§ The Secretary of State for Energy (Mr. Anthony Wedgwood Benn)
With permission, Mr. Speaker, I wish to make a statement about the fifth round of licences in the United Kingdom Continental Shelf.
The number of applications we received for licences in the fifth round shows how great an interest the world's oil companies are still taking in the United Kingdom Continental Shelf.
1443 In the several months of our appraisal of the applicants, that high level of interest was shown in a number of ways. First, each applicant company or group of companies impressed upon us the potential it saw in the blocks for which it had applied. Secondly, the offshore oil companies, through the United Kingdom Offshore Operators Association, have thrown themselves with vigour into the working out of a pro-forma agreement. This will be the basis of the relationship between British National Oil Corporation, which will have a 51 per cent. share in the fifth round licences, and its co-licensees.
Thirdly, good will on the part of the companies and the recognition of the justice of the Government's policy on State participation in fields under existing licences have enabled virtually all of the companies concerned in commercial fields to come to an understanding with us in this context. That factor, along with all the other published criteria for the appraisal of fifth round applications, has been taken into account in working out the allocation of the new licences, which is now complete.
I can accordingly now tell the House the outcome of my study of the licence applications which my Department received in October. As I told the House on 27th July and announced on 20th August 1976, I shall be making offers of licences subject to two conditions: the agreement between us and the potential licensees, including BNOC, of a compulsory exploration programme for the blocks to be licensed; and the conclusion by each group of co-licensees, with my approval, of an operating agreement based on the pro-forma text which I mentioned earlier.
The first of these conditions has been a regular feature of United Kingdom rounds of offshore licensing. The second is new, because it is needed to define in a way acceptable to the oil companies and to the Government the working relationship between the majority partner, BNOC, and the other licensees. Both of these are important matters: the first because it will spell out precisely the the blocks licensed; the second because it will determine the way in which the programmes of exploration drilling for 1444 nation's interests are taken into account in our future offshore oil programme.
The list of the applicants to whom these conditional offers are being made and the blocks or part-blocks offered to each will, with permission, be circulated in the Official Report. Each applicant is being asked to reply to the offer within two weeks. After that, there will be a period of some months during which the two agreements will be worked out for each successful applicant or applicant group. The actual awards of individual licences will take place as and when the individual negotiations are completed. If, as I expect, all the offers we now make are in practice taken up, we shall be issuing licences for 44 out of the 71 blocks and part-blocks which we listed in the invitation to apply. The take-up rate is close to the highest obtained in earlier rounds of United Kingdom offshore licensing, and about the same as in last year's United States offshore oil round. Two applicant groups applied for specified blocks and in addition offered to consider other blocks, yet to be specified, from within those offered in the fifth round. I shall be pursuing this offer further with them.
Hon. Members will see from the list that the major international oil companies are well represented. But there are also oil companies, both European and North American, which are among the independents. There are a few, but not many, companies which are new to United Kingdom offshore oil operations. The very severe demands which exploiting offshore oil makes upon the technical, managerial and financial resources of companies mean that particularly high standards have to be demonstrated in all these respects by anybody who is to be entrusted with the task of exploring for and developing British oil.
Among the operators for the blocks and part-blocks for which licences are being offered will be BNOC. By agreement in each case with its co-licensees, BNOC is to be the operator in four blocks. This will help BNOC to develop its existing capability as an operator, currently working in exploration and on the Thistle field, and hence continue to extend its ability to help maximise the benefits to the United Kingdom from exploitation of our oil and gas resources.
§ Mr. Tom King
Is the right hon. Gentleman aware that we welcome his further routine announcemen of another round of licences for the North Sea? We hope that success will attend those applications in the interests of the country as a whole.
However, we cannot extend congratulations to the Secretary of State on the delay in producing this much-heralded but much-delayed statement. Will he confirm that the delay will mean that the whole of this year will now be lost in developing these blocks? Furthermore, will he give an estimate as to the loss in potential employment in the offshore oil industry following the delay?
Does he not appreciate that we find somewhat nauseating the smug conceit in his claim that the companies recognise the justice of Government policy expressed in part of the statement—a claim which, from my personal experience, I have not found to be shared by one oil company?
Would the right hon. Gentleman confirm that to make a success of this round of applications a major change of Government policy took place in the middle of them involving the agreement that BNOC would pay the full commitment of its participation costs? In connection with that, and the recognition that BNOC is now a full risk partner in the exploration project, would he give the House an estimate of the cost involved? Would he tell the House whether he anticipates that that will take BNOC outside its financial limits under the Petroleum and Submarine Pipe-lines Act? Does that not underline the recent comment by Lord Kearton that when he told the Treasury the figures involved, the Treasury was aghast at the figures?
§ Mr. Benn
If this is a routine statement, I wish that we had heard it when the previous Government licensed North Sea oil. It has taken three years of hard effort to undo the damage done by the hon. Gentleman's Government in disposing of oil under the licensing round for which they were responsible without any guarantee that the United Kingdom would benefit, as it now will benefit from our policy.
I do not accept that there has been delay in this. The difference this time is that 51 per cent. of the holding of all the licences issued, which I have announced, 1446 will be a BNOC holding. With the petroleum revenue tax, which we introduced and not the previous Government; with the capacity to have a royalty from oil, which we introduced; with the Petroleum and Submarine Pipe-lines Act, which we introduced; and with the arrangements I have announced today, 85 per cent. of the revenue from the licensing will accrue to the United Kingdom. That is a substantial change in policy and I make no apology to the hon. Gentleman for taking a little time to make it possible.
§ Mr. Grimond
Has the Secretary of State made any estimate of the date when work will start? Has he made any estimate of the consequent demand which there may be for such things as drilling rigs and shore facilities during the exploratory period?
§ Mr. Benn
The drilling season begins in spring. It is our intention that the agreements I mentioned will be completed soon and that we shall catch the 1977 drilling season. This will bring potential work in terms of jobs and investment to the United Kingdom, and it will be much easier for the general British interest in these matters to be observed due to the rôle which the BNOC will have. I should be happy to pursue that matter in greater detail if the right hon. Gentleman would like me to do so.
§ Mr. Robert Hughes
Whilst congratulating my right hon. Friend on his statement, I must ask him whether the pro-forma agreement he has mentioned will give the Government full rights of access to information about reserves of oil and gas? Is there a fair competition clause for United Kingdom suppliers of equipment? Is there a fair access clause for the rights of trade union organisation on the rigs?
§ Mr. Benn
Some time ago we agreed a full and fair opportunity provision which will apply in the case of a new round. The Minister of State and I have been involved in discussions with oil companies and trade unions about trade union rights offshore. This was raised in Aberdeen when I visited my hon. Friend's constituency 18 months ago.
I have repeated many times in the House that there should be access to information, so that the United Kingdom Government are in a position to watch 1447 the development of these resources not only from an exploration point of view but in the general conduct of the trade and refinery business. This has taken some time and the House must recognise that it was not provided for under the previous round.
§ Mr. Skeet
Will the Secretary of State stop prevaricating and answer the question put by my hon. Friend the Member for Bridgwater (Mr. King)? What is the capital investment of the BNOC under the fifth round of licensing, bearing in mind that it is taking a 51 per cent. interest in all the licences? What are the conditions attached to the sale of oil under the operating agreements?
§ Mr. Benn
The hon. Gentleman must recognise that the amounts of capital involved in developing the North Sea depends on whether wells that are drilled are capable of development. The BNOC will be in exactly the same position in raising funds as will BP or any other oil company. That is the gain.
The participation arrangements have been published. We published the BP agreement and the Shell-Esso memorandum of understanding. These provide that the Government have access to information and have the appropriate influence in the development of oil company policy.
§ Mr. Speaker
Order. The hon. Gentleman has had his intervention in the debate. Every speaker is in favour of open government when he sees it.
§ Mr. Madden
Would the Secretary of State agree that the Government's policy 1448 on oil has done nothing to deter or lessen oil exploration activity, contrary to the howls so often heard from the Opposition Benches? Would he also agree that requests made from the Labour Benches for tax revenues to be increased over the present levels are underlined by the announcement he has made this afternoon? What proportion of licences has been awarded to British companies?
§ Mr. Bean
I agree that our policy has not deterred companies from continuing their development of the North Sea. The provision of the petroleum revenue tax, plus the royalty, plus the fact that BNOC will be a genuine 51 per cent. equity holder provides the 85 per cent. figure which I have given. [HoN. MEMBERS: "Genuine?"] It is genuine in the sense that it puts up 51 per cent. of the money—
§ Mr. Benn
—and gets 51 per cent. of the return.
I will answer the hon. Gentleman about the cost. If I could tell him how much oil there was in the blocks which I have licensed today I could, with the help of experts, give him sonic estimate. Since neither he nor I know how much oil there is in the blocks I have licensed, it is impossible to guess what the cost of development of the field would be.
Open government does not give me an insight, alas, into the resources of the the North Sea. I shall give my hon. Friend the Member for Sowerby (Mr. Madden) the percentages. They are quite complicated to work out.
§ Mr. Gordon Wilson
Is the Secretary of State aware that his reputation of being an English nationalist will be enhanced by his statement that 90 per cent. of the 85 per cent. return which he expects from the new blocks will go into the Treasury and into the hands of London? Is it not a gross betrayal of the interests of Scottish workers that in the statement there is no reference to the Memorandum of Understanding in relation to the purchase of goods? Will he say whether detailed discussions on the 1449 individual licences will incorporate, in the agreements, a clear understanding that purchases of equipment should be made from Scottish sources and that Scottish nationals and citizens should be hired wherever possible?
§ Mr. Benn
I answered that point in reply to a supplementary question. I am sorry if I did not put it in my initial statement, but it was rather a long statement. We have negotiated a full and fair opportunity provision which is part and parcel of our oil policy. If the hon. Gentleman is suggesting that I, as a Minister, should be steering work away from factories in England to Scotland—
§ Mr. Benn
—perhaps he would make that explicit. Candidly I do not think it right for United Kingdom Ministers to do things that would hinder the opportunities of, say, platform builders in the North-East to go to Scotland. I am under international obligations to provide full and fair opportunity and no more. The majority of the jobs have accrued in Scotland and I very much welcome that. I ask the hon. Gentleman to reflect whether the Scottish interest has not been better served by a determined United Kingdom oil policy pursued over a long period with the oil companies. I believe that to be the case.
I can now give my hon. Friend the Member for Sowerby the answer to his earlier question. The United Kingdom public sector share of the North Sea licences I have announced today amounts to 56 per cent. The private sector United Kingdom share totals 18 per cent., making the United Kingdom share of the licences I have announced 74 per cent. The rest are divided between others.
§ Mr. Canavan
In view of our grave unemployment problem, may I ask my hon. Friend whether he will demand that the applicant oil companies give specific commitments to provide jobs, especially in areas of high unemployment? Furthermore, is he aware that many of us, and probably most Scots, would rather have an English Socialist such as my right hon. Friend than a Scottish Fascist or a Scottish nationalist?
§ Mr. Benn
That latter requirement is, unfortunately, not provided in the licences I have awarded. I will consider it for the sixth round in case it would be helpful.
My hon. Friend is on a serious point about jobs. The Government of any oil-producing country—and this is certainly the case with the British Government—should be determined to see that resources are developed, not only so that the oil may be sold but so that those resources help contribute to the re-industrialisation of the country. That is why the revenues matter.
My right hon. Friend the Minister of State has played a most notable part in going round the oil companies continually pressing the claims of orders for United Kingdom yards and factories. Of course BNOC, as a 51 per cent. holder, will be in a much stronger position to see that these factors are not overlooked. The order that has gone to Marathon is an example of what might be achieved.
§ Mr. Tom King
Since Lord Kearton was able to give an estimate to the Treasury—which caused that sense of shock that has been expressed in the newspapers—why is the right hon. Gentleman unable to be equally frank and give us an estimate about the likely costs involved?
§ Mr. Benn
It was announced from the beginning that BNOC would pay 50 per cent. of the exploration costs. The change that occurred was in relation to development costs. That is where substantial expenditure may be incurred. The exploration costs are small relative to the development costs. The oil companies were pleased that the BNOC participation would be on a full equity basis. The returns from this will accrue to the Government in the form I have described.
§ Mr. Skinner
On a point of order, Mr. Speaker. You did say that you would call two hon. Members from either side.
§ Mr. Skinner
Has my right hon. Friend pursued the logic of his statement inasmuch as he refers to this current deal as being a "genuine" deal? Can we assume that the previous deals, which allowed BNOC the ability to purchase as distinct from the ability to own, were not genuine? If this is so, and if, after a year's delay, my right hon. Friend has been able to use his muscle to get a genuine deal, does it not follow that the sensible thing to do is to use that muscle—having got the latest round in his pocket—to ensure that we get a genuine deal with the past licences? Does he agree that in that way we shall get more Scottish and English jobs—and fewer American jobs?
§ Mr. Benn
The relationship between jobs and the role of the BNOC is not as direct as my hon. Friend makes it seem. What I said originally was that there was a genuine 51 per cent. equity holding. We inherited licences signed by the previous Government under which there was no guarantee that a drop of the oil found in the North Sea would be available to the United Kingdom.
§ Mr. Benn
There was no legislative régime, no petroleum revenue tax and no guarantee whatsoever—[Interruption.] The agitation on the Conservative Benches is meant to conceal the total failure of the Conservative Government to safeguard our position. To return to my hon. Friend's point, I had to go—it was all that was open to me—for a right to acquire 51 per cent. of the oil at market prices. When we did the fifth round we were in a position for the first time to implement our commitment that there should be a 51 per cent. ownership of the resources. To that extent it is a genuine 51 per cent. equity position. The rest is a matter of recovering what I could, on what basis I could, from the previous Government's policy.
§ Mr. Speaker
I am sorry. What I said was that I would call two more hon. Members from either side and I was caught out because I did not anticipate that an Opposition Front Bench spokesman would get in again. I try hard to work on the principle of never making a promise unless I can fulfil it. My promise was two on either side. I have kept it.
§ Mr. Speaker
I realise the hon.Gentleman's deep interest in this subject, as I recognise the interest of the hon. Member for Exeter (Mr. Hannam). I wish that I had been able to call other hon. Members, but I must be fair to others who are interested in later proceedings.
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