Mr. Deputy SpeakerBefore I call the hon. Member for Edinburgh, North 1748 (Mr. Fletcher), may I indicate to him that on the subject he wishes to raise he will, I trust, avoid discussing the details of the Offshore Petroleum Development (Scotland) Bill. It will save a lot of trouble if he does.
§ 1.32 a.m.
§ Mr. Alexander Fletcher (Edinburgh, North)Thank you, Mr. Deputy Speaker.
There are a number of items in the Consolidated Fund which are of great importance, but I suggest that the item in the Supplementary Estimate which relates to the Department of Energy and to the £7 million for development of sites for offshore oil production platforms is of critical importance to the whole of the United Kingdom and to the United Kingdom economy. There are one or two questions about the estimate which I should like to raise.
I should like to know to some extent how the figure in the Supplementary Estimate has been arrived at. How many further sites are necessary, remembering that in August this year the Department of Energy estimated that about another five sites would probably be necessary to produce the capacity for the production of concrete platforms? I wonder whether the Minister could identify those five sites and tell us which areas will be affected by the decisions and calculations which form part of the estimate.
I should like to know how many platforms are considered necessary by the Department because, referring to the statement made last August, the estimate by the Department then was that between 55 and 80 plaforms would be necessary by 1980. That statement suggested that the final figure would be nearer the upper limit. That was based on a calculation that nine orders would be necessary for each year from 1976 to 1980, a further 45 platforms, in addition to those already built or being constructed at that time, about 20, so what was being talked about in August was about 65 platforms for the North Sea.
The Department estimated that a platform could produce about 5 million tons of oil annually. Therefore, with 65 platforms—I apologise for the arithmetic that I am giving the Minister, but I am sure that he is well aware of it—each producing, say, 5 million tons of oil, we 1749 are talking about production of 325 million tons of oil a year by the early 1980s.
Various factors must be brought into the calculation, not least the Government's Brown Book of 21st May this year, which referred to production by 1980 of between 100 million and 140 million tons of oil per annum. Looking at these figures, the Brown Book is referring to about half the capacity that the number of platforms referred to are capable of producing.
Can the Minister reconcile these figures with his Department's platform and production programmes? Can he reconcile these figures with his Department's depletion policy? Is the target still self-sufficiency? Or has the Government's ineptitude doubled the production target deliberately to pay for the excessive overseas borrowings being made against our North Sea assets?
It is not enough to allow gas finds and construction delays in attempting to reconcile these figures. The gap between the estimates of oil production and platform capacity requires further explanation on the basis of the figures that the Department presented earlier this year. This is necessary if we are to have confidence in the Government's estimates of the number of sites and platforms, the target for oil production, and the estimates presented to us today.
If the Department can identify the remaining five sites to which I have referred, how will they be acquired? Obviously not by the existing planning procedures, which have not been revised in any way by the Bill to which I have been told I should not refer. It is a national tragedy that during this year the Government have not brought forward proposals to amend the planning procedures generally.
If the Government have the courage to identify these new sites now, they could start a helpful and informal series of discussions with those who are likely to be affected by these planning applications and new sites and put at peace other areas which imagine or have reason to believe that developments may take place in their parts of the country. I believe that positive action is called for if confidence in planning arrangements is to be regained and time is to be saved in developing our North Sea resources.
1750 The Department of Energy is in a unique position in Government circles. It has the opportunity to be the only Department of State that may operate at a profit. It could pay its own way and perhaps in time win the Queen's Award to Industry.
There are several ways in which this might just be achieved. It is recognised that platforms built in the United Kingdom save on the balance of payments. The British-built platform is worth about £60 million in orders to British industry. A platform built abroad costs our balance of payments about £45 million. These pieces of equipment could have a tremendous effect on the balance of payments. So the importance of how this figure of £7 million was reached is far greater than might appear.
If the Department operates efficiently by giving the correct answers to some of my questions, it can save money by avoiding delays in the North Sea. Each installed platform represents a benefit annually to our balance of payments of £185 million. All this financial benefit can be won by the Department. It is time that it introduced a serious programme of energy conservation throughout the Departments of Government, in industry, by domestic users and even in the Palace of Westminster, where we maintain a temperature well above what most of us like to live in. I hope that the House will have an early opportunity to discuss conservation proposals by the Department.
The Government have indulged in a policy of huge overseas borrowing which has put a burden of interest charges on our economy for many years to come. They should consider forward selling of even the current operations in the North Sea to ease the burden. This point was raised in Tuesday's Scotsman.
These are some of the areas in which the Department's presence should be felt, not in nationalisation and trying to run the oil industry but in acting as a catalyst so that all North Sea operations and maximising of resources can be achieved at the right pace and in the right way, for the benefit of everyone in the country.
§ 1.43 a.m.
§ Mr. Iain Sproat (Aberdeen, South)My hon. Friend the Member for Edinburgh, North (Mr. Alexander Fletcher), suggested that the Department of Energy might be 1751 the only Government Department to show a profit. But it is much more likely to do that, or to be the cause of profit in others, if it gets rid of the concept of the British National Oil Corporation, which will cost £3,000 million at the start and then a continuing sum for absolutely no added control over the industry.
I feel more trepidation than usual tonight because of your warning, Mr. Deputy Speaker, that we may not mention the Offshore Petroleum Development (Scotland) Bill. I was not aware of this circumscription of my right to speak, and my speech will no doubt be considerably shorter as a result.
There is still a great reluctance in certain quarters—not by the Government— to relate that part of the gravity of our economic situation caused by world oil prices—the price has increased fivefold in just over a year and we shall this year have to pay £1,200 million more for 5 per cent. less oil—to the crisis measures that we must take to solve the problem. We are in an emergency and must be prepared to use emergency means. This is a time, as rarely in peace time, for making sure that we get our national priorities right.
Bluntly, our absolute priorites are not the preservation of bird life, of rare or unsual flora and fauna, or even of a few isolated spots of natural beauty or of an agreeable and antiquated way of life in certain specified areas. Such matters are important to Scotland and other parts of the United Kingdom. They are important in varying degree in different places. They are not, however, the most important matters. The most important matters are our absolute national priorities. The first is to ensure that we can extract as much oil as we want, as fast as possible, namely the equivalent of at least self-sufficiency by 1980. Secondly we must ensure maximum British participation in oil platform building and all the related activities.
There are those in Scotland, and I am not thinking of the Government, who say, or imply, that there is something sordid, disgracefully materialistic, or short-sighted about this elevation of the importance of oil and the priority development of sites for its exploitation. What such people must realise is that it is no use preserving the flora and 1752 fauna of our country if, by doing so, we help destroy the economic life of the country. It is no use preserving aspects of scenic beauty if, by doing so, we leave the country in financial ruins from which we may view such scenic beauty.
If we in the United Kingdom are to maintain our democratic values, the preservation of beautiful landscapes is a luxury, while the preservation of economic strength is a necessity. I am strongly in favour of the principle which the Government are maintaining through a number of Bills, with regard to construction sites in particular. I refer to the aim of maximising the speed and efficiency with which these sites are got under way.
While I am sure that this end is the right one, I am equally sure that the means which the Government sometimes employ to achieve that end are wrong. There was a powerful piece by Professor Bradley on this in the Scotsman of 23rd November which put it very well. No doubt these matters will be amended in Committee. I believe that certain emergency measures for the acquisition of land with regard to construction sites should be exercised. I would be much happier about the exercise of such powers if we could get from the Government, as I believe we must, unbreakable assurances regarding the restoration of land as soon as may be after the oil platform construction rôle is finished.
When the Minister of State, Scottish Office, introduced the Offshore Petroleum Development (Scotland) Bill he said that the Bill
ensures the ultimate restoration or adaptation of the sites."—[OFFICIAL REPORT, 19th November 1974; Vol. 881, c. 1110.]If the Minister had stopped at the word "restoration" I would have been reasonably, though not wholly, assured. By adding the words "or adaptation" he gave the sentence an interpretation so wide as to make it meaningless. The addition of those words could be taken to give the Government powers, without reference to the original landowner, and without any connection with the purposes for which the land was acquired from the original owner, to adapt the use of the land, once its construction site role was ended, to almost anything else the Government happened to think of.1753 It is right in principle that the Government should acquire, through legislation, power to acquire land at accelerated speed — and with some considerable diminution of normal rights—for a definite and relatively brief period of platform construction because of the vital relationship between oil extraction and our economic life. But the Government would be wrong to use the same methods to acquire and then keep land, private or public, for purposes unrelated to oil sites. The power given to the Government under the Offshore Petroleum Development (Scotland) Bill is not suitable for and should not be instrumental——
Mr. Deputy SpeakerOrder. The hour is late and I hope that the hon. Gentleman will not go into the terms of the Bill. If he does I shall be jumping up and down, and I would rather sit down just now.
§ Mr. SproatI apologise, Mr. Deputy Speaker. I will leave the point. No doubt it can be dealt with in Committee. Perhaps the Minister can tell me, or find out for me, whether it is true that the Government did not consult the Scottish Trawlers Federation at any time in any way when they were preparing the Bill dealing with the construction of sites. If so, it is an astonishing and shocking admission considering that it affects the very element, the sea, in large part, from which our fishermen draw their living, which must inevitably be affected in many ways. Is that the case? If it is, I will undertake at least to let the Secretary of State for Scotland have the views of the federation, and my own as well.
I turn to the question of the defence of the oil construction sites and rigs. Yesterday, in his defence review, the Defence Secretary excluded any mention of how he would deal with a threat to North Sea oil construction sites and installations, either on land or at sea. He said that the review did not take it into consideration. This is indicative of the reluctance of the Ministry of Defence to realise the importance of these structures and the part they can play in meeting our desperate need for offshore oil.
In the last debate, an hon. Member said that the three most important things for the country at present were manufacturing exports, invisible exports and North Sea oil. Yet the defence review did not consider the cost and 1754 method of defending our North Sea oil rigs. It is extraordinary. Each rig is worth about £60 million, quite apart from the immeasurable amount of oil it can discover and extract. Our North Sea installations and sites are perhaps the biggest single additional military burden we shall have, apart from Northern Ireland.
§ The Under-Secretary of State for Energy (Mr. John Smith)The subject of this debate is the development of construction sites for offshore oil. Is the hon. Gentleman suggesting that we should have a special defence programme for the construction sites?
§ Mr. SproatThe Defence Secretary said that the onshore sites were more vulnerable than the sites at sea. If the hon. Gentleman does not agree, he should argue it out with the Defence Secretary. But protection for the sites was not provided for in the defence review. Either the Defence Secretary will have to protect the North Sea oil sites with his reduced forces, or, on reconsideration, he will have to increase the military budget.
§ 1.49 a.m.
§ Mr. Gordon Wilson (Dundee, East)At this hour and in the presence of this audience of hon. Members, must of whom are from Scottish constituencies, it is an almost incestuous discussion, and I propose to restrict myself to the question of development costs and the effect this may have on Government policy in relation to construction sites and the number of rigs which may be required. I shall be very brief at that.
It is clear that each platform which may be constructed for oil purposes will have a value of between £50 million and £70 million—a very substantial contract. It is clear also that there is a degree of interest among certain companies in obtaining sites for their own commercial purposes. Without going into the subject of other legislation now before the House, it is possible, as the hon. Member for Edinburgh, North (Mr. Fletcher) did, to query the estimate of £7 million contained in the current Estimates in this Bill.
It is said there that £7 million is reserved for development costs, and I should like to hear from the Minister what sort of development costs are anticipated in that estimate. It is clear to me 1755 that, at any rate in commercial terms, any company that has the chance of obtaining a profit of £50 million to £70 million should be expected to meet the cost of the development of that site. It is part of the Government's policy that the costs of reinstatement, and so on, should be met by such commercial companies, but there is no reference in the estimate to reinstatement and therefore we come back to the initial question of development.
If it is the case that £7 million is required for development costs, one wonders whether that is worth while. There is a market for construction platforms, and this is probably one of those cases in which the Government should keep their money out and let industry meet the costs and set them against the profits that they may reasonably be expected to make on the deal.
As the hon. Member for Edinburgh, North said, and as I said in an earlier debate, it is possible that there could be under construction sufficient platforms to meet the United Kingdom's estimated self-sufficiency of about 110 million tons. The Government have said that they are interested in the conservation of oil resources. If there is an intention to proceed with the construction of other platforms, that may suggest that the Department of Energy intends to increase oil production to more than 110 million tons per year, perhaps up to 150 million tons, or perhaps even up to the astronomical figure referred to by the hon. Member for Edinburgh, North.
This question was raised in an earlier debate but was not dealt with by the Minister. The information that was relied upon in that debate came from the Department of Energy. I refer the Minister to the answer that he gave on 18th November 1974 which indicated the platforms under construction and set against each of them the expected oil production. According to my calculation, there was a certainty of 88 million tons, with the prospect of another 24 million tons. If that is the case, and if self-sufficiency is to be met, it may be argued that the less the Government spend of their estimates the better.
That raises the secondary question of the value of exports to United Kingdom 1756 or Scottish industry. Although it is said that there should be great value to industry from these large contracts for construction platforms, there is expert evidence to suggest that we may be moving in the next 10 years to sub-sea completion plant systems. One need refer only to the recent report from the Select Committee on Science and Technology on offshore engineering, where attention is drawn specifically to the need for greater attention to be paid to that new form of engineering that is much more capable of adding to the exporting level.
There is a limit to the ability to produce large platforms for export because of the practical difficulties involved, but I concede that by producing construction platforms one gets involved in producing a large amount of other and smaller equipment for export to countries in which platforms are to be constructed. Therefore, my suggestion is that if Government money is to be provided at this stage as an incentive to industry, related to energy, perhaps some part of the £7 million would be better directed to research into sub-sea systems and matters connected therewith.
I shall be glad to hear the Under-Secretary's reply to the questions which have been raised in this debate.
§ 2.0 a.m.
§ The Under-Secretary of State for Energy (Mr. John Smith)We have had a short but interesting debate which has ranged much wider, Mr. Deputy Speaker, despite your strictures, than the short title of the Bill.
In noting the ingenuity of the hon. Member for Edinburgh, North (Mr. Fletcher)—to whom my remarks were intended to be a compliment, although his own Front Bench apparently did not so regard them—in managing to introduce energy conservation into his speech, I reflected that these very proceedings, in fuel terms and human terms, are the very opposite of energy conservation. He managed to raise a number of interesting points and I will deal with them and give him answers.
On the question of the £7 million, which is the justification for this short debate, the figure takes account of the likely expenditure during the current financial year on the development of 1757 sites to ensure that contractors to whom sites are allotted are prepared for the 1977 float-out.
May I say to the hon. Member for Dundee, East (Mr. Wilson) that it is not the Government's intention that there should be any form of subsidy to the contractors who will be using the sites for the production of platforms, but that in order to catch the development in time for the very severe restrictions in terms of weather it was thought prudent that the Government should be in a position to advance money so that sites can be developed in advance of orders.
This is a matter which we can discuss more fully in Committee on the Offshore Petroleum Development (Scotland) Bill. I should have thought it was common sense for the Government to make sure that sites are available in time for production to start, so that we catch the 1977 float-out, the 1978 float-out and the rest. The policy will be that the expenditure which the Government make will be recouped from the companies in the course of the development of the sites. I hope that will reassure the hon. Gentleman, who is rightly vigilant about the expenditure of public money.
On the other point raised by the hon. Member for Edinburgh, North, about the arithmetic of multiplying the number of platforms by the projected possible production from each platform, I think he will appreciate the difficulty of taking such a simplistic view. It assumes that all platforms are producing at full blast all the time. It takes some time for a platform to come into full production, and these platforms have a limited life, given the very severe conditions existing in the North Sea. Therefore, it is a case of keeping up the supply. It is not possible to take the total required in the foreseeable future and multiply the number of platforms by the projected production and arrive at a meaningful figure. It raises, however, the important question whether we have a sufficient number of sites.
The other criticism which is voiced from time to time by the hon. Member for Dundee, East is whether we have too many sites. The Government were under criticism for some time that they were not doing enough to make sure that sites were available for concrete platform 1758 production. We are now criticised for the possibility that there may be too many sites. If we are being criticised on the one hand for too few sites, and on the other hand for too many, it is possible that we have got the number just about right. Our policy is a flexible one. It will ensure that we have the sites available to meet current demands, and it is no use hon. Members sniggering at that, because that is what the Government should be doing. It is a changing pattern and we should have a flexible response to it. That is the only common sense policy any Government could have.
The hon. Member for Edinburgh, North was right to stress the importance of the statement of 12th August. Before that statement there was a problem in that there seemed to be a plethora of designs for platforms. There also seemed to be a plethora of planning applications. There was a rash of planning applications for the west coast of Scotland, a large number of which were quitely rightly refused. However, the Government determined what was necessary to bring more cohesion and reason to the situation and therefore on 12th August they identified, with the help of independent consultants, those designs for platforms which were likely to be commercially successful. The criterion in this context was whether they were likely to win orders from oil companies, and that was a realistic test.
Government policy since then has been to try to match successful designs to sites. The object of our policy is to make sure that we get the maximum number of platforms from the minimum number of sites because we have to be alive to the danger of environmental damage. I think that the hon. Member for Aberdeen, South (Mr. Sproat) was too insensitive to the damage which might be caused to the Scottish environment by allowing too many sites to be developed. I think the issue is much more complex than he suggested. That was one of the reasons the Government were determined to make sure that the full rights of communities under existing planning procedures would be respected and would not be interfered with by the programme of public ownership of sites.
Other matters that the hon. Member raised have a great deal to do with the 1759 Bill which we shall be discussing next week and I must keep in order and not discuss them at any length.
§ Mr. SmithI am sure that you would, Mr. Deputy Speaker. I would be frightened to incur your wrath.
Perhaps I may deal with progress, since the statement of 12th August, in obtaining sites and matching them with designs. Since then a number of sites have been obtained. Howard/Doris has obtained planning permission for a site on Loch Kishorn and following that has received a letter of intent from the Burmah Oil Co. for a platform for the Ninian Field. That is a large and significant order which is of great importance. Following discussions with the Department of Energy, Mowlem has modified the Condeep design, which was the subject of a planning application for Drumbuie. With considerable modifications to that design it has submitted a planning application for a site at Campbeltown.
At the same time the Andoc consortium has submitted a planning application for Hunterston. Sea Platform Construction (Scotland) has submitted a planning application for a site at Portavadie for construction of a modified version of the Subtank platforms known as Seadeck. This is the subject of an existing planning application to be determined by my right hon. Friend the Secretary of State for Scotland.
I was asked to identify a number of sites, but the difficulty is that some of them are still subject to planning decisions to be taken by my right hon. Friend, who has sole control of planning permission. I cannot therefore give precise answers on that score. Considerable progress is being made in matching designs to sites and we feel we are roughly on target in obtaining sites for designs which will be successful.
The importance of the platform construction industry to the British and Scottish economies cannot be underestimated. Not only are these platforms significant orders— up to the value of £60 million each—but they offer a unique opportunity 1760 for the economic regeneration of the Scottish economy. They are important not only for the orders in themselves but for the spin-off for the manufacturing sector in the rest of the economy. It is vital that British companies obtain as many of the orders as possible.
If a British company obtains the order for a production platform it is much more likely that the associated works will go to British companies. There is, in particular, immense opportunity for industry in the works which will be used on the decks of the platforms. We hope that it will be one of the ways in which we can regenerate the economy of West Central Scotland. It was for that very reason that the Offshore Supplies Office of the Department of Energy was expanded and moved to Glasgow, so that it would have an influence in the area where the Government hope we shall have developments in concrete platform production.
I cannot give the hon. Member for Dundee, East a reply to the report of the Select Committee, because it is a convention of Parliament that the Government give a considered reply in the form of a White Paper. The Select Committee would take grave umbrage if I started to answer its points piecemeal in a debate of this kind. But the hon. Gentleman can be assured that the Government are carefully studying the report and will issue a comprehensive White Paper dealing with its points. They welcome the work which the Select Committee has done on this important topic.
I have said enough to indicate that the Government are well aware of the importance of the construction of concrete platform sites. They have taken action in the fairly short period in which they have been in power. They have intervened to identify designs, something which had not happened before. They have put before Parliament a Bill to enable them to take powers to speed up development. The Government are fully aware of its vital economic importance for the future of this country.
We have had a short debate, but I do not think that we could have had a debate about a much more important topic, and I am grateful to the hon. Member for Edinburgh, North for giving us the opportunity.