Offshore Oil and Gas

HC Deb 22 July 1974 vol 877 cc1015-9

1. Mr. Pardoe

asked the Secretary of State for Energy what is the projected rate of return on capital for each of the oil and gas fields that are currently being considered for development, and those already being exploited, around the United Kingdom.

The Secretary of State for Energy (Mr. Eric G. Varley)

The purpose of the measures I announced on 11th July was to secure a fairer share of profits for the nation while leaving the oil companies a suitable return on their capital investment. But it is not possible to estimate with any certainty the detailed figures requested by the hon. Member.

Mr. Pardoe

I thank the right hon. Gentleman for that reply. Is his Department doing any work to try to ascertain the answer to the question which the right hon. Gentleman does not appear to have? Does the Minister accept that, even under his current proposals, the rate of return may be as high as 65 per cent? Does the right hon. Gentleman not agree that, far from nationalisation being the answer, the real solution lies in having a tax structure tailored to each field which will allow no more than 25 per cent. profit?

Mr. Varley

We are entering into discussions with the oil companies, and it is not possible or wise at this stage to lay down what we regard as a reasonable rate of return. It will vary substantially according to the price of oil and the value of the field, but the profit could be as much as 60 per cent. to 70 per cent. if nothing were done.

Mr. Patrick McNair-Wilson

Does the right hon. Gentleman realise that, regardless of the rate of return, a dangerous myth is being circulated that North Sea oil will solve Britain's economic problems? That is not likely to be the case. It will not be cheap oil, and it will not save Britain from taking the really hard decisions that will have to be taken if our economy is to survive.

Mr. Varley

It is true that North Sea oil will not be an answer to all the problems of Britain, but it will be a valuable asset. In terms of trade and balance of payments, the return from the oil will be enormous. It depends how we use this opportunity.

4. Mr. Alexander Fletcher

asked the Secretary of State for Energy what are the reasons for the current slippage in exploration and production targets in the North and Celtic Seas.

The Under-Secretary of State for Energy (Mr. Gavin Strang)

I am unaware of any slippage from exploration targets. On production, I would refer the hon. Member to the reply I gave to the hon. Member for South Angus (Mr. Bruce-Gardyne) on 5th July.

Mr. Fletcher

In view of that statement, will the Under-Secretary state what is the relevance of the Government's participating in the oil business? I take it from what he says that he is quite satisfied with the way in which the oil companies have carried out jobs in the North Sea and Celtic Sea. What reason have the Government to interfere in exploration as well as development?

Mr. Strang

My right hon. Friend spelt out clearly the objectives of our North Sea policy. I ask the hon. Gentleman to discriminate between the mechanics of getting the oil out and the State's responsibility to secure an adequate share of profits and control of this basic national resource.

Mr. Sproat

Will the Under-Secretary accept that future slippage may be caused by a lack of housing in the North and North-East of Scotland? Is the Under-Secretary aware that a report out last week by the Joint Regional Planning Advisory Committee and Aberdeen University said that unless there is more drive behind housing projects in the area, many oil-related expansion plans would have to be postponed or cancelled?

Mr. Strang

I agree that there is an urgent need to increase house building in the Aberdeen area. This is a matter for my right hon. Friend the Secretary of State for Scotland, who is giving it high priority.

7. Mr. William Hamilton

asked the Secretary of State for Energy if he is yet ready to make a full statement on the Government's policy on North Sea oil.

9. Mr. Ioan Evans

asked the Secretary of State for Energy what proposals the Government will make to bring the North Sea and Celtic Sea oil and gas interests into public ownership.

32. Mr. Wrigglesworth

asked the Secretary of State for Energy if he is yet ready to make a full statement on the Government's policy on North Sea oil as it relates to the North of England.

Mr. Varley

I would refer my hon. Friends to the statement I made in the House on 11th July. I reiterate the Government's intention of ensuring that the regions in need of development will receive particular benefit from the exploitation of our indigenous petroleum resources.

Mr. Hamilton

In view of the almost instant hostility to that statement in some parts of the House, notably on the Opposition benches, will my right hon. Friend say what the reaction has been in the country, and particularly in Scotland, since Scotland is most directly affected by these policies?

Mr. Varley

I believe that the statement has been widely welcomed, particularly in Scotland, where people realise that they will get a proper benefit and a proper share only by the policy that I have outlined.

Mr. Tom Boardman

Does the Secretary of State, if he takes a maximum controlling participation, intend to entrust the management of these large funds to the oil companies, or does he intend to assume for himself the ultimate responsibility for the management of these highly technological projects?

Mr. Varley

The British National Oil Corporation will co-operate with management in the existing oil companies. There will be understanding and the closest cooperation between the Gas Corporation and British Petroleum in this respect.

Mr. Evans

Does my right hon. Friend realise that although his statement was welcomed there is a body of opinion which feels that we should have gone further and which hopes that he will go further in future? Does he believe that the oil and gas finds off the coasts of Scotland, Wales and England should be developed for the people of Britain as a whole and not for selfish commercial interests or for the benefit of one section of Britain?

Mr. Varley

I agree with my hon. Friend. When oil comes ashore—as it will—from the Celtic Sea, comparable arrangements will be made in Wales to those that we are making in Scotland.

Mr. Grimond

As for participation, as outlined in the document, has the right hon. Gentleman made any estimate of the cost of this participation? For instance, on the assumption that 51 per cent. in future licences and 51 per cent. in past licences is taken by the Government, what is the total amount of capital that will have to be put in?

Mr. Varley

I cannot say at the moment because we are entering into discussions with the oil companies as soon as possible, but the Government's return on any investment will be enormously greater than the outlay a year or two after the start of production—as will the return for the oil companies.

Mr. Gordon Wilson

What proportion of the oil revenues from the Scottish sector of the North Sea will be used for the selective improvement of old-age pensions and other benefits in Scotland?

Mr. Varley

The hon. Member will recall that on 11th July I told him that we were not waiting until oil revenues started before setting up the Scottish Development Agency. That is what we are doing. Of course, the people of Scotland will benefit substantially over the years—they are already benefiting—from North Sea oil.

Mr. Wrigglesworth

I welcome my right hon. Friend's statement, but is he aware that many people in the North of England are deeply disturbed to find no specific proposals for the dispensing of oil revenues for regional development in the North of England? Will he now make an announcement that he is to establish a North of England development agency comparable to the Scottish and Welsh development agencies already announced?

Mr. Varley

We are determined that Scotland, Wales and the older industrial regions of Britain will benefit from offshore oil and gas.

Mr. Patrick Jenkin

Is the right hon. Gentleman aware that, far from his proposals being widely welcomed, he got a lousy Press for his statement the next day? On the question raised by the right hon. Member for Orkney and Shetland (Mr. Grimond), surely the point is the incremental value that the taxpayer will get from a massive investment, over and above anything that he gets from taxation. Will the Secretary of State now explain what real benefits could conceivably flow to the taxpayer which cannot be achieved by taxation and by strengthening the controls?

Mr. Varley

I am sorry that the right hon. Gentleman should be so sour. On any objective assessment of the Press and the other media, my proposals were widely welcomed. Even in his own party there is a great split about this. There is a letter in today's Daily Telegraph from the prospective Conservative candidate for Newham, North-East, in which he says: I would like to state my agreement in principle with Labour's proposal for a 51 per cent. shareholding by the State in North Sea oil. So the right hon. Gentleman is out of touch with his own party