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Gazprom Energy

Volume 820: debated on Thursday 24 March 2022


Asked by

To ask Her Majesty’s Government what plans they have (1) to withdraw Gazprom Energy’s licence to operate in the United Kingdom, or (2) to place Gazprom Energy into special administration.

My Lords, Gazprom Energy’s parent company has been sanctioned by the UK Government in relation to transferable securities. Our sanctions continue to put pressure on Russia to cease its war on Ukraine. As regards the retail arm in GB, Ofgem and BEIS will continue to work closely with all energy suppliers to ensure that customer supply remains uninterrupted, and we have tried and tested practices in place for situations where suppliers exit the market.

I thank the Minister for his Answer, but can he explain to the House why it is that a subsidiary of Russian state-controlled Gazprom is continuing to operate in the United Kingdom one month after Russia’s brutal invasion of Ukraine, and when his own colleague in government, the Health Secretary, has been calling on NHS bodies to cancel contracts with the company, and local authorities and businesses are doing the same? Is it not time for the Government to stop dithering and take Gazprom Energy into administration now?

We keep these matters under constant review and the sanctions regime is constantly evolving. The noble Lord will be aware that the Foreign Secretary today sanctioned another 65 new bodies, and we have now sanctioned over 1,000 individuals and businesses since the invasion started.

Many local authorities, NHS trusts and other public bodies have gas supply contracts with Gazprom Energy. What support is Her Majesty’s Government giving to authorities and trusts that wish to break their contracts with Gazprom, and what consideration has the Government given to changing public procurement rules to allow that?

The noble Lord makes an important point. Gazprom Energy supplies about 20% of the UK business market, as he correctly observes, including many schools and hospitals, and so on. It would not be right for the Government to interfere in individual contractual decisions but for those that choose to break their contracts, the Crown Commercial Service stands by to support them in securing their next energy contract.

My Lords, is the Minister aware of a recent paper by the Energy and Climate Intelligence Unit which shows that our dependence on Russian gas could be quickly and permanently eliminated, not by more North Sea gas, which is expensive, not immediate, low impact and temporary, but by reducing gas demand by returning to our programme of insulating homes, installing heat pumps and expanding renewables? Of course, that would also reduce household bills, create jobs and provide us with energy security.

The noble Baroness posits those as two alternatives but in fact we are doing both. We will still need gas supplies during the transition, but we are spending some £6.6 billion over this Parliament on home insulation measures, and we have one of the largest programmes of renewables in the western world and one of the largest offshore wind sectors in the world. We are proposing to expand that to approximately 40 gigawatts by the end of this decade. None of this can happen quickly—it is a transition—but we will still need gas during that transition. My point is that it is better to get the gas that we will need during the transition from UK sources rather than relying on unstable parts of the world.

My Lords, following on from the noble Baroness’s question, which focused on domestic use of gas, I note that in August 2021, the Swedish firm HYBRIT made the first delivery of steel produced through green methods, without coal and without gas energy supplies. I note that Sheffield Forgemasters, for example, is a Gazprom client, and indeed, two-thirds of the energy supply for the Energy Intensive Users Group comes from Gazprom. Should not the Government be doing far more to help energy-intensive industries get away from fossil fuels?

We are—that is the answer to the noble Baroness’s question. We have the Industrial Energy Transformation Fund, and we are working with many of these difficult-to-decarbonise industries, such as steel, which of course plays a vital role in many of our deprived communities. We want to help them transition to clean forms of production such as hydrogen, so we are. I add that, even if gas is supplied by Gazprom UK, it is not Russian gas. Gazprom buys gas on the wholesale gas markets here, as many other retail suppliers do. We are dependent only by about 3% to 4% on gas supplies from Russia.

Can my noble friend assure the House that there will be no prodigal distribution of permissions for onshore wind farms?

I am not sure exactly what my noble friend means by that; there are very tight planning constraints on onshore wind farms. I am sure he will want to await any future announcements on energy policy which may be coming in the near future. However, we opened the contracts for difference round to onshore wind bids in the last round.

My Lords, is it possible not to be profligate but sensible about onshore wind? At the moment we have a total moratorium on a source of domestic cheap power that has been imposed by the very strict planning restrictions. As the Minister is well aware—the House may not be—my Private Member’s Bill, the Onshore Wind Bill, would put this situation right and put applications for onshore developments into the same regime of planning applications as other renewables.

I was glad to debate the noble Baroness’s Bill last week. We are not ruling out onshore wind—it can make an important contribution. There are local planning considerations that are important to bear in mind. Many people object to fracking because of the imposition on local communities, and in many respects the same objections and arguments should apply to onshore wind as well. We need to take the public with us on this and ensure that there is public support for these turbines.

My Lords, between 24 February and 3 March, 28 new companies and one new limited liability partnership were registered at Companies House for which the person with significant control claims to be a Russian national. What steps have the Government taken to ensure that these companies are not used for sanctions-busting, and will they take steps to put them into compulsory winding up?

I am not sure what point the noble Lord is trying to make here. We are not pursuing a war on the Russian people; many Russian individuals are just as opposed to this war as we are. We have a constantly evolving round of sanctions—the Foreign Secretary announced another 65 sanctioning proposals this morning—and some 1,000 individuals and businesses have been sanctioned. However, we have to be careful to differentiate between Russian state entities, those linked to Putin, and perfectly legitimate Russian individuals.

My Lords, the Government have said that Gazprom has been sanctioned and will no longer be able to issue debt or equity in the UK. Can the Minister say what that means? The British people want to be sure that no money from Gazprom is going to the Russian state to finance its vendetta against the Ukrainian people. Can the Minister categorically state that that is happening?

As I said, it is difficult for me at this stage to comment on individual cases. However, we keep the whole sanctioning regime under constant review and new rounds of sanctions are constantly announced. It is difficult in this case because of the large numbers of essential businesses, schools, hospitals, et cetera that have contracts with Gazprom UK, but we will keep these matters under review.

Can the Minister tell the House how he squares his earlier answer that it is up to individuals, businesses and organisations to make decisions about whether they cancel their contracts with Gazprom with the instruction that his colleague the Health Secretary has given to NHS England that it must withdraw from contracts? With various organisations withdrawing from these contracts—local authorities, health authorities and businesses—is it not almost inevitable that Gazprom will collapse? Would it not make much more sense for the Government to get ahead of this and take Gazprom into special administration now?

Ofgem has a number of processes in place to deal with supplier collapses and we stand ready to put those into effect if they are required. However, these are individual commercial decisions. Local authorities, for instance, are individual legal entities and they have to take their own commercial contractual decisions, but we will support them as much as we possibly can in that process.