Greg Hands speech at EIC Connect Oil & Gas 2016
Speech delivered by Greg Hands, Minister of State for Trade and Investment in Manchester.
Thank you - delighted to be here. As the MP for Chelsea, it is always good to be in Manchester after 6 successive Premier League victories, but fortunately for Mancunians, I am here to talk oil and gas, not football.
Over the next 2 days, EIC Connect will provide an ideal opportunity for UK businesses to forge new partnerships, explore new markets and highlight the strong skills base we have in the UK, which has proven so successful in securing business overseas.
I would like to thank the EIC team for making this event happen.
The UK’s energy supply chain is world-leading and it is vital that we continue to support this industry in showcasing the very best the UK has to offer.
We have a good story to tell – particularly in the oil and gas sector.
The UK started off small: using oil shale from Dorset to light the streets of Wareham with 130 gas lamps in the 1850s, through a company called Wanostrocht and Company. The same company also became the UK’s first oil and gas exporter with a contract to light the streets of Paris!
A century later, in 1964, the first licences were issued for the extraction of oil and gas from the North Sea: about 42 billion barrels of oil have since been produced.
There is still more available: 10 to 20 billion barrels according to the Oil & Gas Authority.
The UK’s oil production capacity is now the largest in the European Union and within the top 25 of global oil producers.
Our 300 offshore fields in production provided 68% of the UK’s primary energy in 2014 and directly and indirectly support 330,000 jobs.
And currently our oil and gas sector exports over £20 billion per annum.
Many people think this sector is just the prize of Scotland.
They are mistaken.
Its supply chain touches all parts of the UK: across the entire breadth of the Northern Powerhouse right down to the South East.
UK capability is also revered across the world.
In over 100 years of UK onshore exploration and 50 years’ experience in the North Sea, we can now boast world class expertise in exploration and subsea engineering production.
And we’re taking our expertise around the world: whether that be through large engineering companies such Amec Foster Wheeler, who this year won a great contract in Mozambique, or smaller firms such as EM&I, who having joined a Department for International Trade (DIT) mission to Brazil, won contracts worth over £6.6 million with major international oil and gas companies.
And the UK continues to attract investment.
International giants such as Halliburton and Baker Hughes service much of the Middle East and Africa from the UK - and they invest heavily in our science, to boot.
I think it’s safe to say that we’ve come a long way from the gas lamps of Wareham.
And looking to the future, we must lead the way in identifying ways to continue to meet the growing global demands for energy - which are expected to increase to the oil equivalent of 18 billion tons by 2035.
By embracing technology, we can meet the world’s energy needs in ways that are sustainable, safe and environmentally friendly.
My message today is simple. When our oil and gas sector succeeds, the whole of the UK succeeds.
This government will ensure that we help UK companies up and down the supply chain, to ensure we remain one of the leading lights in this sector.
In the brief time I have today, I want to outline some of the work government is doing to make this happen.
Let me start by setting the context. Following the formation of our new Department for International Trade in July, trade became front and centre of this country’s future.
The Department for International Trade was established with the primary purpose of ensuring UK becomes a beacon for open trade around the world.
The department will develop, coordinate and deliver new trade and investment policy for the UK, including negotiating new trading arrangements with non-EU countries.
I am delighted that trade is back at the heart of government, with a seat at the cabinet table, and that promoting the UK’s fantastic oil and gas industry falls under my remit as Minister of State.
In what have been clearly challenging times for the energy sector, I have been genuinely impressed by how firms have adapted and innovated to survive.
Many of you have helped drive down unit operating costs in the UK continental shelf by nearly 30%.
Despite the challenging conditions facing the industry, there is still a sizeable prize for UK companies to fight for.
Between now and 2020, oil companies are predicted to spend more than $2 trillion and we believe that, based on UK supply chain capabilities, $500 billion of that spend is accessible to our companies.
My department will rally the whole of government to help the UK win these contracts.
For example, Baroness Nicholson, the UK’s trade envoy to Azerbaijan, will be leading a delegation of 23 UK companies to Baku, later this month.
And we are already working with firms such as Shell and BP in the Caspian, and Nigeria, to find local supply chain gaps and match them to UK companies.
Our oil and gas high value campaigns are active in 13 markets.
For example, in our Kazakhstan programme we have facilitated 51 local partnerships and helped UK companies win over £6 billion in contracts, since 2011/12.
Government is also removing some of the historic barriers that have long deterred UK firms from exporting.
You will have heard of our Exporting is GREAT campaign, which was launched last year to inspire and support UK companies to seize the huge global appetite for our goods and services.
Right now, there are live business leads for the energy sector on the GREAT.gov.uk website – for which UK companies can apply.
Brazil wants our air and gas compressors for their oil and gas industry, Turkey wants specialist equipment for an oil pipeline and Poland needs help constructing a gas pipeline in the south of the country.
And in India, where I visited earlier this month with the Secretary of State and the Prime Minister, they are looking to the UK to help enhance their subsea capability.
The demand really is out there.
Some businesses tell me that lack of access to finance is another barrier to exporting.
They should check out UK Export Finance (UKEF), the government’s credit agency, which provided £586 million worth of support for exports in the energy sector in the last financial year.
In fact, Forum Energy Technologies, which manufacture remotely operated sub-sea vehicles, recently won a contract in Nigeria, thanks to buyer finance provided by UKEF.
The benefits of exporting are well known – it increases profitability, enhances resilience and improves productivity. However, the importance to this particular sector should not be underestimated.
Research by EY shows that around 40% of revenues in the oil and gas supply chain come from exports.
However, the research also suggests that this revenue is delivered by a relatively small number of companies: 50% of exports from less than 10% of companies and 80% of exports from around 25% of companies.
So there are many companies in the supply chain where export revenue is a small part of their business or, more worryingly, plays no role at all.
This shows an incredible amount of unfulfilled potential in this sector and our economy as a whole. I want to work together with industry to see this change.
For those who think all this support will change after we leave the EU, let me reassure you: it won’t.
Leaving the EU gives us an opportunity to reset and enhance our trading relations with the rest of Europe and the wider world. And we will do so in a way that puts the interests of Britain first.
That is why my department is not designing our trading future in isolation – we are consulting with businesses, academics and trade experts from the UK and around the world to ensure we end up with a deal that is right for Britain.
We may be leaving the EU, but we are re-joining the rest of the world.
We are still seeing investment pour into the UK after the referendum.
That is due to the UK’s strong economic fundamentals: a skilled workforce fed by some of the world’s best universities, and a low tax, low regulation economy in the right time zone for global trading.
These fundamentals explain why we continue to enjoy record numbers in employment, a growing manufacturing sector, and why we remain the highest ranked major economy for ease of doing business, according to the World Bank.
With central government policies that help to address these conditions, the growth of these types of companies can be sustainably accelerated.
All of this reassures me that the UK will be a leader in the global energy market for years to come.
We have the expertise, the will of both industry and government, and now the chance to chart our own trading future.
So to conclude:
We have the right focus on the development of partnerships, technology transfer and investment
We believe it is possible to support further production growth, develop new capacity, open new markets and create the right environment to secure investment.
All companies need support and the right conditions to help them to thrive, but we must also be prepared to be more ambitious, take measured risks and look further afield.
I am excited about what we can still achieve, and I hope you are too.
I wish this conference every success.