SHELL ITALIANA (Hansard, 1 February 1974)

§ Mr. Robert Edwards (Bilston)

The internationalisation and international distribution of production which characterises the multinational companies today is an old story in the oil industry. For half a century seven great oil companies have blanketed the Western world and have used their global investments without any public accountability. The purpose 841 of this Adjournment debate is to try to establish that great companies operating in the oil industry throughout the world must become more accountable to Governments and to their employees.

Seven great oil companies control the oil production and distribution of the Western world. They are called the seven sisters, but I call them the seven greedy sisters, and I regard these great oil companies as one of the main contributory causes of inflation.

We heard from a speech in Paris this week that British Petroleum Products is likely to increase its profits for 1973 by 350 per cent., Gulf Oil by 86 per cent. and Royal Dutch Shell—the company I hope to discuss today—by 36 per cent. The profits of these oil companies are so great that they are certainly a basic cause of the inflation that is sweeping the Western world.

Dutch Shell is the second largest company that exists in the Western world outside America. Sixty per cent. of its capital is controlled by Dutch citizens but 40 per cent. is controlled by Britain. Some weeks ago Royal Dutch Shell decided to sell a capital investment in Italy valued at £300 million which include three great oil refineries and 5,000 garages. The company employs 3,000 workers there, not including those who work in the garages. One thousand Italian workers went on strike because they had never been consulted and all the office staff in Genoa, including British citizens, left the office for two and a half hours to attend a meeting, at which they were informed that the sale of Shell Italiana was only a rumour and was not likely to take place. That is the usual practice of companies which are transferring their investments. They first deny that the transfer is likely to take place and then it becomes a practical reality.

This sale of a British capital investment should not have been undertaken without consultation with the employees concerned, and particularly without proper consultation with the Government. I doubt whether the shareholders of Shell were consulted. This was an arbitrary decision arising out of the fact that the Italian Government had a tough control over oil and petrol prices, and this was one method of destroying that attempt to halt inflation in Italy arising 842 from control of oil prices. If that is a correct analysis, it is a dangerous tendency which should be thoroughly investigated.

Here in London in the offices of British Petroleum the international oil cartel has been meeting, and I have not the slightest doubt that the sale of these investments in Italy has been thoroughly discussed. Members of that cartel do not act in isolation; they operate a global policy based on international cartel agreements. I believe that this tendency should be subject to close governmental inquiry.

Royal Dutch Shell has up to recent months had control of 43 oilfields scattered throughout the world and still controls 400,000 miles of oil pipelines. That company has received exceptional facilities from successive British Governments. It is not just a private company but is part of the whole economic structure of the Western world. Any basic change in its policy of global investments is important to us all, because many pension funds are invested in Shell and shareholders are entitled to know of any basic change in its policy.

It will be argued that there is no reason why a private company should maintain investments in a country that is not profitable. I understand that the company lost £6 million last year in its operations in Italy. But those of us who understand the operations of multinational companies know that they can make a loss in any country they want by transferring costs. They can send their equipment and raw products to subsidiaries in any country of the world, based on inflated prices, and thereby can easily show a loss wherever they want one. This is how they handle their balance sheets and it is common knowledge that this has been done repeatedly when they want to interfere in the policies of various Governments.

The interesting feature of the sale of these British assets in Italy is that £80 million has been paid by the National Hydrocarbon Company of Italy, or ENI, but the value of the assets is £300 million. I understand that the rest of the money is to be raised here in London. Therefore, we have reached the position where British money is being used to buy out British assets in another country.

The head of the Italian ENI is at present in Saudi Arabia negotiating for the 843 building in that country of huge oil distilling plants. I understand that after that visit he is to visit Libya, where again he will negotiate for the setting up of oil distilling plants there. If that is the new policy of the oil companies of the Western world, it is time that we understood what it was all about. Here is a threat to the whole oil distilling industry of Europe and of the Western world.

I have noticed all kinds of indications that these great oil companies are moving their capital investments and production into countries where there are no trade unions, where unions are illegal and where they will not be troubled by anti-pollution legislation. They are moving their distilling plants to Portugal—there is a large installation in Mozambique—to Spain, Singapore, Latin America and, now, to some areas in the Middle East to strengthen the control of the world's energy resources in the hands of unrepresentative sheikhs.

I have an interest in this matter which I suppose I must declare, though it is not a vested interest. I am chairman of the chemical division of a great trade union international—the International Federation of Chemical and General Workers' Unions—to which the unions catering for oil workers in 29 countries are affiliated. It is not a vested interest because I am not paid for the job, but it is an interest which I now declare.

I am informed by the unions affiliated to this international, which has 55 million members throughout the world, that this development of moving products from their countries into the emergent countries is not just an isolated occurrence but a general tendency of the great oil companies which blanket the Western world. In my opinion this is a very serious development which is worthy of serious attention.

I wish to ask the Minister a number of questions. First, in view of the importance of this transfer of capital investment to an Italian company, were the Government consulted and, if so, what was their attitude?

Secondly, do the Government know of the meetings at the headquarters of the British Petroleum Company of the international oil cartel, and have they 844 been informed of some of these global decisions?

Thirdly, can the Minister say what right Royal Dutch Shell has to guarantee to this Italian company the supply of 14 million tons of crude oil a year?

We have an energy crisis, with a shortage of oil supplies and increased costs of oil affecting the living standard of our people at every level of our society. The high price of oil means higher costs for food, transport and manufactured goods. It creates inflation in every industry in the Western world. I understand that Governments have been compelled to take over what was previously the priority of the oil companies and negotiate direct with Middle Eastern States. If that is so, how can a private British company guarantee, as it has in this agreement, 14 million tons of oil every year to an Italian company?

Does not all this mean that the international oil companies are accountable to no one, and that they are States within States—even States within continents now—over which Governments have very little control?

I am pleased to have had this opportunity of raising my voice against what I consider to be a great international conspiracy which is developing against workers and technicians employed in the oil industries of the Western world. I urge that these great companies which make super-profits out of the needs of industry should be made more publicly accountable than they have been in the past.

§ The Minister for Energy (Mr. Patrick Jenkin)

I have listened to the hon. Member for Bilston (Mr. Robert Edwards) with a great deal of interest. I shall seek to deal with his arguments and questions so far as I am able, but I must make it clear that inevitably there are some limitations on how far I can go in answering his questions.

My Department has a good deal of information about the transaction to which the hon. Gentleman has drawn attention. It was given to us by Shell voluntarily and under no obligation but in accordance with the normal practice of the big companies to keep Governments informed of their activities. Some of the information which we have been 845 given is of a commercial nature, and I am sure that the hon. Gentleman will agree that it would be wrong of me to breach that confidence.

A more fundamental difficulty—I think this formed part of the burden of the hon. Member's criticism—is that my Department, the Department of Energy in the British Government, has only a limited interest in this transaction, the sale of certain Shell interests in Italy, and very few, indeed if any, powers. There is the question of exchange control consent, and I imagine that this is the peg upon which the hon. Gentleman has managed to get this debate within the rules of order. Of course, the Government have a rôle there, and I shall have something to say about that in a moment. It is a matter primarily for my colleagues in the Treasury; I have consulted them, and I am prepared to say a word or two about it.

Her Majesty's Government's interest does not go very much further than this. The Government have no shareholding in the Shell companies; nor is our shareholding in BP in any way affected by the transaction affecting Shell Italiana. I thought it right to make the position clear at the outset of my speech so that the House may be aware of the limited nature of the involvement of Her Majesty's Government in the matter.

The hon. Member has already raised this matter in the House. He asked my right hon. Friend the Secretary of State for Trade and Industry before Christmas about the sale, and he has today again mentioned a figure which he described as the value of the assets. I am given to understand that this figure is probably substantially higher than the true figure, although I must make it clear that the actual price paid for this transaction between Shell and ENI is a commercial matter; it has not been disclosed publicly and is confidential to the parties to the transaction.

In reply to a Question by the hon. Gentleman, which was tabled on 28th November, my right hon. and learned Friend the Minister for Trade and Consumer Affairs on 4th December told him that he was aware that negotiations were in progress but that no final decision had been taken. I think I am now in a position to give the House rather more information than that, and it may 846 be helpful if I briefly sketch in the circumstances of the sale.

Shell has been operating in Italy for over 60 years, and in recent years it has had about 20 per cent. of the Italian market. However, over the last few years the market, for reasons which the hon. Gentleman has outlined, has not proved as attractive to it as it had earlier hoped. It therefore followed an earlier decision of British Petroleum which had done the same thing and decided to sell its Italian interests to a subsidiary of the Monti group; and Shell, too, decided to sell out, in that case to ENI. It has made it clear in public statements that had it not taken this action it would have had to inject substantial additional capital into Shell Italiana in order to meet the losses of recent years and to maintain the efficiency of its operations. In view of its heavy commitments elsewhere, particularly in exploration and development in other parts of the world, not least in our continental shelf, where it is particularly active, it decided that it was not within the interests of the company to increase its investment in Italy. However, the company is maintaining an important presence in Italy.

The sale does not include the group's petro-chemical interests, nor does it cover its exploration and production activities on the Italian continental shelf. Indeed, the group has laid considerable stress on its continuing desire to maintain an active presence in Italy.

The hon. Member drew attention to the fact that, under the arrangement with ENI, the Shell Company will continue to supply the Italian market with considerable quantities of crude oil for a number of years. There have been reports in the Press of rather higher figures than the hon. Gentleman mentioned. The Press mentioned that some 30 million tons would be supplied between now and 1978. The suggestion has been made that this might affect the availability of group oil elsewhere in the Shell group, including its sales to the United Kingdom.

I am in a position to assure the House that there will be no additional drain on group resources. The company informs us that, although final details remain to be settled with ENI, it will not be supplying in excess of the quantities previously imported by Shell 847 Italiana, and that after two years the quantities to be supplied in Italy will decline significantly. I can confirm, however, that the quantities which have been quoted in the Press are of the right order of magnitude.

As regards the cost of the deal, I am informed that a figure has been agreed between the companies but cannot now be disclosed since it remains conditional on future performance and will be subject to possible adjustment at a later date. Therefore, although I have already indicated that the figure mentioned by the hon. Gentleman is very much on the high side, I cannot otherwise comment on the accuracy of what he said.

The interest of this country is that we have here the headquarters of the Royal Dutch Shell Group. For this reason we have a clear involvement in the financial transactions of the company both as they affect the economy of the country and as they affect our balance of payments and the movement of funds.

That brings me to the question of exchange control. The hon. Gentleman gave the impression that these international companies operate, as it were, outwith the control of Governments altogether. I assure him that that is not the case. Wherever they operate, they do so within the framework of the legislation which applies in those territories. In this country we have a number of areas of legislation with which any international oil company has to comply, and exchange control is one of them.

Since 1946 the Royal Dutch Group has been allowed United Kingdom resident status for exchange control purposes, in spite of the fact that it is 60 per cent. under Dutch ownership. In return, the group undertakes to remit its earnings to London and to keep its central funds in sterling. I am sure the hon. Gentleman recognises that that can be of considerable benefit to the United Kingdom balance of payments and to our economy. There is a satisfactory working agreement between the Treasury and the group which allows for operational flexibility without undue formality. But, as with all transactions with citizens and companies, the actual details of the agreement must remain confidential.

Under normal exchange control regulations, when a United Kingdom company 848 disposes of foreign currency assets it must seek the permission of the Bank of England. But that does not apply to the sale of assets, and here the only obligation is to repatriate the proceeds. Therefore, even without the 1946 agreement with the Treasury, Shell might not have had to seek permission for the sale of Shell Italiana.

Under the agreement, however, the Bank of England has established guidelines in order to simplify the exchange control procedure for a company which, after all, is one of our biggest earners of foreign currency. Under this agreement, the bank was informed of the proposed sale, and, although there is no obligation on the company in this regard, it gave my Department informal information about the transaction. I hope that that answers the hon. Gentleman's question on the matter of information.

I assure the hon. Gentleman that the Government and the country have no reason to complain of the conduct of Shell in this transaction. The agreement which it has made is one for its commercial judgment as it affects its operations in Italy, and, clearly, it must be a matter for the Italian Government to satisfy themselves that this transaction is in the interests of the Italian economy.

The hon. Gentleman referred throughout his speech to the general question of these great multinational corporations, and obviously the big oil companies come within that description. A great deal has been written and spoken in recent years, not all of it perhaps as well informed as it might be, about the activities of these companies. My impression is that the great majority of large companies today go to very considerable lengths to conform with the wishes and policies of the host countries within whose territories they operate. Indeed, the tendency is increasing for the individual companies in these big international groups to regard themselves more as national companies operating within each individual territory than as part of a single world-wide operation.

So far as Shell is concerned in this country, particularly with reference to the recent problems over the supply of oil, we have established a satisfactory working relationship with it and other companies through the Oil Industry Emergency Committee, whose Chairman 849 is Mr. Greenborough of Shell-Mex and BP.

The hon. Member mentioned particularly the implications of the sale of Shell Italiana for the availability of crude oil in the United Kingdom. There is no need for concern. There is no reason why the agreement with ENI should reduce the supplies which Shell will bring into this country.

I can understand the hon. Member's legitimate concern about the employees of Shell in Italy by reason of the distinguished post that he holds in the international trade union to which he has referred. Of course there was concern, as there is in many cases, about possible redundancies as a result of this transaction. I can offer him some reassurance. In the joint communiqué issued by Shell and ENI on 28th December, it was made clear that the agreement would protect the interests of the employees of Shell Italiana. This accords with the growing practice—it is one which Her Majesty's Government are keen to see in this country—that transactions like this should always be accompanied by the fullest possible consideration and, where possible, advance consultation with the employees' interests.

I hope that I have tried, within the limits of my responsibilities as Minister for Energy and of a short debate, to answer most of the hon. Member's questions. I thank him for his courtesy and for the obvious expertise with which he 850 spoke. I hope that any of his apprehensions about this transaction and some of his general fears about lack of accountability of these international companies have been allayed.

Governments in all developed and developing countries recognise the great advantage which many of these great corporations, because of the resources they deploy and the skills and technologies that they can place at the disposal of the peoples concerned, can bring to countries. There was a time when the word "exploitation" was probably rightly used. I doubt whether, apart from some individual cases which the Press is quick to expose, it would be correct now. Today we talk about partnership between the companies and the countries for the benefit of the peoples and of the companies themselves. This is the right way to set about it.

So far as there are problems because of the international ramifications and the scale of operations of these companies, I am sure that it is through international institutions——