§ 11.1 p.m.
§ Mr. Dick Douglas (Clackmannan and East Stirlingshire)The first thing that I wish to do in this debate, which is concerned with the as yet unquantified but acknowledged considerable wealth that lies beneath the North Sea, is to remind the House that the natural resources in this area will be gained only at a sacrifice in terms of human effort and endeavour. While looking for economic benefits for the many, we must remember the few—the engineers, technicians and all the others who have made possible these benefits.
I know that the Minister has paid a visit to one of the rigs and recognises the efforts made and the degree of safety that we must make sure is available to the workers. I know that he also recognises that we must ensure the utmost stringency in the operation of the regulations to ensure the safety of personnel overall.
No one has yet put a figure on the reserves of oil in the North Sea off the Scottish coast, but all the commentators suggest that they are, considerable. Therefore, the first impact of the exploitation of these reserves will be on the United Kingdom balance of payments. If we are now importing about £700 million worth of crude oil a year, and if the consumption requirements of the United Kingdom continue to increase at the average rate of the past five years—7 per cent.—any savings coming from the use of an indigenous source of fuel will be considerable for the United Kingdom economy.
In addition, there will be direct implications for fuel policy in determining the new mix of energy resources—coal, oil, nuclear and hydro power, and natural gas. These are larger issues than I wish to pursue this evening, but they should be noted.
It seems reasonable to assume that even with the growth of consumption to between 15 million and 18 million tons by 1980, the refining of North Sea oil in Scotland will mean that she will be a net exporter of oil. Consequently, there will be a growth of servicing facilities for such activities. British Petroleum's plans for the Forth are an indication of things to come. Perhaps the Minister—who is probably more privy than I am to the 790 intentions of B.P.—will be willing to allay some fears that have arisen about the projections at Grangemouth.
Before we get to the refining stage, the oil has to be brought ashore. If I concentrate this evening almost entirely on the Forties field we can see something of the problem. It will mean construction of fixed permanent platforms consisting of about 10,000 tons of steel costing, in very approximate terms, £10 million each to fabricate and install. What evidence have we that Scottish firms are being encouraged to quote for such structures? As I understand it, construction of these platforms will require a considerable amount of space, and it is advantageous that they should be built relatively near the positions where they will be eventually sited. I believe that designs are to hand. I believe that oil companies are in the market for these structures and that they are anxious to buy British.
Next comes the underwater pipeline which, naturally, has to meet most stringent specifications. Again, what evidence have we that the British Steel Corporation has the capacity to quote for such a line, or, for that matter, has the capacity to quote for the B.P. land-line which, we understand, will go from Cruden Bay to the Forth? I am also dubious about the structure of the British Steel Corporation and its ability to get into the market for this kind of equipment.
Additionally, considerable sums are involved for servicing and repairing the rigs and platforms, and servicing in this context includes provisioning. There is also construction work for storage of the oil on or off shore. Again, what efforts are the Government making to ensure that Scottish—or, for that matter, United Kingdom—companies get into this market? We are witnessing, in my view, a unique opportunity which is being given to us in Scotland to have an indigenous growth industry. We are getting a second chance, and we must show imagination in grasping it.
At Grangemouth we already have an oil refinery and a petrochemical complex. These will be added to, but in my view the real opening for the Scottish economy, in terms of petroleum technology in a European and world sense, centres not in the East but in the West, 791 [MR. DOUGLAS.]
at Hunterston. If this natural advantage is unique and has a role to play as a Europort, what raw materials are to be brought in to have value added to them? Coking coal and iron ore are distinct possibilities. If tanker sizes continue to rise, crude oil must also be considered.
We are anxious to know the Secretary of State for Scotland's views concerning the Eurospan proposals. I know that the Minister has expressed himself on this and took part in our Press conference, albeit remotely, with the individuals concerned, but it is not enough just to mouth pleasant phrases. The report on this subject states:
What does emerge clearly, however, is that only determined action by Government and other bodies will ensure development of any new locationI recognise that Mr. Hugh Stenhouse and Mr. W. S. Robertson are performing yeoman service to the Scottish economy— better service than the Secretary of State at the present time—but I am not flattering them when I say that. Those individuals, however, are not responsible to this House. The Secretary of State for Scotland, when he was in opposition, made speeches about the development at Hunterston. We want to know what he intends to do now that he is in government.
I envisage Scotland gaining a place in petroleum technology in a world sense and while I am willing to admit that because of the developments of the petroleum industry internationally, much of this technology would have to be imported particularly from the United States, there is nothing to suggest that United States companies, given the right incentives, are not willing to develop a Scottish base in harmony with existing concerns, both private and public. What inducements, if any, are the Government offering to attract this United States technology to Scotland to ensure that we get the maximum benefits from these discoveries?
That leads me naturally to the vexed question of the revenues coming to the Exchequer in the form of licence fees and royalties. To mix the metaphors, other parties in the House and elsewhere have displayed a tendency to spend the seed corn rather than think of ways of 792 conditioning the climate to ensure a good harvest. These revenues could be considered in the nature of a windfall arising from the public ownership of the Continental Shelf. This was a massive piece of public ownership embarked on by the Conservative Government in 1964. Since then we have had other elements of public ownership. Therefore, if I introduce other topics in relation to public ownership I should not embarrass right hon. and hon. Members opposite.
The Government have a direct responsibility to ensure that the United Kingdom and Scotland gain the maximum advantage from this public resource. In terms of petroleum technology the most exciting new aspects are the construction of self-propelled drilling rigs at a cost of about £8 million each and, much more important in my view, the construction of natural gas carriers at a cost of about £27 million each for the very large sizes. I do not think we should look at the North Sea oil on its own. We must see the shift in technological terms of new industries coming to Scotland and think in terms of satisfying not just the United Kingdom market, or even a European market, but a wider international market for vessels of this type and this type of apparatus.
Taking the projections made by people in the industry and carrying the example of development costs a little further, the expectation is that in the not too distant future the world will require about 200 of this type of ship. It is absolutely crazy, when much of this technology is readily available and we have problems in the shipbuilding industry, not to use some of the revenues arising to the Government from the North Sea oil to give development contracts and to guarantee funds to United Kingdom shipyards to build such vessels.
We are told—this is the present view— that a United States company is interested in the Clydebank yard for the construction of liquid natural gas carriers. Cannot the Government be a little more imaginative and produce their own consortium for such purposes based on Clydebank? I am firmly convinced from my observation of the British shipbuilding industry that we can build this class of ship and that such development contracts, if they were placed, would be to the benefit not only of the West of 793 Scotland but of the whole United Kingdom shipbuilding industry.
Looking at research and development expenditure on other ventures, like Concorde—I am not pronouncing on the viability of that project—a total expenditure of £1,000 million on research and development has been shared by the two countries with very little prospect of marketing the eventual product. In shipbuilding terms, in this case there is a distinct possibility of marketing the eventual product and we should be in the market, particularly in the West of Scotland, for this type of gas carrier.
I turn now to the apparent unwillingness of the Government to commit themselves to a strategy in connection with North Sea oil and Hunterston.
§ Dr. J. Dickson Mabon (Greenock)My hon. Friend has been most earnest in going round the shipyards not only in Scotland but elsewhere. Will he confirm —I know it of the Lower Clyde, and it is, I am sure, true of the Upper Clyde— that the shipbuilders are most anxious to get orders for these very large ships in order to give strength to the Scottish shipbuilding industry?
§ Mr. Douglas:I am obliged for that intervention. It enables me to cast a little more light on his aspect of the matter. The shipbuilders I have visited are firmly convinced that they can build this type of ship. There is no doubt about their being able to build them, and being ahead of almost any other country, including Japan. The Japanese have built some gas carriers, but they are hanging back to look at developments in this type of ship in other countries. There are certain yards in the United Kingdom —I shall not specify them—which are quite capable of building these ships and which have experience of building to the stringent specifications required. Therefore, by putting out development contracts as I suggest—I have put this to the Secretary of State for Trade and Industry on earlier occasions, and I put it again now—we should be doing a good job for the United Kingdom shipbuilding industry as a whole.
The Government, however, are unwilling to commit themselves to a strategy on such matters as this. They say, "Let industry sort out this problem for itself". But this is not the sort of cost problem 794 that one can deal with in that way. The industry needs underwriting—I do not mean pandering to; it needs some under-pinning if it is to embark on the difficult job of building ships of this type. They are difficult ships to build. Security is needed, and a development contract would give a secure basis from which to embark upon such building.
I cannot in an Adjournment debate discuss all aspects of the overall strategy. I know that Governments do not like preparing White Papers but I call on the Government to prepare a White Paper setting forth their views on the matters which I have raised tonight. I am convinced that we should then see that a major factor inhibiting Scottish industry from fully benefiting from the exploitation of North Sea oil is the doctrinaire withdrawal of investment grants on 27th October, 1970.
If we do not get the benefit in Scotland of North Sea oil, we shall be able to point directly to that date. Examining all that has happened since, particularly in this type of capital-intensive industry, and taking all the items I have mentioned —the rigs, the ships, the pipelines and so forth—we see that everything will be held up because of the present Government's doctrinaire attitude. We shall remember that date, 27th October, 1970. If anything is to be done by using the licence fees and revenues, one thing which the Government could do directly, at a stroke, would be to restore investment grants to the Scottish economy.
§ 11.19 p.m.
§ Mr. Peter Emery (Honiton)I thank my hon. Friend the Under-Secretary of State for allowing me a moment or two in which to speak. I have promised to be very brief. Obviously, the House would expect me in connection with this sort of matter, though not precisely on the question now before us, to declare an interest.
I do not accept the party-political points that were made by the hon. Member for East Stirlingshire (Mr. Douglas) about investment grants or about shipbuilding. There is a far greater matter at issue here which I urge upon the Minister, namely, the bringing of oil from the North Sea, not just from the British side of the Continental Shelf but from the whole of the North Sea bed, into the United Kingdom.
795 [MR. EMERY.]
The idea that there are at the moment known reserves is a fallacy. There are estimates. The known reserves at the moment are in the Norwegian waters, on the United Kingdom side of the Norwegian Trench. The obvious place to which to transport and in which to market these oils is the United Kingdom—perhaps Scotland, perhaps the North-East. Are the Government paying enough attention to ensuring that all oil in the North Sea this side of the Norwegian Trench is brought to the United Kingdom?
As a basis for operations, strategically and industrially, this must be of great use. Therefore, from the national point of view, irrespective of party politics, this is of the greatest concern, and I hope that the Government are paying enough attention to it.
§ 11.20 p.m.
§ The Under-Secretary of State for Development, Scottish Office (Mr. George Younger)I am grateful to the hon. Member for East Stirlingshire (Mr. Douglas) for raising a matter of the greatest importance to Scotland in the shape of the discovery of North Sea oil and its implications for everyone involved in the Scottish economy. I welcome this opportunity to say a few words about the implications of it for our economy and the main considerations of which everyone concerned with Scottish industry must be thinking in making the best use and best exploitation of this great new resource.
What my hon. Friend the Member for Honiton (Mr. Emery) says is right, of course. Any calculations that we can make about the actual quantities being available are estimates and must remain so. It can, however, be said, with reasonable technical advice to back it up, that we can look forward to an availability of oil from the northern sectors of the North Sea, on the United Kingdom and the Norwegian sides, of at least 50 million tons per annum by the mid-1970s and, looking further ahead, of as much as 150 million tons a year by the end of the 1970s.
It is difficult to say how much of that would be in the British sector but, as far as can be judged, again from the available evidence, the share that we should get would probably be roughly 50 per cent. or of the order of 75 million 796 tons, by the end of the 1970s. Since our current usage in Great Britain is about 100 million tons, I do not think there can be any question that North Sea oil is a major resource for us. Obviously, too, it is not sufficient by itself to make us self-supporting or even net exporters, but obviously there are great benefits to be had for us.
It is not entirely a matter of quantity. There is the quality as well, and what we can tell so far indicates that we can expect a higher yield per well of good quality oil with a low sulphur content. This is essential to justify the high costs of operating in this very difficult area which, as I saw recently for myself, is said by those concerned to be the most difficult sea area of all in the world for oil exploration.
The hon. Member for East Stirlingshire referred especially to the tangible economic benefit to Scotland of the exploitation of this oil. So far, only B.P. has announced how it proposes to bring ashore the oil that it has discovered. I was grateful to the company for inviting me in September of this year to fly to its rig "Sea Quest" in the Forties field. It enabled me to see at first hand how efficiently the painstaking appraisal work is carried out in that inhospitable environment. Incidentally, the recent tragic death of a diver reminds us of the considerable danger associated with this work.
I was also able to discuss with B.P. its plans for opening up the field for production. It hopes to do this by 1974 and proposes to lay an offshore pipeline of about 110 miles in length coming ashore at Cruden Bay, near Peterhead, and thence overland to Grangemouth. If the flow of oil is up to expectations it could well influence the expansion of the Grangemouth refinery from its present output of 9 million tons per annum. I notice that B.P. has recently announced deferment of its previous plan for the expansion of Grangemouth but there is no doubt that the new supplies, when they are flowing, hold out the assurance of expanding activity in the Falkirk Grangemouth area and of associated employment opportunities there.
Many of the other companies engaged in exploration work have made interesting progress, but have not yet reached the 797 stage at which plans for exploitation can be drawn up.
§ Mr. Harry Ewing (Stirling and Falkirk Burghs)As the Member who represents a constituency most directly concerned with the oil industry, I was interested to hear the Minister say that this oil find would provide greater job opportunities in my constituency. I am anxious to know whether he has figures indicating how many more jobs will be available as a result of this oil find. I know that it is difficult at this early stage in the exploration work to estimate the job opportunities which might become available in future, but I should be interested, as would my constituents, to know how great this potentiality is.
§ Mr. Younger:I thank the hon. Gentleman for what he has said. I should like to welcome him to our debates on this subject. I hope that he will take part in them in future. I hope to say something about job availability, but I cannot say anything more particularly about job opportunities at Grangemouth at the moment.
Grangemouth will not be the only place in Scotland to benefit from North Sea oil. Already there is plenty of evidence that the exploration activity off the North-East Coast is generating activity in that area of Scotland where shore installations, pipeline construction, servicing facilities, housing and other provision for oil industry personnel are required. The North East Scotland Development Authority tells me that more than 60 firms with employment expected to reach 1,000 people are now engaged in this work in the Aberdeen area alone. The North East Scotland Development Authority is to be congratulated on the admirable initiative it has shown in bringing together the oil companies and the local interests concerned. I was particularly glad to hear of their successful participation in the Oceanex '71 exhibitions at Great Yarmouth last month.
Aberdeen Town Council and the local harbour authority have also acted very promptly in considering how the facilities of their area can be adapted to meet the needs of the drilling rigs for services. B.P. has said that it was particularly impressed with the ready response of the people in the Aberdeen area to meet its needs quickly and efficiently. 798 Peterhead is likely to benefit from being chosen as the base for work on the coating of pipes for underwater use.
The ripples of this activity are, however, spreading much further than the North-East. B.P. has selected Dundee as the site for its marine base for berthing supply vessels to service rigs in the North Sea. Further north the Cromarty Firth has been indentified as a possible base for the construction of oil rig platforms and associated equipment with the prospect of substantial numbers of new job opportunities there. Brown & Root (U.K.) Ltd. recently announced plans for a 100-acre fabrication yard at Nigg Bay which is expected to provide employment for over 100 people. Mid-Continent Supply Co. (U.K.) Ltd. has acquired an interest in a 50-acre site at Alness with a view to its use as an oil rig platform construction and servicing base. With the pattern of activity becoming increasingly concentrated in northern waters, there are signs that the more northerly parts of the mainland and the islands could also benefit in similar ways.
All this is a good beginning and indicates that there are real opportunities for firms in Scotland in the servicing and ancillary activities associated with the oil industry. Exploration activity as such, however, is nothing new on the world scene and we must remember that there is already a highly developed and keenly competitive sector in which firms else-where will be eager to exploit their existing expertise by adapting their products and services to meet North Sea conditions. Scottish firms must he prepared to meet this challenge and he ready to adapt and innovate in order to be even more competitive.
In this connection I very much welcome the great effort which the Highlands and Islands Development Board, the Scottish Council (Development and Industry) and some of the local authorities, as well as the North East Scotland Development Authority, which I have already mentioned, are making to alert Scottish interests to the wide range of possible opportunities which the situation presents. It is necessary to go further than that, however, and for existing firms to develop new variations of their products and, in some cases, new types of products to meet a new need that many of them will not have met before. 799 [MR. YOUNGER.]
The question of the supply of pipes has been mentioned. This, of course, is a matter for the oil industry and the pipe producers in the light. of commercial circumstances but I know that the British Steel Corporation has had difficulties in supplying pipes of the required specifications. It is working strenuously to overcome those difficulties in the face of strong overseas competition. An indication that the Corporation is having a measure of success is that it recently received a large contract from the Gas Council for pipes of this kind, although not of exactly the same bore and size as will be needed for oil under the sea.
Another less obvious but encouraging and, in the long term, important development is the participation of Scottish 800 capital in the groups applying for licences in the latest round of applications. There are now four or five companies with Scottish financial backing and several leading Scottish industrialists are associated with them. The oil men are optimistic as regards the prospects. Much expensive work will need to be done before the potential can be accurately forecast. But the—
The Question having been proposed after Ten o'clock, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.
Adjourned at twenty-nine minutes to Twelve o'clock.