rose to move, That the draft order laid before the House on 20 November be approved [Second Report from the Statutory Instruments Committee].

The noble Lord said: My Lords, the order before you makes certain amendments to the Petroleum Act 1998 and should be seen in the wider context of the UK’s security of supply and diversification of supplies agenda.

Noble Lords will be aware that earlier this week the order was debated in Committee in the other place. During that debate, the Minister of State for Science and Innovation reminded the Committee of the strategic importance of the Langeled South pipeline from Norway, which flowed first gas to the national grid in October this year. The pipeline has capacity to meet up to 16 per cent of the UK’s winter demand for gas and is a very welcome addition to the UK’s import capacity at a time when our reserves of oil and gas are declining. We are fortunate in having a long history of close partnership with the Norwegians, who have proven to be stable and reliable partners and suppliers.

The purpose of the order—the Petroleum Act 1998 (Third Party Access) Order 2007—is to make certain amendments to the Petroleum Act 1998. The amendments are consequent on provisions agreed in the 2005 UK/Norway framework agreement on cross-boundary petroleum co-operation and, in particular, provisions that relate to the Langeled South pipeline.

The 2005 framework agreement was an innovative umbrella agreement to streamline the processes for approving a variety of projects in the future, but it also laid down specific provisions in respect of this major gas pipeline to the UK. When we negotiated it, it was agreed that the Norwegian regulated access system, where shippers are subject to published tariffs and terms, would apply to the whole of the Langeled South pipeline, which forms an integral part of the Norwegian offshore gas pipeline network.

The regulated access system differs from the United Kingdom’s offshore system, where access terms are a matter for negotiation between individual shippers and the pipeline owner, with subsequent determination by the Secretary of State only if negotiation proves unsuccessful. The provisions in the framework agreement thus avoid the complexity of different access systems at points along the pipeline length.

There are safeguards built into the agreement that allow a measure of joint agreement between the Norwegian and UK authorities. In particular, both the Norwegian and UK authorities must agree on the entry tariffs charged to UK companies seeking access to the Langeled South pipeline and the points at which access is to be made to it. In addition, should a UK company claim that the terms of the Norwegian regulatory system are not being fully and properly complied with, the framework agreement provides for joint determination of the dispute by the UK and Norwegian authorities. The need for an amendment to our law to ensure that it is consistent with provisions agreed in the framework agreement was signposted in the Explanatory Memorandum that accompanied that agreement when it was laid before both Houses in May this year.

I shall take your Lordships through the key points of the order. First, it amends the Petroleum Act 1998 to remove any pipeline that, under the terms of the framework agreement, is to be subject to the Norwegian regulatory access system from the scope of Section 17F of the Petroleum Act 1998. That category includes Langeled South. In the absence of the amendment, Langeled South would have remained a controlled pipeline within Section 17F. As I am sure all noble Lords know, Section 17F makes provision for application to the Secretary of State for the right of access to pipelines on the UKCS following failure to agree between the person seeking access and the owner of a pipeline.

Secondly, the order establishes, under two new sections—17GA and 17GB—a new category of dispute that the Secretary of State, jointly with the Norwegian authorities, may resolve under the Petroleum Act 1998. The new sections provide that, where access to Langeled South has already been awarded to a third party under Norwegian regulatory rules but that third party subsequently claims that the owner or operator of Langeled South has not complied with the terms and conditions under which access was awarded, a determination is made jointly by the Secretary of State and Norwegian authorities.

The changes to the Petroleum Act 1998 are required before Her Majesty’s Government will be in a position to notify the Norwegian Government that all the internal procedures are complete and that the framework agreement can enter formally into force. The Norwegians have completed all their internal procedures. I therefore commend the draft order to the House and beg to move.

Moved, that the draft order laid before the House on 20 November be approved [2nd Report from the Statutory Instruments Committee].—(Lord Truscott.)

My Lords, we welcome the order, and I thank the Minster for explaining it. It seems not only sensible but important.

As the Minister says, at capacity, the Langeled South pipeline is capable of meeting some 20 per cent of our current gas requirements. It is good news that it will no longer be necessary to negotiate separate project-specific agreements. Equally, it is essential that the correct regulatory framework is put in place. As your Lordships would expect, therefore, I have a few questions for the Minister.

I would be grateful for clarification of the interplay between the Norwegian and UK authorities. The Explanatory Memorandum helpfully explains that, as things stand, the Secretary of State is entitled to determine third party access to controlled petroleum pipelines, but he may not act jointly with the Norwegian authorities. It goes on to say that the draft order provides for third party access to pipelines such as Langeled South to be determined under the Norwegian system rather than the UK one and for the Secretary of State to act jointly with the Norwegian authorities in determining disputes. Can the Minister explain in simple terms how the Norwegian access system will differ from the existing system? Why will the Secretary of State be involved at all, as set out in subsection (6) and subsection (8), which require him to determine applications jointly with the Norwegian authorities? In practical terms, it seems that he is inexorably going to have less control over time. In that context, what mechanism is there to resolve situations where he and the Norwegian authorities disagree?

I understand that the development of the pipeline project is headed by a joint Norsk Hydro/Statoil team, which I believe means that it is partly state-owned. As the Norwegian authorities will be regulating access, how will that potential conflict of interest be handled? What consultation has taken place over the order generally with the UK gas industry? Given the particular importance of the pipeline in contributing to the security of gas to this country, what progress is being made to increase the UK’s gas storage capacity, which is of course of equal importance to supply itself?

In looking forward to the Minister’s responses to these and other noble Lords’ questions, I confirm that we will not stand in the way of the order.

My Lords, we also welcome the order, which, although it is called a petroleum order, is of course about a gas pipeline. The pipeline is going to greatly help the security of supply of gas to this country to the order of 20 per cent.

I have a question on one aspect of gas supply that is perhaps outside the order. Do we not need to increase onshore gas field supply security? Even with the Langeled increase in the supply of gas, we still have a very short supply of reserve gas.

My Lords, I shall respond immediately to the point mentioned by the noble Lord, Lord Redesdale: the new Langeled pipeline is today operating at around 60 million cubic metres per day—close to its full capacity of 70 million cubic metres. I also recently attended the opening in Bacton of the BBL line, a new source of gas for the country. In addition, we will be seeing the opening of new capacity in Teesside in the new year and later on in Milford Haven. There is going to be a considerable increase in gas storage capacity in the UK over the next few years. I think that I am correct in saying that we are doubling capacity between now and 2010.

I return to the points raised by the noble Lord, Lord De Mauley. The regulated access system differs from the UK’s offshore system, where access terms are a matter for negotiation between individual shippers and the pipeline owner, with subsequent determination by the Secretary of State only if negotiation proves unsuccessful. If there is a failure to agree on disputes, for example over access to Langeled, the framework agreement establishes a framework forum of representatives from the UK and Norway to exchange information and informally resolve disputes arising from the agreement. The agreement also establishes a conciliation board, to be used in the event that the framework forum is unable to agree a dispute, which also includes members from both states and a third country. Decisions of the conciliatory board are binding on both Governments. That is an example of the dispute framework being well worked out and quite comprehensive.

On other disputes and the question of whether the UK has given up powers to determine access terms, I would say that we have not given up all our powers of dispute resolution. With the Norwegian system, tariffs and terms are published, and in the framework agreement we agreed with the Norwegians that, in the unlikely event of a dispute with a UK third party as to whether the owners or operators of Langeled South had fully and properly complied with the terms and conditions in the regulated access system, the dispute would be jointly determined by both Governments along the lines that I have already suggested.

The noble Lord, Lord De Mauley, mentioned consultation. Oil and gas companies were fully consulted at the drafting stages of the agreement.

If I have inadvertently missed any questions, I shall write to noble Lords.

On Question, Motion agreed to.