20150115_R4

Source: BBC Radio 4: Today Programme

URL: N/A

Date: 15/01/2015

Event: Ed Davey: "we're still going to be using an awful lot of oil and gas" in future decades

Credit: BBC Radio 4: Today Programme

People:

• Ed Davey: Secretary of State for Energy and Climate Change in the UK
• John Humphrys: Presenter, BBC Radio 4: Today Programme

John Humphrys: Well, most of us might be reaping the benefits of the crash in the price of oil - cheaper petrol, heating and so on - but, for people who work in the oil industry, these are worrying times. In Aberdeen - which has risen to prosperity, of course, on the back of oil - bosses at BP are talking to their staff today and delivering a pretty sombre message. The Energy Secretary is Ed Davey, he's going there today, I asked him if the government's expecting jobs to go.

Ed Davey: There are a huge number of jobs, not just in Aberdeen and the north-east of Scotland but across Scotland, across the whole UK, that are dependent on the oil and gas industry, so the government is determined to do everything we can to work with the industry, to make sure we can maintain those jobs. Liberal Democrats in this coalition have been fundamentally focussed, not just on making sure we balance the books but making sure we maintain employment, create jobs, and that's why I'm going.

John Humphrys: But with the oil price dropping as low as it now is, there are inevitably going to be problems for a company like BP, who have already got problems anyway, haven't they.

Ed Davey: Well, of course there are problems for a number of oil and gas companies, as a result of the low oil price, but we also have to think strategically, because energy is a long-term game. I talked about the importance of energy security - actually, I'm talking about energy security for the UK in the 2030s and 2040s. Even as we green our economy and reduce our dependence on oil and gas, and have electric vehicles and so on, we're still going to be using an awful lot of oil and gas later on, in the decades to come, and therefore we've got to make sure we know where our oil and gas supplies are coming from. And we've got to make sure we have a long-term view - we're not just panicked by short-term changes in the oil price but we are strategic.

John Humphrys: Yeah, but those short-term problems are real, aren't they, and BP, as I say, does have other problems as well - Russian sanctions, the oil spill in the Gulf of Mexico, and all that sort of thing - and some people are saying "Well, maybe there should be some sort of deal, maybe, not a merger as such, but some sort of tie-in with Shell", so you'd have a much stronger international company, a company able to weather these storms perhaps more effectively than BP alone can do.

Ed Davey: I think BP and Shell are very strong companies, and I think if we work with them and the whole industry, we can ensure that we have the jobs we need and the energy security that we need. I mean, when I asked Sir Ian Wood, who is a doyen of the oil and gas industry, to review the way we regulate and work with the North Sea industry, a year or two ago, he produced a report which got huge support across the industry, and we're implementing that with the new Oil and Gas Authority, who I'll be meeting, with industry, later today, and the purpose of that is to think about how we manage these challenges in the decades ahead. We're taking a strategic view, to make sure that we're not wasting money, we're much more cost-competitive than we were. There have been problems in the North Sea, you're absolutely right, we've seen production efficiency go down, we've seen exploration rates go down, and the Wood Review, which I commissioned, I think will begin to answer some of those problems. And the fact we've now got - already have that in place, even before the recent oil price drop, actually I think is going to support industry, support the jobs, support energy security goals, even in these difficult times.

John Humphrys: They would argue, of course, that they're taxed too highly - 60% of profits is a huge amount of tax to pay, for a company that might start to struggle, in some directions.

Ed Davey: Well, you're right to say that the oil and gas industry, in terms of corporate sectors, pays more tax than any other, and therefore it's very important that we think about that, both in terms of jobs and in terms of the overall tax take and the future health of the sector. When we're looking at energy policy, we look at how we can support all sectors, so, for example, we have a very long-term strategic approach to supporting renewables, and equally we need to make sure that to secure our gas and oil needs, in the decades ahead, that we are planning, with the sector, on tax as well as regulation.

John Humphrys: Ed Davey, many thanks.