 The First Minister's statement is a statement of business by Fergus Ewing on oil and gas When Minister will take questions at the end of his statement, there should therefore be no interventions or interruptions Mr Ewing, ten minutes please Thank you Presiding Officer The oil and gas industry has been, is now and will continue to be an enormous asset to Scotland Felly, mae'n gweithio i ddwylo 300 billion pwn yn y gweithrefenau i'r UK, a mae'n gweithio i Aberdeen i unrhywgol yn unrhywgol a'u gwahau a'u yng nghyngwysgol, ac mae'n gweithio i ddweud, ac mae'n gwneud ddweud i ddweud i ddweud i ddweud i ddweud i ddweud i ddweud i ddweud, mae'n gweithio i ddweud i ddweud i ddweud i ddweud i ddweud i ddweud. While the North Sea is a mature basin, there are also frontier regions such as West of Shetland with huge prospects and a diverse range of development opportunities, but the current fiscal regime is a barrier to this development. In 2011, I asked industry and academia to help devise a modern oil and gas strategy. That strategy set out a clear vision for the industry's long-term future and set priorities for future action. It has guided this Government in its actions for its on-going support to the industry. Let me summarise the progress made. First, Scottish Enterprise has already achieved the target set in the strategy to engage with an additional 100 oil and gas companies for account management in the period of 2012-2015. They now have 344 oil and gas companies within its account management portfolio. In addition, HIE account managed over 50 companies. Second, on innovation, working with industry leaders such as Paul de Llo and Ian Phillips and Professor Albert Roger of Aberdeen University, we launched the oil and gas innovation centre in November last year. The centre has funding of £10 million over five years. It is already up and running, developing and delivering solutions to the key challenges that are faced by businesses. Thirdly, on internationalisation, Scotland's oil and gas supply chain is an international success story. Total international sales grew to £10,000 million. That is not £10 million. It is £10,000 million in 2012-13, an increase of 22 per cent on the previous year. International activity now accounts for just over half of the total oil and gas supply chain sales. Scotland is now an international hub for oil field services. For example, we have led the way in areas such as subsea, safety, integrity and supply chain management, giving us a significant competitive industrial advantage. I have led two trade missions to Houston and I am confident that, due to the support of SDI, SE and HIE, our supply chain companies are well placed to capture new high-value activity. Fourthly, we continue to support skills development in the sector. Scottish Government, Skills Development Scotland and the Scottish Funding Council are all working with Oppito and the industry to deliver the immediate and long-term skill needs of the sector. Progress has been made with the establishment of Energy Skills Scotland and the publication of the Energy Skills Investment Plan, which is being refreshed and will be published in the coming weeks, taking account of the recent Ernst and Young report fueling the next generation and identifying key actions to be taken forward collaboratively by industry, academia and government. Fifth on infrastructure, the Scottish Government is targeting investment in local infrastructure in the Aberdeen area, city and shire. For example, the £745 million project to upgrade the Aberdeen western peripheral route will benefit communities, business and remove a serious impairment to economic growth in the area. Sixth on decommissioning, we are committed to supporting infrastructure that will help offshore activity. For example, this Government and our agencies contributed £2.5 million to the nearly £12 million quiesai project at Dalesville south. That will enable Shetland to become a leading decommissioning hub. I have summarised some of the measures that this Government has taken. We are making the best use of our devolve powers. However, we continue to examine every further way in which we can possibly do more. However, it is crystal clear that it is the fiscal regime that needs to change. The responsibility for that rests with the UK Government, and it is to that the time out turn. We have consistently called for a competitive, predictable and stable fiscal regime. In 2011, we published proposals including the introduction of an investment allowance to help mitigate the Chancellor's shock tax grab, raising the supplementary charge from 20 per cent to 32 per cent. In 2013, we published maximising the returns for arongas in independent Scotland, setting out the approach that we would take to stewardship. Following publication of Serene Wood's interim report in 2013 and final report in 2014, we made clear our full support for its recommendations, including that a shadow body should be set up immediately. That did not happen. We commissioned an independent expert commission to consider how best to maximise the value from the sector. They recommended that the Government consider the total contribution that is made to the economy and society by the industry, the total value added. I sent the fiscal commission's recommendations to the Chancellor of the Exchequer. Today, we have published a paper setting out the fiscal changes that we believe are necessary to support investment, encourage exploration and ensure that the North Sea is a competitive investment location. That reflects the range of challenges such as declining production efficiency, rising costs and premature cessation of production. First, we are calling for an investment allowance, as recommended previously by the Scottish Government in 2011 and the expert commission in 2014. That will simplify the fiscal regime and potentially boost investment by between £20,000 and £37,000. Secondly, we are calling for a phased reversal of the increase in the supplementary charge alongside a clear timetable to provide clarity for investors. That will provide a strong signal to investors that the North Sea is open for business. That could encourage more £7 billion, £7,000 million of investment. Scottish Government analysis based on industry data shows that those measures, Presiding Officer, can potentially support up to 26,000 and 5,600 jobs respectively. Thirdly, we are calling for an exploration tax credit. Exploration, Presiding Officer, is already at an historically low level. Failure to address that will mean that we do not maximise the economic recovery of oil from the North Sea. We will now consult with stakeholders on those proposals, but, in conclusion, let me be clear. Speedy action from the UK Government on those areas is vital. Put simply, Presiding Officer, those measures must be delivered in the budget this March. There is a long-term sustainable future for the North Sea, and we are committed to using every lever at our disposal here in the Scottish Government. It is time, Presiding Officer, for the UK Government to follow suit. The minister will now take questions on the issues raised in his statement. I intend to allow around 20 minutes for questions. It would be helpful if members who wish to speak or ask questions would press the request-to-speak buttons now. We are extraordinarily tight for time this afternoon, so short questions and short answers would allow us to get everyone in, hopefully. Thank you very much. I thank the minister for advance sight of his statement. When Jim Murphy and I met oil and gas UK in Aberdeen on Tuesday, they told us that 2,000 jobs had already gone and that many thousands more were at risk. The word crisis was used at meeting after meeting with operators, service companies, trade unions and local government, yet there is little sense in the minister's statement of the potential crisis that we face. There are many things that we can agree with, but there is almost nothing that is new. The price of oil has fallen by half over the last few months. It is now slipping below $50 a barrel. This is a new feature of the issues facing the oil industry, and it must be a new feature of the Government's response. We cannot simply have business as usual. Mr Ewing has published an assessment today of the fiscal impact of changes in the tax regime at Westminster, but we have not yet seen or heard the Scottish Government's assessment of the impact of the falling price of oil on the Scottish economy. Can he now tell us what assessment he has set in train of the impact of $50 oil on jobs and business in the Scottish economy? Will he tell us whether he intends to assess the potential impact of $40 oil on jobs and business in the Scottish economy? He has said today that he will examine every further way in which the Government can possibly do more, and I welcome that. Will he undertake to assess the value and contribution of Scottish Labour's proposal for a resilience fund to help industry in exceptional circumstances such as that? I note from the SNP backbenchers a sceptical response to that. I want to hear from the minister in the spirit of what Nicola Sturgeon told Gezz Dugdale just before Christmas that the SNP Government is open to ideas from other parties. I do not want them laughing at the possibility of examining ideas from other parties as to how to save jobs and business in the Scottish economy. It is not just to say to Westminster what Mr Ewing thinks Westminster should do. It is the duty of the Scottish Government to provide proper stewardship for the Scottish economy, and that should start here today. Perhaps I can start with the resilience fund that has been mentioned. First of all, I think that it is reasonable to say that Mr Murphy did not say how much this fund should be, so it is as yet an unspecified sum for unspecified beneficiaries from an unspecified source. If it is the case that Mr Murphy in the little he has said about this fund thus far is now a convert to an oil fund, we welcome that conversion no matter how late in the day. It is important not to work ourselves up into a panic, Presiding Officer, as Mr McDonald seemed so intent on doing. Remember that Aberdeen, as he well knows, has been here before. The all-price has been low down to $10 in 1986, in 1999. More recently, in 2007 and 2009, it has also been low around the $48 to $50 mark. It does fluctuate. We have always said that. We have always recognised that. None of us here control the prices any more than any of us here have predicted the prices. If we did, we would all be multi-billionaires, would we not? The fact is that Labour had 13 years to set up an oil fund. Over that period, they had £93 billion of revenue from oil, £93 billion. That is three times as much as the annual Scottish Government budget. It is 10 times as much as was spent in Iraq and they did not invest one bobby. Meanwhile, Norway, back in 1999, when oil was $10 a barrel, was just setting up its fund. How much is it worth now? Around £540 billion pounds sterling. There is a tale of two countries' stewardship of an enormous and invaluable asset, the poor stewardship from Labour and Conservative in successive Governments, which has resulted in no oil fund and the successful stewardship of a smaller country that has managed over that period to build up a fund that helps to stabilise those figures. I really do not think with respect that this proposal can be taken too seriously, especially as Jackie Baillie has not signed up the proposal, as the First Minister pointed out. She said that, just in August this year, setting up an oil fund will take money from public services, Presiding Officer, warts and butter shambles. We are now five minutes into the 20 minutes allocated for this part of the afternoon. Short questions and answers, please. Murdo Fraser. I thank the minister for his statement and for advance sight of it, although I note that in over 1,000 words he did not once mention the fall in the oil price. We are all aware of the seriousness of the challenges facing the oil and gas sector and the economy of north-east Scotland in particular. Those involved in the industry want to see Scotland's two Governments working together on the issue to try to find practical ways to help those affected. What they did not want to hear today from the minister was the repeat of his previous performances in this chamber, where all he did was grandstand and try to score political points against Westminster. Sadly, they will have been disappointed this afternoon. What we have here today is yet another example of a minister refusing to take responsibility and trying to pass the buck entirely to Westminster for action. That is not good enough. The minister knows that we support the call for a new investment allowance being brought forward and that we have made this clear to our colleagues in the UK Government. However, what we want to know today is this. What is this minister and this Government going to do themselves to help the industry? The statement is totally devoid of a single practical new help to help the industry. Over the past 18 months, HIE has supported developments in 23 companies that are estimated to create over 1,000 jobs. SE has invested £9.7 million against total project costs of £68 million. Over the past couple of years, we have invested around £6.5 million in energy skills. We have invested £10 million in innovation. Nearly 100,000 companies in Scotland receive our small business bonus. We work ever more closely with the universities and colleges that are involved in oil and gas. I set up two joint meetings, jointly arranged between the Scottish Government and the UK Government, at my suggestion, to arrange sessions for small and medium-sized businesses in oil and gas to access finance. We did that without a fanfare of trumpets. We just did it. There was no publicity. There were hundreds of companies there, and we believe that many were helped. I have attended five pilot meetings over the past three years. I work constructively as far as I can to the best of my ability with the UK Government. However, the trouble is this. I am afraid that what Mr Fraser sadly does not seem to get is that it is not really just us in the Scottish Government that are saying that the urgent and pressing need is for the fiscal changes that are urgently required to tackle exploration at an all-time low, to tackle the desperate need to instill and reinstill confidence in the industry. It is the industry itself. Malcolm Webb says, We have experienced repeated and increasingly aggressive tax hits. All of that has weakened the international competitiveness and resilience of the industry. I have met more than 110 oil and gas companies in and around Aberdeen over a period of 57 days that I have spent over the past three and a half years in Aberdeen. I can, in conclusion, tell you beyond any shadow of doubt that the clear consensus amongst almost every business in Aberdeen is that those tax changes to bring back exploration as Norway has done, to reinstill confidence to the UK, to undo the damage of the Danny Alexander tax, the Danny tax and 211. Those are what the industry wants, they are what they need, and they need it this March. Kevin Stewart Thank you, Presiding Officer. Companies have told Aberdeen and Grampian Chamber of Commerce that the current fiscal regime is unpredictable, unnecessarily complex and simply too burdensome. Jeremy Creswell, the Press and Journal's energy editor, has said today that the London Government does not grasp the immense strategic value of our offshore oil and gas resource. Does the minister agree that, in order to help the oil and gas industry, the Chancellor should follow Mr Creswell's advice to get a move on and slash the tax burden now? I do, and I pay tribute to Aberdeen Chamber of Commerce. I am reminded by my office that I met them formally on 8 February 2013, but I have also met them and their members on many occasions. Indeed, to the Press and Journal, whose coverage of the oil and gas industry in Scotland is second to none. It simply is not a matter of party political claim and counter claim. It is just a matter of fact that what the industry now needs, and now, by this March budget, is implementation of the tax changes that are necessary to help to address the very serious predicament that the industry now faces. Presiding Officer, there is nothing new in this statement. Not one action that has changed or appeared since the dramatic fall in oil prices in the last few months. Let me ask the minister again about the risk of job losses, and I hope that he treats the question more seriously than the First Minister did. Spice estimates 15,750 job losses, that is one in 12 jobs in the industry, on a scale that is worse than the closure of Ravens Creek. Given that the price is now below $50 a barrel, what will the Scottish Government do to help to ensure that we do not risk those jobs? If Jackie Baillie has read the Ernst and Young reports on fueling the next generation, she will also be aware that between this year and the end of this decade, there are also between 10,000 and 20,000 extra job opportunities and requirements for new entrants into the industry. That is a complex and fluid situation. Therefore, we are working with the industry and with academia to ensure that the future recruitment requirements, especially of young people, are going to be met. That is clearly set out. If Jackie Baillie had read the oil and gas UK report, she will see the large number of projects that are going in stream that will require people to work on and offshore. We are working with the industry, with oil and gas UK and with subsea UK and with all the other representative bodies to tackle their recruitment needs. We will continue to do everything that we possibly can to address the needs of both the industry and those people who face redundancy at this time. That includes working with bodies such as Scottish Engineering and the manufacturing sector to see what opportunities there are for the traditional industries in the north-east to provide help for a solution in taking on young people. Of course, that is part of the solution. That is work that we are doing. Yes, it is not you, because we have been doing it for the past three years and, Presiding Officer, we will just carry on doing it. Thank you very much, Deputy Presiding Officer. I thank the minister for an advanced copy of his statement. Would he accept that the Chevron's west of Shetland Rosebank field was not sanctioned at $110 a barrel because the cost of production in the oil and gas industry has risen by 62 per cent over the past four years? That is one of the major factors that needs to be confronted. Does Sir Ian need to be called into action to challenge that issue? Would he also accept that, as well as writing to the energy companies, as the First Minister made clear he was doing this morning, his Government undertake to write to shipping companies and airlines such as Loganair to make sure that the higher the lower fuel bills they face will now be passed on in terms of lower ticket prices for those who use such services? Yes, Tabby Scott is exactly right. I have spoken on numerous occasions. I met Chevron twice and I have spoken with him on various occasions. He is absolutely correct to say that the major Rosebank field, one of the largest fields that there will ever be, was not going to go ahead even before the all-price call. That is absolutely correct. He makes a reasonable point with regard to Loganair. I will look into that with the Minister for Transport and see what action if required needs to be taken. We will, of course, continue to work very closely with the likes of Sandra Lawson of Llewick Port Authority and with Murdo McKever of Peterson SBS to continue the good work that they are doing to exploit the opportunities from the excellent location that Llewick and Chevron has to do decommissioning. We will also work with shipping that he mentioned with people like Craig Shipping, Douglas Craig, who provides leadership on Aberdeen and opportunities to a great many young people. I should also say in conclusion that the serious question about the real threat to many people's jobs is whether we can bring in exploration tax credit measures to do what Norway did in 2005. We can emulate their success, which saw a fourfold increase in exploration and appraisal drilling—fourfold. After the introduced tax breaks, there were four times as many drilling rigs as Heather II. That is the way to tackle the jobs difficulties that we face. We have nine questions left in five minutes. Thank the minister for detailing the six separate streams of action that are being taken by the Scottish Government. Can I ask him for an assurance that those actions will be intensifies as the need arises given the threat of job losses in the industry? Of the tax changes that he proposes, can I commend the exploration tax credit, which he rightly said had a dramatic effect in Norway when it was introduced in 2005? Can he say how we can impress the urgency of this matter? Given the tendency of the Treasury to move like lightning, as in 2011, when prices were high, to increase tax, but to move at a snail's pace when prices are low, to reduce the tax burden and to offer an incentive like the exploration credit, which would do a massive amount to protect and expand jobs now, but also to discover new fields for the future? Alex Salmond is exactly right. At those points, I will relay to the pilot meeting that I am attending of Tuesday next week, where I believe that Mr Hancock, the energy minister, will attend. I will put those points very clearly to him. I think that it is instructive to remember, Presiding Officer, that, as a result of the enlightened exploration tax credit policy in Norway with a 78 per cent uplift, it found some of the largest discoveries ever, such as the Johann Sferdrop field. In fact, some of the discoveries were in the midst of existing fields, which it had not known to be there. If it can do it in Norway, it can do it across the other side of the international boundary very well. Of course, the day rates of the rigs are at a far lower level than they were, so commercially this is the right time to stimulate this activity. Therefore, I will be highlighting that the exploration tax credit measures are absolutely essential if we are to address the jobs challenge that Aberdeen and Scotland faces. It is absolutely essential that this is not delayed beyond March. If there is one message that I want to convey, it is that one. Richard Baker Given the significance of this issue for Aberdeen's economy, will the minister agree that the proposal for an oil and gas summit that is made by Aberdeen city councillor Jenny Leng is an important initiative? Will he and appropriate colleagues agree to attend? Also, that government is now at every level must examine what more it can do to bring forward new vital infrastructure investment in Aberdeen? Richard Baker I have always sought to work very closely with representatives of Aberdeen council in a number of ways. At my behest, I have met them on various occasions to address some of these matters. Of course, we want to work extremely closely with Aberdeen council and we will continue to do so as we do all local authorities. I am extremely pleased that my colleague Shona Robison has been able to announce the increase in the proportion of health budget spending to the north-east. Something that I know is not my responsibility but has been raised by north-east members over a long, long period. I remind Mr Baker that the commitment to the Peripheral Road in Aberdeen is not just another roads project. It is a project that will in part address the road transport problems that, from my observation of 57 days in Aberdeen over the past three and a half years, are the worst in Scotland. Let's not beat about the bush. Therefore, the support of the measure in Aberdeen that we are bringing forward—the Western Peripheral Road—at a cost of £745 million, one of the largest schemes in Scotland, is seen in Aberdeen Chamber of Commerce and across all circles, not just business people, as the key infrastructure change for that city. I am proud that it is an SNP Government that is going to deliver it. Serene Wood, one of the world's leading experts in the industry, was encouraging in his report young people to seek careers in the oil and gas sector. Does the minister agree that they should continue to seek careers within the sector? Yes, I do, and I pay tribute to the work that Serene Wood has done in the youth commission, working with Angela Constance. I was struck by the passion and determination and knowledge that he brought to that task, and that work is being taken forward by colleagues. I would also point out, since Dennis Robertson has mentioned Serene Wood, that if you look at what Serene said most recently, he said that he expected, as I think do, most leading commentators, that the oil price will recover. He said, I believe, towards the end of this year and the beginning of next year. The OPEC itself, Presiding Officer, has predicted that the oil price will recover to around $110 per barrel and, in the long term, $100 a barrel. Presiding Officer, Aberdeen has been here before. It is big enough and strong enough to survive. What it needs is the support from the UK Government that it has never had. Presiding Officer, as we have heard over the peace today, there may be an inevitability about cost-cutting on the jobs and earnings of Scotland's offshore workforce. I anticipate that the minister will readily agree that whatever the pressures of cost-cutting bring, it should not extend to cuts in health and safety. We would forget Piper Alfer and 167 dead, five from our own constituency at our peril. Can the minister give a commitment that he will bring together trade unions, contractors, operators and indeed the health and safety executive to confirm categorically whatever the pressures that befall the oil industry, that there will be no compromise in the safety of the offshore workforce? I think that Mr McNeill makes an absolutely important and valid point. Of course, the standards of safety apply irrespective of what the oil price is. They must be of the highest order. In response to his question about working with trade unions, I meet regularly with trade unions. I met with several trade union representatives in the last parliamentary week before the Christmas period. As a result of that, we agreed to do further work in engagement with the health and safety executive. The standards that apply are extremely high, but we need to be constantly vigilant in Scotland. I point out in conclusion that some of the key areas of specialism and small businesses and skilled workforce are operating and exporting our standards of skills to many other parts of the world. Linda Fabiani Thank you, Presiding Officer. The Scottish Government has again called for a competitive, predictable and stable fiscal regime. Does the minister agree with me that in fact reckless decisions by UK Governments over the years, like the supplementary charge hike in 2011, have in fact damaged prospects of the oil and gas industry? Does he agree with me that devolving powers over the North Sea fiscal regime to Scotland would, in fact, deliver the best outcome for both the industry and public finances? Briefly, if you would, please minister. Well, one particular company, whose name I won't mention, described the 2011 Danny Alexander tax increase as quotes expropriation. Just before Christmas, another leading company in Aberdeen said that the UK has quotes, the worst tax regime in the world. Now, Presiding Officer, colleagues in the UK parties representing in this place may think that this is politics. This is what the industry says. This is what the industry thinks. That is wrong. We need confidence to get the jobs back. We need to win back the confidence the way I have set out with the expiration tax credits, the investment allowance and a phased reversal of the Danny Alexander tax hike in 2011 is quite simply what the industry wants, what it needs and what it deserves in March this year. Yet another discussion of fossil fuels without the words carbon or climate being so much as uttered. That is just one day after yet more evidence this time from UCL demonstrating again that the bulk of the world's fossil fuels must be unburnable if we are remotely serious about climate change. How can the minister fail to acknowledge the vulnerability of a Scottish economy overexposed to the carbon bubble? How can he want to just get back to business as usual when business as usual is what brought us to this perilous position? Well, I strongly suspect that Mr Harvey and myself are not going to see eye to eye in all of these matters, Presiding Officer. I do respect his position, though, but I do not agree with it. I would just point out one simple fact. The opportunity for us to meet the carbon emission targets can only be achieved if we are able to deal with the carbon emissions and store them. Carbon caption storage is the only means by which this can be achieved according to the international energy authority. The depleted oil fields in the North Sea are the only place where that carbon can be stored. Therefore, the opportunity for carbon caption storage in the North Sea combined with enhanced oil recovery is, in one sense, the greenest policy of them all. Finally, Mark McDonald. This morning, Mike Tholan, the oil and gas UK's economic director, told BBC Radio Scotland that the single biggest beneficiary of high oil prices has been the UK Government because more than 60 per cent of profits go to them in taxation. The minister agreed that, given the vast benefit over the decades, it is vital that the UK Government puts in place the fiscal regime to ensure that the industry remains strong. I do appreciate what Mark McDonald says. Sadly, it has been the case that the oil and gas industry in Scotland has been regarded as by the UK treacheries of whatever hue as a kind of gigantic cash machine instead of an excellent industry. That mindset, that approach, that attitude too must change. Many thanks and my apologies to the several speakers who have been unable to call this afternoon. We must now move on to the next item of business, which is a debate on motion number 119.