NORTH SEA OIL (Hansard, 26 January 1973)

§ Mr. Gavin Strang (Edinburgh, East)
I hope that all hon. Members will now accept your ruling, Mr. Deputy Speaker, although they may not be happy about it. My hon. Friend the Member for Fife, West (Mr. William Hamilton) has asked me to convey his apologies to the House for the fact that he is unable to be here to take up the Adjournment which he had originally obtained in the ballot. Unfortunately he has an important prior speaking engagement in Glasgow from which he could not absent himself.
There is no doubt that the development of industries that provide equipment and services required for the exploitation of North Sea oil could make a massive contribution to solving Scotland's economic problems. Although a number of exciting new developments have got off the ground already, Scotland is not yet getting any- 904 thing like its share of new jobs and investment created by the demands of the oil companies. This has been confirmed by the recently published report of the International Machine and Engineering Group. I regard the IMEG report as an extremely valuable document, containing a great deal of useful information, and I congratulate the Government, first, on commissioning the report but, more important, on publishing all the material in the report apart from that which was confidential to the company. They performed a very valuable service.
I believe that the report will become a manual with which we can evaluate the extent to which British industry in general and Scottish industry in particular is participating in these developments, and the extent to which the Government are taking the necessary measures to see that this is achieved.
The recommendations in the IMEG report are somewhat modest. This stems from the basic philosophy of its authors. They believe that risk-taking is essential in the free enterprise supply of oil and they formulated their proposals with these principles in mind. Because they adopted this philosophy they did not go as far as I would like them to go.
In my view, and in the view of many people, we need a powerful oil development board based in Scotland with an associated State holding company. This board should have the funds to give the industry support in a massive way to carve out a stake for the nation. The exploration of oil in deeper waters requires a new technology. Scotland has a chance to be in the forefront of the developments and substantial Government support is necessary. I also believe that the Government must put maximum pressure on companies to see that they buy British and Scottish equipment.
To date the Government's reaction to the IMEG report has been abysmal. They have rejected the recommendation to establish an independent petroleum supply board. Instead they have agreed to establish a Department of Trade and Industry offshore supply office in London. The decision not to locate this office in Glasgow will offend the people of Scotland.
On Wednesday the Department explained in great detail to the Select Committee on Science and Technology why 905 the Government had rejected the proposal to set up an independent agency. I do not ask the Minister who is to reply to go over that ground again. I merely say that, although they explained the position fully, I do not believe they have made a correct decision.
I wish to ask a number of broad questions regarding the Government's approach to this matter. I have given the Minister brief notice of these questions.
I should like, first, to ask how many additional civil servants are likely to be based in Scotland as a result of setting up the off-shore supply office. How much money do the Government expect to allocate to this office? I appreciate that the amount of money will to some extent depend on the response from industry. The Government have already given a flexible estimate of the amount of money to be spent under the Industry Act, but we should be given some idea of the level of support which the Government are prepared to put into this venture.
Do the Government intend to deal with some of the important recommendations set out on pages 12 and 13 of the IMEG report in connection with offshore contracts? Will they assist financially contractors who wish to hire equipment? Do they intend to establish a wholly British offshore drilling capability? Will they enter into discussions with selected shipbuilders to provide them with assistance and support facilities? Do they intend to promote the building of service and supply vessels?
Finally, are the Government planning to give massive support to research and development projects on this subject? I am talking in terms not only of pipeline barges and drilling rigs, but of the new techniques and services required when operations move into deeper waters.
I do not know how much more time I have, Mr. Deputy Speaker, but I wish to refer to other important issues. First, there is the question of service and supply vessels. I believe that situation is scandalous. The' IMEG report says that supply vesesls should be bread and butter work for small United Kingdom shipyards. It is outrageous that, at a time when this massive new market for service vessels 906 has opened up, workers in east coast firms such as Robb Caledon should be faced with the possibility of redundancy in the near future through lack of work.
The report goes on to say that 75 supply vessels are on order outside the United Kingdom. Only 10 are on order in the United Kingdom. One is being built in Scotland, but it should be said that that one is not on order but has been built "on spec" by Hall Russell. Decisive and immediate Government intervention is required to change this position.
Secondly, I want to refer to the position of the British Steel Corporation. The quality and competiveness of steel supplied by the corporation will be fundamental to the success of British industry in this field. More than half the total value of the equipment and materials required in the offshore industry is represented by steel. Although the corporation has an existing development at Methil, the IMEG report says that the British Steel Corporation's assessment of the market is too cautious and may need revision if BSC is to be able to supply the substantial orders for pipe and high quality plate that are likely to be required in a couple of years.
The third issue is the whole question of research and development. There are great opportunities as we move into deeper and deeper waters and drilling takes place off the west coast of Shetland in depths of up to 2,500 feet. These opportunities exist not only in respect of drill ships and pipelaying but, more importantly, in the development of the new techniques that will be required for the exploitation of hydrocarbons in these deeper waters. The Government should get together with a big company such as Vickers in order to set about establishing this indigenous technology. Lock-heeds are moving in. For geographical reasons we have a great chance, and I hope that the Government will seize the opportunity by giving the massive, imaginative and bold support that is required.

Mr. Deputy Speaker
Mr. Emery.

§ Mr. Emery
Because of the shortened time for the debate——

§ Mr. Doig
On a point of order, Mr. Deputy Speaker. The hon. Member who has an adjournment debate is usually allowed about 15 minutes in which to put his case. My hon. Friend the Member for Edinburgh, East (Mr. Strang) took only 10 minutes to present his. In those circumstances should not another hon. Member who wishes to take part in the debate be allowed to do so?

Mr. Deputy Speaker
The Chair has a discretion in deciding whom to call. Mr. Emery.

§ Mr. Emery
I have no desire to prevent the hon. Member from taking part in the debate, but the fact is that a large part of the time that would have been available has been taken up with points of order.
I want quickly and decisively to thank the hon. Member for Edinburgh, East (Mr. Strang) for raising this debate. We welcome his congratulations to the Government for creating the IMEG report and for the speed with which they have acted upon some of its recommendations. One of the most important of these referred to the setting up of a special agency to sponsor and assist the development of an internationally competitive British supply and contracting capability, which is what we all want.
The Government decided that the speediest and most effective way in which to act upon that recommendation was to create an offshore supplies office within the Industrial Development Executive. This office has been kept within the Government rather than independent—as perhaps was implied should be the case in the IMEG report—because we took the view that it could be set up with the minimum of delay and would have all the advantages of working within the Industrial Development Executive, with the result that there would be no overlapping and it would be a positive factor to assist the decision-making.
The House will no doubt have seen yesterday the announcement of the appointment to the important post of director of the office of Mr. Peter Gibson, a man who has proved his ability 908 in industry and whose industrial experience is directly relevant to the task that he has taken on.
We have also given practical and positive recognition to the special importance of offshore developments to the Scottish economy by our decision to establish a new Scottish petroleum office through which the offshore supplies office will discharge its responsibility in Scotland. It is being set up in Glasgow as part of the Scottish Industrial Development Office. It is certainly not, as was suggested, an affront to Scotland that it should be set up in that way.
We are attempting to get the maximum benefit for Scotland and for the whole of the country. We honestly believe that this is the best way to bring the greatest number of orders and the greatest industrial activity into Scotland. It will have as its head a man of vast experience of the oil industry and oil related industries. Alongside it in Glasgow there will be a branch of the DTI Petroleum Division which will be staffed largely with expert petroleum engineers. That will create an effective Scottish centre for stimulating industrial development relating to offshore oil. The centre will bring together the Scottish Industrial Development Office, the offshores supplies office and the DTI Petroleum Division. It will work in the closest co-operation with the Scottish Office and with the Scottish Economic Planning Board which now has a new North Sea Oil Development Committee.
Therefore, the Government could not have worked faster in trying to coordinate activity for Scotland after receiving the IMEG report. My right hon. Friend the Secretary of State for Scotland is most concerned not only that we should do this but that the infrastructure requirements will be kept under continuous review. I do not have time to run over the reconstruction of the Perth/Inver-gordon road, the developments at Peter-head Harbour and the programme of 700 houses in North-East Scotland. All those matters are known to the House.
Other recent action taken by the Government, which Scottish industry has found particularly helpful, includes the measures introduced with the Industry Act last year. These produced a large number of inquiries. About 500 inquiries 909 had been received at the end of the year from undertakings interested in development in Scotland. As hon. Members will be aware, assistance under the Act is available not only to provide employment in the assisted areas but also to maintain and to safeguard it. That is of particular interest to Scotland. It is available for modernisation as well as development, although those projects which will create employment in the assisted areas are more likely to receive preferential treatment.
In effect the Government have provided a financial regime which encourages British industry, and above all industries in areas such as Scotland to seize opportunities for growth. The North Sea oil developments offer just such opportunities and it is for the firms themselves to grasp them without delay. I am glad to say that substantial contracts have been obtained by Scottish firms. Major new facilities have been established and it is interesting to note that of the seven orders for platform structures secured for the United Kingdom, five have been won by Scotland. Those five orders have a total value of about £40 million.
Moreover, Scotland has also done well in various other forms of equipment. All this means that the North Sea oil developments have created approximately 2,800 jobs in Scotland, with jobs in prospect over the next three to four years from firm projects in excess of 8,000.
It is also relevant that Marathon, on Clydeside, is receiving North Sea orders and will, of course, be receiving substantial Government assistance. It has a labour force of about 1,000. About 130 new firms have been set up in Aberdeen over the past two years, employing over 1,500 people.
As the hon. Gentleman knows, I am particularly interested in Scotland. I have spent some time there speaking to industrialists, trade unionists and others, and I am returning at the beginning of next month, when I shall be having further talks with the Council of British Manufacturers of Petroleum Equipment. I shall also be meeting the Scottish TUC and a wide range of representatives of industrial concerns in Glasgow. The hon. Gentleman may be pleased to know 910 that I am taking Mr. Gibson, the new head of the offshore supplies office, with me, although he does not take up his appointment for a number of weeks yet.
The hon. Gentleman asked how many civil servants would be employed in the offshore supplies office. At the start, we reckon that it will have a staff of about 30, with eight situated in the Glasgow office. The hon. Gentleman asked what the IMEG proposals will cost. The amount of Government help needed must depend on how many projects arise which merit assistance over and above the considerable financial incentives to investment already available from Government sources.
The offshore supplies office will play a positive rôle—it will not just wait to receive such projects—and may act as a link between financial institutions and companies. Where necessary, I can say definitively, the Government will use their powers under the Industry Act or the Science and Technology Act to provide additional help. It is impossible at this stage to quantify the sum needed. Obviously, much will depend on industry's response to the challenge of the offshore market, but I have no doubt that the necessary funds will be made available.
The hon. Gentleman asked me about the British offshore drilling capability. This is essential if we are to secure the share of the exploration market which IMEG suggests. One British company has already shown interest in a partnership with an experienced overseas drilling company, and a wholly British capability may be feasible in the long term when experience has been gained. But to believe that one can attain experience just by waving a magic wand is not the case.
I turn now to the question of the construction of drilling rigs and supply vessels. In common with other industries, shipbuilding, which is establishing new capabilities at its yards, knows that it may be eligible for assistance under the Industry Act when dealing with oil rigs. But in spite of the lack of orders for ships in some of the yards, shipbuilders have not yet shown much enthusiasm for diversifying into rig construction, although, of course, Marathon has obtained orders for rigs already. I think the construction grants and credit 911 facilities should put British shipyards in SPEAKER adjourned the House without a strong position——