HC Deb 23 July 1969 vol 787 cc1734-41
The Minister of Power (Mr. Roy Mason)

With permission, Mr. Speaker, I wish to make a statement on Continental Shelf licensing.

As the House knows, great success has been achieved in the first stages of exploration and development of the United Kingdom Continental Shelf. In less than five years since the first batch of licences was issued, five major commercial discoveries have been made; natural gas is being used in quantity by the gas industry; and large supplies have been contracted for by the petrochemical industry. Already, we can be confident of 4,000 million cubic feet per day in the mid-70s. This fine achievement will be of great value to the economy.

Over the past year I have been considering the next stages in the exploration and development of the United Kingdom Continental Shelf. My objective has been to realise the maximum benefit to the economy in the exploitation of these national resources.

The two most important considerations are to maintain a continuing and vigorous effort on the United Kingdom Continental Shelf and to do this in a way which secures the maximum advantage for the economy in terms of the balance of payments and of low energy costs.

The first objective can only be achieved by continuing to take advantage of the immense experience and resources of the oil industry. To achieve the second it is my intention that the nationalised industries and British companies should play a larger part in future.

Large tracts of the North Sea and almost all the Irish Sea are still unexplored, and I have decided that the time has now come to invite applications for a limited number of blocks in both areas.

In the North Sea, the bulk of the territory to be offered will be in the north, since most of the blocks in the south were licensed in 1964 and 1965 and will not come up for reallocation before the end of 1970. The criteria by which I shall judge applications will be similar to those used in 1965, though with some added preference for groups involving the Gas Council and the N.C.B. and other British interests.

In the Irish Sea, I intend to make two changes. First, it will be a stringent criterion that applications for licences should provide for participation by the Gas Council or the N.C.B., through direct partnership or options or other acceptable arrangements which the parties may agree between them. Secondly, I have informed the Gas Council that an application by the council to act as operator in a limited area in the Irish Sea would be welcome to the Government so that the gas industry can gain the practical experience necessary to equip it to play an even more active rôle in the further development of the United Kingdom Continental Shelf. For this purpose it is the council's intention to operate through a wholly-owned British hydrocarbons company.

Further north, between the West Coast of Scotland and the Outer Hebrides, I shall shortly be granting the Gas Council and British Petroleum a licence in the North Minch, for which they have jointly applied. This, being technically a landward area, comes under different arrangements from the North Sea and Irish Sea.

Finally, to clarify the present position of the Gas Council and to make sure that it is in a position to exploit to best advantage any oil it may find, I intend to seek powers by legislation for the Gas Council to search for, refine and market oil. Appropriate provisions will be included in the Bill on the re-organisation of the gas industry which I shall be presenting next Session.

To sum up, I shall be increasing the public stake in the continuing exploration of the Continental Shelf. In the Irish Sea, in particular, I envisage the Gas Council and N.C.B. being extensively involved, with the Gas Council, through its British hydrocarbons company, playing not only a larger but a more active role than hitherto. At the same time, I shall be offering private industry renewed opportunity to contribute to our national objective of rapid exploration of the resources of the Continental Shelf.

Invitations to apply for licences will be published in the next two or three months.

Sir J. Eden

Is the right hon. Gentleman aware that his proposals are wholly unacceptable to this side of the House? The first question which one is led to ask is: why is this being done? In what way will these proposals add to what the Minister described as the immense experience and resources of the oil industry? Why, having paid tribute to the oil companies, does not he leave them to get on with the job, instead of forcing them into partnerships that they may not wish to go into?

Is it not very wrong that taxpayers' money should be used in this highly speculative field in order to let the Gas Council gain experience in a field for which it was never intended? Has the Gas Council been given powers to search for oil anywhere in the world? Has the Minister considered the international implications of what he has just said?

Mr. Mason

On the latter point, no one would make a statement without considering the international implications. Do I take it that the hon. Member, speaking on behalf of the Opposition, is against British companies playing a larger part in exploiting gas and possibly oil in the North Sea together with the international oil industry—not only the National Coal Board and the Gas Council, but companies such as B.P., Burmah and I.C.I., all of which are participating in North Sea exploration?

Secondly, as to international oil companies, 51 are already playing a part in North Sea exploration and will still be able to apply for licences in the northern sector of the North Sea on their own, or as consortia or in partnership with British-owned companies and the Gas Council and the Coal Board. In 1964, when the Tories issued the first licences, I am told that only 3 per cent. of the licences went to nationalised industries. We intend to step that up.

Mr. Dalyell

Is my right hon. Friend aware that his statement will be as acceptable to many technical people involved in the industry as it is to his hon. Friends? We find it an excellent statement. What will be the difference in staff recruiting policies of the Coal Board from now on?

Mr. Mason

I thought it right to establish what is an embryo British hydrocarbons company to give the Gas Council a new dimension. As my hon. Friend has pointed out, it is right that we should also have our own expertise. Therefore, it will be necessary for the Gas Council to recruit the necessary experts and technical staff to start this sort of operation.

Mr.Lubbock

Is the right hon. Gentleman aware that the Tory Front Bench spokesman is not speaking on behalf of the whole Opposition and that we welcome his statements, particularly the confirmation of 4,000 million cu. ft. per day and that there will be an increase in public participation in the exploration of the North Sea and the Irish Sea?

Will the right hon. Gentleman say whether this entails any increase in borrowing powers for the Coal Board and the Gas Council, which were agreed fairly recently? Has he any reason to believe that applications such as he has mentioned, with substantial participation of the N.C.B. and the Gas Council, will be forthcoming for Irish Sea blocks? If he is to create this British hydrocarbons company, does not he think that it should take over the concessions now operated by the Gas Council and the Coal Board, leaving it as the sole operator of the Continental Shelf?

Mr. Mason

I do not think it necessary to disturb the present arrangements and to give the Gas Council's new hydrocarbon company those responsibilities. In the Irish Sea, as is known, only five blocks have been issued so far for production purposes and they are between the Coal Board and Gulf Oil, and a nationalised industry is, therefore, already involved in that sea. I was asked about the money. The Coal Board and the Gas Council are already spending £18 million—£7 million respectively on exploration and £11 million on development—and this will be a gradual exercise. I do not visualise that any extra borrowing will be involved.

Mr. Sheldon

While paying tribute to the useful rôle of the overseas oil companies in carrying out the exploration and investment which they undertook in North Sea gas, may I ask my right hon. Friend whether he will accept the congratulations of many of us who believe that he has made a wholly right decision in making sure that a great proportion of the exploration goes to British companies who can provide for this country some of the wealth which is ours as of right?

Mr. Mason

I am obliged to my hon. Friend. My statement is designed to do most of that. It ought to be on record that the international oil companies have played a great part, and there is no reason why that should be slowed down. There is no reason why there should not be the exploitation and development in the North Sea and Irish Sea to give us the gas supplies that we require.

As I said, 51 companies had been involved, in 24 groups, and so far 14 have put more than £25 million in the North Sea and they have had no return at all and have found no gas.

Mr. Maudling

Is the Minister aware that in his reply he was both definitely and, I fear, deliberately unfair to my hon. Friend the Member for Bournemouth, West (Sir J. Eden). In no way did my hon. Friend say that he was against the extension of the interests of British companies, and the Minister should not pretend that he did. As my hon. Friend said, what we are against is this further extension of nationalisation on a very large scale. Will the Minister give one simple reason why the extension of nationalisation should improve on what he has himself described as the very satisfactory present situation?

Mr. Mason

The hon. Member for Bournemouth, West (Sir J. Eden) said that my proposal was "wholly unacceptable". He did not say "partly unacceptable"; he had no reservations. He said that it was wholly unacceptable. The right hon. Gentleman cannot wriggle out of that. There are a large number of British companies which are involved in the North Sea operations and they probably want to be involved in the Irish Sea operations, too

Secondly, as I said, when the Tories issued their licences in 1964 the nationalised industries got 3 per cent. We stepped that up in 1965 and we hope that that trend will continue. It is right and proper and in the national interest, if this country is to exploit to the full the natural and national resources around its shores, that it should have the expertise available.

Mr. Maudling

The Minister must not persist in misrepresenting my hon. Friend, who made it absolutely clear that this proposal is unacceptable simply because it involves an extension of nationalisation.

Hon. Members

Oh.

Mr. Speaker

Order. I want to hear the counter-exchange and questions.

Mr. Hector Hughes

Does the Minister realise that the country and all who understand the complexity of the oil industry will be amazed at the lack of understanding shown by the questions from the Opposition Front Bench? To enable the country at large to realise the benefits of his constructive announcement, will my right hon. Friend issue a White Paper for the benefit of the country and of consumers in particular?

Mr. Mason

I do not think that a White Paper is necessary on this matter. I was pleased to hear a Scottish voice, because Scotland will now be involved. B.P. and the Gas Council have applied for licences for the West Coast of Scotland—the coastal area called the Minch. I hope that Scotland will benefit from that.

Mr. Peyton

While we all wish to see increased British participation in the North Sea, may I ask the right hon. Gentleman what evidence he has to suggest that there is increased enthusiasm on the part of the British taxpayer to take part in a highly speculative enterprise when he is a locked-in shareholder in the nationalised industries? What grounds has the Minister for suggesting that either of these industries has the experience or the capacity to carry out these operations which are envisaged? Is he suggesting that the best legacy which he can offer the British people is a series of dry holes, as I think is probably the case?

Mr. Mason

One of the problems is that we lack nationally the experience and expertise which the international oil companies have and it is right that we should develop it, so that we can exploit this wealth fruitfully for the British taxpayer, who will benefit from it.

Mr. Eadie

Is my right hon. Friend aware, much as the Opposition may wriggle, that when he made his statement today he was speaking for the people of Britain? Secondly, is he aware that the people of the country, realising that a new source of wealth will exist within our shores, want to take part in sharing in the exploitation of the new source of wealth?

Mr. Mason

Of course, it is in British interests, and certainly in the interests of British companies, and publicly-owned companies, and there is nothing wrong with that.

Mr. Boyd-Carpenter

Will the capital employed in this enterprise by nationalised industries be raised on Government guarantee and at a Government rate of interest? Secondly, whatever arguments there may be about the concern of the Gas Council, what has this to do with the National Coal Board?

Mr. Mason

The Gas Council has been involved from the start. It has taken an interest in the North Sea, although its operations must obviously have bypassed the right hon. Gentleman. Secondly, as I said to the hon. Member for Orpington (Mr. Lubbock), I do not visualise any extra borrowing being required. They will both go into it slowly, with a small number of licences at first, and will gather experience in a gradual way, which is right.

Mr. Oakes

Is the Minister aware that the implications of this decision will be to put Britain among the foremost nations of the world—if not the foremost—in the science of oceanography? Is my right hon. Friend aware that the developments from the previous licences in 1964 were mainly with American equipment? Will he give full encouragement to all the licence holders, both public and private licence holders, to use British-made equipment in their exploitation of both the North Sea and the Irish Sea?

Mr. Mason

Although I cannot press that upon them, I will encourage them to try to use as much British equipment as possible. No doubt my hon. Friend is aware that in the purchasing of British rigs, which can cost between £.1½ million and £2½ million, and in the development of their helicopter operations and their ships for 24 hours surveillance around the rigs, they are bringing employment and are already saving foreign exchange.

Sir H. Legge-Bourke

Before arriving at this conclusion did the right hon. Gentleman have any consultations with the Natural Environment Research Council, whose interest in the Continental Shelf is enormous and is increasing? Will he give an assurance that if he had such consultations the council was prepared to agree that what he was doing was scientifically sensible?

Mr. Mason

I have had no consultations with the body concerned, but I have no doubt that it would think it scientifically sensible. Is it not right that our own country should manage to build up a reservoir of experience and technically skilled people able to exploit the resources of the Continental Shelf?

Mr. C. Pannell

Is my right hon. Friend aware that the voices raised against this decision from the Opposition benches are the voices of the sons of Conservative Members who proclaimed the interests of the royalty owners in the coal mines to bleed white the earth, and, presumably, now want to bleed white the ocean on behalf of their friends?

Mr. Mason

I hope that we are rapidly moving away from that situation.