has been mentioned by a number of members. The role of OPITO—the Offshore Petroleum Industry Training Organisation—has been mentioned and I am sure that members will be aware that proposals are being developed for a new sector skills council for the oil and gas sector to address some of those issues. The council, worked out jointly by the Executive and the UK Government, is trailblazing the new provision of training organisations throughout the UK. The point of that is to attract the new recruits that are required in an industry that has a long-term future and is in transition, but not in decline. Everyone who spoke tonight recognised the fact that this is an industry with a long future.
On the transport infrastructure and NESTRANS, the minister said that he looked forward to having a debate at the proper time. When does he think that that opportunity will present itself?
I had moved on from that point, but no doubt there will be many opportunities to address precisely those points in future.
Surely 30 to 40 years is not a long time? Is there no sense of urgency about the idea of getting Aberdeen to be a renewables capital rather than an oil capital before halfway through the next century?
Absolutely. I will move on to that point, but I do not want to diminish any of the other issues that are important.
Aberdeen companies, large and small, have demonstrated that they are capable of rising to the challenges of developing the oil and gas industry and developing some of the technologies into other areas of opportunity. They are well placed and highly capable of diversifying into the exciting new opportunities that are offered by those renewable energy technologies.
Companies such as Shell and BP have been clear about their commitment to such diversification as a way forward. Many other Scottish-based companies are also showing a strong interest in investing in, and diversifying into, renewable energy. Several Aberdeen-based companies are on board for those things and renewable energy developments are already in the planning process in the north-east, both onshore and offshore. That augurs well for the future.
The Executive is pursuing a number of distinct strategies. Responsibility for oil and gas is reserved to Westminster, but we work closely with the Department of Trade and Industry on a range of issues. As Alasdair Morrison said, he used to sit—as I now sit—as vice-chair of Pilot, the joint Government and industry working group that is helping the industry to maintain momentum.
This is the first debate in the Scottish Parliament on the oil and gas industry and on Aberdeen's potential to evolve into an energy capital for the whole of Europe. Does the minister accept that it is within his power to work to designate the city as a centre of excellence for energy and to establish a Scottish energy institute?
I will say more on both those points in a moment.
It is worth noting at this stage that the north-east's fiscal stability, to which a number of members have referred, has been one of the main achievements of Pilot. That is a product of the strategy that was worked out by the UK Government in association with the Scottish Executive.
Will the minister give way?
If Mr Harper does not mind, I want to make a little progress with my speech and respond to some of the points that have been made.
It is also worth noting that, in the past two or three years, there has been a significant shift in jobs in the industry to Aberdeen from elsewhere in the United Kingdom, in both the public and the private sector. I have no doubt that that trend will continue.
Let me turn to the opportunities that are presented by renewable energy. Under the Scottish climate change programme, we plan a big increase in renewable energy to help meet the UK goal of reducing greenhouse gas emissions. We will introduce the renewables obligation Scotland, which we expect to come into force in April, to implement that big increase. The prospect of the renewables obligation is creating a strong demand for renewable energy, which is good for the environment and good for business. It is creating demand for new goods and services in what will be an industry of the future. Aberdeen and Scotland are well placed to exploit that demand.
A good example of that is the potential to convert end-of-life oil fields to offshore wind farms. That may be what Mr Harper had in mind when he intervened. My officials have been in discussion with oil company executives who are considering ways of exploring that possibility. Some of those plans are already at a well-developed stage and there is good expectation that they will become a commercial reality in the not-too-distant future. It is the prospect of the renewables obligation Scotland that is making those plans so commercially attractive.
Does the minister agree that, because renewables come under the responsibilities of the Scottish Parliament, the more we move towards renewables the more control we will have over our energy policies and the less control Westminster will have over them?
It is not often that the Green party responds to points from the SNP, but I welcome Robin Harper's important comment, which exemplifies the fact that the areas for which we are responsible are the areas in which we are seeking growth and development. We work through the Scottish Enterprise energy group in Aberdeen to ensure that our companies can compete for the resulting manufacturing opportunities.
The minister mentioned offshore wind power and technologies that are already developed. What is he doing to encourage the UK Government to put research money into developing what Robin Harper described as blue-sky research into tidal and wave power, which has the potential for expansion and development?
I want to use the remainder of my time to address that important issue, which a number of members have raised. We must take the opportunities that exist in renewable energy and diversification. Energy research and development are critical to that.
It has been said that Scottish companies and universities already lead in research on, and development of, subsea technology and in maintaining structures that are able to withstand the worst offshore weather. The successful exploitation of offshore renewable energy potential will depend on developing such ideas. The Executive is determined that those ideas are commercialised here and generate prosperity for Scotland—that is why we support the marine energy test centre in Orkney and why we are exploring new mechanisms to maximise the return on research and development investment.
Scottish Enterprise is considering intermediary bodies around the world that assist with technology transfer to enable research to be commercialised locally. It is also considering how we can learn from them to develop schemes here. Scottish Enterprise's aim is to quantify the benefit of such institutes and focus on key market areas, such as energy, in which Scotland has a strong research and commercial base.
The proposals are still at an early stage, but if they proceed, an energy intermediary technology institute could be established as an invaluable resource for energy companies throughout Scotland as they seek to maximise the remaining North sea reserves and diversify into the renewables sector. We are considering such proposals closely. Should they go ahead, they will send out a clear message to manufacturers and suppliers about the long-term prospects for the energy economy of Aberdeen and Scotland and will lead to continued financial benefits for the communities involved. There will be continued business opportunities for energy companies and a more sustainable future energy supply for all of us.
Without the Executive's intervention, there would not be such diversification. In partnership with energy companies and the UK Government, our efforts will be directed to continuing to diversify and develop potential.
There is great potential in Scotland for the renewable energy sector and we can build on the strengths of oil and gas. Aberdeen and Scotland are well placed to exploit that potential and will continue to do so. In that way, Aberdeen's position as the recognised energy capital of Europe will be continued.
Meeting closed at 18:12.