HC Deb 28 November 1961 vol 650 cc394-404

Motion made, and Question proposed, That this House do now adjourn. —[Mr. Whitelaw.]

10.57 p.m.

Mr. James Boyden (Bishop Auckland)

On 20th November the Minister of Power stated in answer to my Question No. 17 about the importation of methane that he regarded it as his duty to give information where his responsibilities were involved, but that these responsibilities did not extend to the commercial arrangements reached by the nationalised gas industry.

It is a most extraordinary situation where a Minister of Power encourages one nationalised industry to compete with another and then refuses to publish most of the facts by which it is possible to judge the wisdom of this competition. At this late hour I have not the time to challenge the whole concept of the Electricity, Gas and Coal Boards competing against each other in order to provide cheap fuel at the expense of the mine worker and, ultimately, against the public interest. But on this specific issue—the importation of methane from the Sahara—the Minister has not disclosed enough information to enable us to judge the economic wisdom of a decision which he agrees is entirely within his area of responsibility.

May I ask, first, whether he will disclose the full effect of the Gas Council's plans on the balance of payments situation? That the full utilisation of our coal resources will improve the balance of payments no one can deny. That the importation of oil costs us foreign currency no one can deny, although the extent of the damage cannot be known while the Government refuse to publish the figures. How much will this new development in methane importation aggravate our balance of payments difficulties?

The methane is to be brought from the Hassi R'mel field in the Sahara. Who owns this field? How will the Gas Council pay for the gas, and to whom will it make the payment? The gas will go through an existing main to Port Arzew. How is payment made for this service and to whom? It is then to be liquified by a part American, part Anglo-Dutch concern, the Compagnie Algérienne de Méthane Liquide, a company in which British control will be very slight.

Even the two 28,000-ton tankers to be employed are to be designed and operated by concerns dominated by American and foreign capital. It is true that the ships will be built by Vickers at Barrow and Harland and Wolff at Belfast, but everything else could be controlled abroad. Thus the ships will be chartered from a United Kingdom subsidiary of Conch International Methane Ltd., owned 40 per cent. by Royal Dutch Shell, 40 per cent, by Continental Oil and 20 per cent. by Union Stock Yard and Transit Co. of Chicago; and in the transportation of the gas the Gas Council will own only half of the capital.

At five stages in the process of getting the gas from Hassi R'mel to Canvey Island there is to be a commercial rake-off by operators in no way concerned with the interests of the British public; at most points there may be a payment of foreign currencies, and at any one point there is a risk of political disturbance which could wreck the whole complicated scheme. How much will these contracts affect our balance of payments?

Even on the grounds advanced by the Gas Council, the cheapness of the im- portation of the methane may well prove to be illusory. The Gas Council estimates that the methane will cost 8½d. a therm. The National Coal Board expects that gas made by the Lurgi process will cost 8¼d. a therm.

The methane contracts are subject to two grave risks on which the Parliamentary Secretary should comment. The Algerians will receive 1d. out of every 8½d. spent on the gas. What are the rates of pay of the manual workers in the methane fields, in the liquefaction plants, in the docks? Are these workers now organised in trade unions? How long, in the present African situation, will they put up with their low wages and inferior position? And if in due course they secure a substantially better standard of living, how will this affect the price of the methane?

Is this a Common Market rehearsal—the Gas Council using cheap African labour to threaten the National Union of Mineworkers? Rumours on the Continent about the impending devaluation of sterling are rife. What would be the effect of a 20 per cent. devaluation of the £ on the cost per therm of this imported gas? Comments on these two factors—much increased payments to the Algerian workers and the effect of devaluation—ought to be made by the Parliamentary Secretary tonight.

As to the political risks which may wreck the whole scheme, the Minister says that the Gas Council will make alternative arrangements if supplies are interrupted. Is it not probable that if supplies are interrupted they will be stopped permanently? If the Government could not make satisfactory alternative military arrangements for the Suez and Cyprus bases for several years, how can the hon. Gentleman expect the Gas Council to protect its extended and vulnerable lines of communication?

Would the Minister dispute the following observations: that at present no French banks are lending any appreciable sums for development in Algeria; and that the French are not themselves using any of this methane because of the political implications?

Mr. T. H. H. Skeet (Willesden, East)

Is it not true that the French are exploiting the Lacq natural gas deposits? They have a pipeline to Paris and Lyons. They do not require gas by tanker meanwhile, because they have ample natural gas.

Mr. Boyden

They are not exploiting this source of gas. No other British companies are investing in the Sahara developments.

The Gas Committee of the Economic Commission for Europe has drawn attention to the lack of information about the effect of corrosion and low temperatures on material used in tankers. A new problem is being presented to the shipbuilders. The risk of corrosion caused by sulphur in the gas is said to be high. Is it a fact that insurance underwriters have insisted that the Gas Council has itself got to carry this risk? Quite apart from the commercial liability involved, what is the degree of risk involved for the seamen? Has the National Union of Seamen been consulted?

The Gas Council and the Government have a curiously ambivalent attitude to the shipping problem. They will provide £7 million at Barrow and Belfast for ship construction, but have the tenders for these two ships gone out to competitive tender, including foreign yards, and were the tenders of Vickers and Harland and Wolff the lowest? Is there a hidden subsidy for British shipping whilst the Gas Council will take the most competitive product it can get for itself? Who pays for the damage to our coastal shipping which will involved when 800,000 tons of coal are not carried from the North-East and Scotland to Canvey Island? Competition seems suitable medicine for the miners and coal shippers but not for shipbuilders and the Gas Council's friends.

The Minister has stated more than once that if methane were not imported oil products would be. If the Government are determined to ride rough-shod over the British miners anyway, why not import liquid petroleum gas from British refineries? These hydro-carbons are more easily obtainable and are cheaper than methane, which takes three times as much tanker space as oil of the same thermal content.

But the heart of the matter is the sudden decision to allow the Gas Council to sign the new contracts when the Lurgi report is nearly ready. Why did the Minister not tell the Gas Council that he would come to a decision on the signing of the contracts when the Lurgi report was ready? The Gas Council has been taking its time about finishing the report. I understand that it has only one technical officer dealing with the matter. Perhaps the absence of appropriate technical staff in his own Ministry is a weakness which has delayed the Lurgi report.

But, in any case, it would surely have been prudent to have waited a little longer, in a matter of such grave importance, before coming to a decision. At the very least, the Minister owes it to the House to publish the full facts—commercial, economic and political.

The Minister denied that this move by the Gas Council will cause 2,500 miners to lose their jobs. My guess is that the psychological effect will cause 2,500 miners to leave their jobs and aggravate the already difficult labour position between different mining areas. Moreover, in future what is to prevent the Gas Council from doubling the importation of methane when it suits it and cause more unemployment and more alarm and despondency among miners?

The Government's appointment of Lord Robens to the N.C.B. was an imaginative act. Their flouting of his views over such an important issue as this does not make sense. The Minister has made a grave mistake and has a great deal to explain away.

11.3 p.m.

Mr. A. Bourne-Arton (Darlington)

The hon. Member for Bishop Auckland (Mr. Boyden) is normally second to none in his championship of the interests of the North-East. Perhaps it was shortage of time which prevented him from referring to one matter closely affecting the commercial and employment position of the North-East with which this question is concerned. A great number of engineering and shipbuilding firms in the North-East expect and hope to get a fair share of the very many millions of pounds worth of business which this decision will make available to somebody. In my constituency we hope that we shall secure some part of this very big business. The highly sophisticated and modern engineering firms in the North-East are certainly not dismayed at the prospect of providing the containers, pressurisation machinery, refrigerating machinery and indeed shipbuilding machinery which this decision of the Government will put in somebody's way, and we have good reason to hope in ours.

11.5 p.m.

The Parliamentary Secretary to the Ministry of Power (Mr. J. C. George)

The hon. Member for Bishop Auckland (Mr. Boyden) has asked a large number of questions, many of which are well outside the scope of my right hon. Friend's responsibilities. With regard to the question of commercial agreements, this is no new arrangement adopted by a Minister towards the nationalised industries. It has never been the practice, and I hope that it never will be, for the Minister to reveal here the internal commercial arrangements of the various boards. Those are the property of the boards and the business of the boards, and my right hon. Friend was absolutely right, and in line with past practice, in refusing to disclose them.

The hon. Member was exercised about the problems of the balance of payments, although he later disclosed the knowledge that if the importation of methane had not been permitted the Gas Council would certainly have turned to other oil products, and the effects on the coal industry would have been the same. The Gas Council is searching for a cheaper therm, and the Select Committee has said that time is not on the side of gas. Therefore, had the importation of methane been refused, something else would have taken its place by way of the importation of petroleum products. While there is a balance-of-payments factor, that element would not have disappeared.

The hon. Member referred to conditions inside the supplying area. Those are not, and cannot be the province of my right hon. Friend. He has taken the best advice obtainable about conditions in the area, and he was frank with the House and said that this proposition was not without risk. He also told the House quite clearly that the design of the scheme, applying as it does to seven area boards, carried with it the minimum of risk. He said that only 10 per cent. of the output of the gas industry would be involved. That 10 per cent. would be spread over seven area boards, so the element of risk in any area board would not be high.

If the supplies were interrupted temporarily, or even over a prolonged period, there is no reason to think that the public would be in any way inconvenienced. Standby plant would be used, and the methane-processing plant could also be set to use other petroleum products. There are, therefore, adequate safeguards against interruption of supply to our consumers.

The hon. Gentleman asked about the wages of the Arab population. That is a rather curious question to ask here if one really expects a reply. We have no access to information about the level of wages in that area or to the state of trade union organisation there, but it would be very strange if the discovery of a new and important gas did not have a substantial effect on the living conditions of the people around its source—

Mr. Boyden

But we have commercial attachés and consuls who are expected to have this sort of information, and be able to form a judgment of the viability of commercial propositions of this kind. Surely, that is something the Government ought to know.

Mr. George

That is not the business of the Ministry of Power. If the hon. Gentleman wants information about conditions in the interior, he should ask the proper Ministry. It is certainly not our business to know these things. I repeat that it would be a peculiar happening if this important discovery did not have some effect on the living conditions of the people concerned.

The hon. Member then asked why we did not await the decision of the study group, and that is quite a sound question. My right hon. Friend has on numerous occasions told the House that these two processes—methane importation and Lurgi gasification—are not opposed. They are not alternatives. There is room for both. This scheme for the importation of liquid methane is a very sound scheme which was available within a reasonably short time at costs which were acceptable. It is technically advantageous beyond all other alternatives and is, in every way, an acceptable scheme employing a process already proven and thoroughly satisfactory to my right hon. Friend.

My right hon. Friend has never considered—and does not now consider—that the study of the Lurgi proposition is in any way prejudiced by the fact that permission has been given to import methane. The Study Group will report, within a few months we hope, and then—and only then—will we have any idea about the price at which the Group considers that the Lurgi plant can supply gas to consumers in this country.

The hon. Gentleman gave figures which are, of course, not applicable to what the Study Group has before it. These figures have not yet been assessed and cannot be known. The hon. Gentleman asserted that methane would cost 8½d. In fact, that figure is quite wrong because in considering the cost of gas even a very little saving means a great difference in price. It will be supplied to the boards at 7½d. per therm. There will be a ½d. rebate from the Council's half share in British Methane Limited, which hires the tankers, and that ½d. will be passed back to the area boards, and the net price will be 7d. Reformed into town gas it will cost 8¼d., but quite a large percentage will be used, we hope, for enriching Lurgi gas and the proportion used for that purpose will be supplied at 7d. per therm. The proportion of methane in the Lurgi gas will be 50 per cent.

In fact, the weaker Lurgi gas will be used to dilute the rich methane in order to make it a commercial proposition. Far from being a hindrance to the Lurgi proposal, the presence of methane in the vicinity, as it will be, will certainly be a help towards the Study Group favouring the Lurgi plant.

I can give the hon. Gentleman an assurance—which I have given before—that the Gas Council entered into this Study Group in all sincerity. It is anxious that the truth about Lurgi should be known, and I can assure the hon. Gentleman that if, in the end, Lurgi is shown to provide a cheap, competitive and safe method of generating gas, then the Lurgi plant will come into the boards' development plans. As I say, the Gas Council is sincere in its purpose in this Study Group. If evidence shows that it is competitive, the intention is to include a large Lurgi plant in its development programme.

Methane importation is a great scheme. It is bold and imaginative, and it brings to this country an entirely new technology. It opens the door to a supply of energy from a wide source in the future. The Gas Council, by its early experiment with the "Methane Pioneer," proved that this liquified methane could be transported safely over long distances, something for which the Council deserves great credit, since it has never been done before.

Now two tankers are being built each to carry 12,000 tons of methane. The tankers are equal in dimension to normal 28,000-ton ships, and these are to be built in British yards at the request of the Gas Council. The British shipbuilding industry will thereby acquire a new technique which ought to give it some advantage over foreign shipbuilders if the use of methane expands in the future, as we hope it will. On the balance of payments question, therefore, this could be decidedly advantageous, and we hope that it will bring same work to the constituency of my hon. Friend the Member for Darlington (Mr. Bourne-Arton) when the developments take place.

While one can criticise the scheme in the way the hon. Gentleman did and question various provisions in the scheme, the Minister is content that the Gas Council, with its business acumen and commercial wisdom, has made arrangements which are sound. He is not in the slightest bit worried if, as the hon. Gentleman said, the French banks are not advancing money in Algeria. Nor is he concerned about other British companies not investing in Algeria, because the Gas Council has not a penny invested in Algeria. The whole of the Council's investment is in the United Kingdom. Its commercial acumen has been brought to hear to such an extent that others carry all the risk outside the United Kingdom. All the Council has at risk in this scheme is £18 million in storage tanks and pipe-lines. Even that is not the true figure, because 6 million pounds worth of plant which was previously planned will not, in fact, be built. Therefore, capital expenditure due to this new venture will be £12 million inside the United Kingdom.

I hope that I have shown that this is a sound commercial scheme which will bring advantage to this country in several ways. It will give an opening to a new technology, it will provide cheaper gas for export industries, and give a chance to shipbuilders to compete on a privileged basis with foreign shipbuilders when, as we hope, this trade expands.

The Gas Council is entitled to a great deal of credit for all the foresight, vision and patience it showed during the long and difficult negotiations. The result has been a great upsurge in the morale of the industry, which has passed through a difficult period from the time of nationalisation until recently. This is the first ray of light this industry has seen, and the effect on the coal mining industry will not be serious but only marginal.

The Select Committee estimated that the consumption of coal by the Gas Council might drop by 2 per cent., which is a very marginal effect. But even that was not quite fair to the gas industry because the Select Committee estimated a growth of 1 per cent. per annum in gas consumption. The area boards believe that with the help of methane, and with natural expansion, it will go beyond 1 per cent.

It is our hope that consumption of gas will expand, but the only hope of that, and of gas remaining an important customer of the coal industry, is to have the gas industry competitive. The way to have it competitive is to give it access to this new technology, to new supplies of this valuable and important material. That has now been done. We can await the result with confidence.

I repeat that the members of the Gas Council and the chairmen of the area boards merit a great deal of credit from this House for the courage, initiative and vision they have shown in this bold scheme.

Question put and agreed to.

Adjourned accordingly at nineteen minutes past Eleven o'clock.