§ 1. Mr. Stonehouse
asked the Secretary of State for Energy what is his latest estimate of the total United Kingdom investment currently being undertaken in the exploitation of oil in the North Sea; and what is the anticipated rate of return on this investment assuming the present international price of oil.
§ 10. Mr. Arnold
asked the Secretary of State for Energy what is his most recent estimate of the full development cost of North Sea oil.
§ The Minister of State, Department of Energy (Mr. John Smith)
It is not possible to give a reliable estimate of the full development cost for North Sea oil. That will depend upon a variety of unknown factors, including the number and magnitude of new commercial developments and of future finds. The United Kingdom's offshore oilfields vary a good deal and the rates of return on investment in those now under development also vary. There is no average or typical figure that would not be misleading.
§ Mr. Stonehouse
In view of the escalation in the cost of developing the North Sea and the present slippage in the international price of oil, with the price of Iranian oil to be reduced by 9.5 cents per barrel, is my hon. Friend satisfied that investment in marginal oilfields will be viable? Will the Minister give an undertaking that the British consumer will not have to pay a protected higher price in order to justify that investment?
§ Mr. Smith
Cost escalation is a serious matter. The Department of Energy has put in hand a study of North Sea energy cost escalation and we expect to report the findings to the House shortly. We are concerned about marginal fields. It is in the national interest that they be developed. That is why safeguard provisions were put in the Oil Taxation Act, and some in the Petroleum and Submarine Pipe-lines Act, which can be used to assist marginal fields. The development of our oil resources will be important to the country and will guarantee the security of a supply of oil which we expect to sell at a proper market price.
§ Mr. Teddy Taylor
Is the hon. Gentleman aware that the decision by the Iranians indicates a further step in the slide of oil prices, which shows that it is difficult to repeal the law of supply and demand? Is it not therefore all the more important that we get a minimum price guarantee in the Common Market as the Prime Minister has said that we have such an agreement? What is holding up that agreement?
§ Mr. Smith
The hon. Gentleman must be aware that the Government have supported the concept of a minimum selling price. That matter is under discussion both in the context of an international energy agreement and within the EEC. It is impossible to predict the future of oil prices and it behoves everyone to treat the matter with caution.
§ Mr. Arnold
In view of that reply, what account is being taken of such estimates as are available in preparing advice by the Department of Energy to the Foreign Secretary in seeking to formulate our attitude towards the EEC energy policy?
§ Mr. Smith
There is constant consultation between my right hon. Friend the Secretary of State for Energy and my right hon. Friend the Secretary of State for Foreign and Commonwealth Affairs. Both Departments have worked very closely for the representation of British interests in the EEC, the IEA and other international bodies.
§ Mr. Buchan
I return to the subject of United Kingdom investment in oil. Has my hon. Friend noticed that the Scottish National Party has said that, in the unlikely event of its being in a position to 913 fulfil its promise to grant autonomy to Shetland, it will use international law to ensure that neither the bulk nor, indeed, any of the oil goes to the Shetland Isles? This view was put in the speech of the hon. Member for Clackmannan and East Stirlingshire (Mr. Reid).
§ Mr. Smith
I noticed that speech and I was surprised by the attitude of the Scottish National Party. One notices a general retreat by the Scottish National Party on the subject of oil, no doubt because the Shetland Isles have made it crystal clear that they wish to remain part of the United Kingdom and two-thirds of North Sea oil is located off the coast of Shetland.
§ Mr. Gordon Wilson
Far from my party retreating on the subject of oil, and bearing in mind that the World Bank forecasts an increase in the price of oil over the next decade, has the hon. Gentleman read the report by Alec Kemp of the Department of Political Economy at Aberdeen University, which was featured on BBC television last week, suggesting that a very high rate of return will be offered to oil companies in the existing oilfields at existing prices? Will the hon. Gentleman refer the whole question of the energy taxation structure to the Chancellor of the Exchequer for a full review?
§ Mr. Smith
I am aware of that article. There are many predictions, assumptions and forecasts about what will happen to oil prices and many views about what should be the level of taxation. The Government's attitude has been to strike a fair balance between achieving a good return to the nation and making North Sea oil operations in the private sector profitable and on-going. We believe that the situation that we have reached, in which we expect about 70 per cent. of the profits to return to the nation, reflects adequately our determination to get a fair return for the nation.
§ 3. Mr. Tim Renton
asked the Secretary of State for Energy how many meetings there have been involving the Department of Energy, the BNOC, and the oil companies to discuss BNOC's participation in the development of North Sea oil; and how many firm agreements have been concluded.
§ 24. Mr. Molloy
asked the Secretary of State for Energy if he will make a further statement on the progress of Her Majesty's Government's policy with regard to 51 per cent. participation in North Sea oil.
§ Mr. John Smith
Over 150 meetings have been held with representatives of the 36 companies currently developing the 14 commercial oilfields. Since their appointment the Chairman and members of BNOC have been kept in touch with the negotiations. The first detailed agreements should be signed in the next few weeks. Discussions with other companies are progressing satisfactorily.
§ Mr. Renton
Will the Minister of State now tell us the other side of the coin? How many major oil companies—following Exxon's lead—will take the Government at their word, that participation is voluntary, and will not volunteer? Will he further confirm to the House that the Government will not use the existence of either loans or guarantees to Burmah to force Burmah into selling any of its stake in the Thistle field?
§ Mr. Smith
I believe that the Government will be able to reach satisfactory agreements with the oil companies concerned in the participation negotiations. I have no reason to doubt that. As the hon. Gentleman will know, discussions are proceeding with Burmah to purchase all or part of the assets which Burmah holds in the North Sea. As discussions are continuing, I do not think that I should say anything further at this stage.
§ Mr. Skeet
Will the Minister indicate what will happen to those companies which are prepared to stand out against the Government on this issue? Will he recollect that this arrangement is voluntary and that there are existing contracts which he is seeking to negate? Will he indicate whether he will be returning to the House for a parliamentary process to nationalise the rights of those companies?
§ Mr. Smith
The Government are proceeding with voluntary negotiations with these companies and progress is such 915 that it leads us to think that we shall reach a satisfactory agreement with the companies concerned. I do not know why Opposition Members wish to encourage the companies not to co-operate, because it is in the interests of the companies and this country that they should co-operate.