PARTICIPATION AGREEMENTS BILL

HC Deb 18 November 1977 vol 939 cc980-1018

Order for Second Reading read.

11.6 a.m.

The Minister of State, Department of Energy (Dr. J. Dickson Mahon)

I beg to move, That the Bill be now read a Second time.

This short Bill removes an element of doubt concerning the relationship between the restrictive trade practices legislation and the Government's policy of majority State participation in North Sea fields.

Before I explain the Bill's provisions, I shall set out the North Sea strategy which the Government have carried out since they assumed office. When the Government took office in 1974, a great deal of highly prospective territory on our Continental Shelf had been licensed to oil companies, and some major fields had been found. Since the issue of those licences three years earlier in 1971, the world oil scene had changed completely with the quintupling of the oil price and the assumption of greater control over oil production by OPEC countries. The Government believed that the British people wanted greater public control to be asserted over the development of our Continental Shelf resources. We moved towards this by the establishment of a new tax regime under the Oil Taxation Act 1975, and by the extension of the Government's regulatory powers under the Petroleum and Submarine Pipe-Lines Act 1975.

Moreover, this oil business was so important that we decided that there should be a public stake in these developments going beyond the limited involvement of the British Gas Corporation and the exploration subsidiary of the National Coal Board. We decided to set up the British National Oil Corporation to run that public stake in our Continental Shelf resources and so to give the nation a say in how they were disposed of. It was simple enough to provide that BNOC should be the majority partner in future licences, but we then had to decide how to get the public sector involved in the very major finds made under existing licences without breaching the contract formed by the licence and without up-setting then current development plans. We decided to try to achieve this through voluntary negotiations.

We adopted three principles to govern the negotiations. The first was that the companies should be left financially no better and no worse off as a result of participation. The second was that BNOC should have access to 51 per cent. of petroleum produced. The third was that BNOC should have an effective voice and vote in the operating committees managing the various fields. Companies were free to suggest their own ways whereby these objectives might be achieved.

As the House knows, participation agreements have now been agreed with 41 companies. Of these, 11 agreements, covering 17 companies, are in final form though some of them still require technical clearances. As agreements become effective, it is our intention to place in the Library an extended summary of their contents, as we did when we signed out participation agreements with British Petroleum.

Meanwhile, it might be helpful if I were to describe in broad terms what participation agreements do. Necessarily I must use broad terms, since the agreements that we have negotiated with individual companies and groups naturally reflect the preoccupations of our negotiating partners and are by no means always identical to one another not least because of the scope which companies had to suggest routes which met our objectives in a manner acceptable to them.

In each agreement, BNOC is accepted by the other parties as a licensee. Except where BNOC is already a licensee as an equity partner, this necessitates a formal assignment of the licence by the companies to themselves and BNOC jointly. As a participant in the field, BNOC then receives all the information about field operations relevant to its participation role and has the right to attend the meetings of the operating committees, including, where necessary, the committees running pipelines and terminal agreements. It also has a vote of its own on decisions taken in the operating committees, including, where necessary, the committees running pipeline and terminal agreements.

Naturally there are safeguards on the confidentiality of the information BNOC receives. The moment at which all these rights begin to take effect is a matter of negotiation in each agreement.

BNOC does not obtain sole control through the participation agreements, but it does have a meaningful vote the percentage amount being dependent on the voting rules within the relevant operating committees and the number and strength of the other licensees. BNOC is granted a right to take at its election up to 51 per cent. of each company's share of petroleum, including crude oil and natural gas liquids, produced under the licence.

A time period is fixed for the duration of each option election made by the BNOC, and a notice period is also fixed so that all parties have sufficient notice of BNOC's intention to take petroleum. Each agreement contains a formula for agreeing upon the market price to be paid by BNOC for its petroleum and detailed provisions about the terms and conditions of payment by BNOC.

Because BNOC is not an equity partner but pays the full market price for its petroleum, each agreement contains an indemnity from the companies to BNOC to ensure that BNOC is not liable for any of the costs of developing the field and keeping it in production. Agreements also deal with many other points, including, in some cases, such matters as the rights of the partners in case one of them defaults and what are called "sole risk" operations.

I mentioned earlier that agreements have been tailored to particular interests and preoccupations of the companies, subject to these being reconciled with the Government's objectives. In most cases we have been able to agree arrangements involving consultations on oil disposal and, for some of the major refining companies, supply of feedstock to them. The success of the negotiating teams of officials from my Department and colleagues from BNOC is due to the enormous good sense of the oil industry and is also, quite frankly, a recognition of the comparative fairness of our regime.

We believe that the participation agreements are immensely valuable to the people of the United Kingdom through the knowledge which the Government are enabled to gather on the operations of the oil companies on the United Kingdom Continental Shelf and through the role which BNOC will play in the development of United Kingdom petroleum. There are bound to be differences of interest between the international oil companies and the United Kingdom. Previous Administrations have worked on the assumption that the oil companies perhaps could be left to pursue their interests. But BNOC is an important element in the Government's strategy which we think will put the balance right.

We have seen a few ill-informed suggestions from time to time that the establishment of our new regime, and in particular our decision to negotiate for majority State participation, has caused delay to North Sea development. I am happy to inform the House that there is absolutely no evidence for this. Oil production from the North Sea is a brilliant success story and continues to make progress. We are now producing at a rate equivalent to nearly half the United Kingdom's consumption of oil and are well on target for the achievement of self-sufficiency by 1980.

Mr. Neil Macfarlane (Sutton and Cheam)

Although the immediate future is very bright, does not the right hon. Gentleman agree that a particular aspect of concern is that the Government, by their policy, have perhaps deferred long-term investment in the North Sea to the end of the next decade or beyond? That is what greatly worries us.

Dr. Mabon

I do not think that there is any evidence of that. I have been to a number of meetings with financial bodies, and there is no question of there being a lack of finance, even long term, for the North Sea developments. Unless one can argue the case for a fall in the price of oil, I do not think that investment is in any danger. I have never heard anybody seriously argue that there is the prospect in the next decade of a fall in the price of oil. My hon. Friend the Under-Secretary of State reminds me that, bearing in mind the immense interest shown in the fifth round applications, there is no evidence to show that the companies are not interested, not only in exploring, but in looking for finance for substantial future developments.

Mr. Peter Viggers (Gosport)

Ministers are fond of talking about the success story in the North Sea and about BNOC in the same breath, but does the right hon. Gentleman agree that the success is due to private enterprise, which put up 94 per cent. of the capital?

Dr. Mabon

The hon. Gentleman must remember that the rôle of the British Gas Corporation is quite outstanding. We must pay tribute to what has been achieved, whether it be in the nationalised sector or in the private sector. We must remember the participation of the British Gas Corporation, and of the National Coal Board, in oil developments. BNOC is operating a field of its own which it has acquired from Burmah Oil. Much work has been done by predecessors but a lot has been done by BNOC. Hon. Members should give BNOC a pat on the back and give it the chance to prove itself, as I am confident it will. I am sure that BNOC will survive and that even if, by some misfortune, there is a change of Government, it will be the bipartisan instrument of the British public's interest in the North Sea. I hope that we shall not have a doctrinaire fight about that.

As I have said, we are now producing at a rate equivalent to nearly half the United Kingdom consumption of oil and are well on target for the achievement of self-sufficiency by 1980. The last few months have seen a fresh round of fields being declared commercial and substantial orders are being placed with the United Kingdom offshore supplies industry.

It is against that background of success for the oil industry, with BNOC playing an increasingly important rôle, that we need to examine the Bill. The House knows of the importance which the Government attach to the protection of consumer interests and to the maintenance of fair competition, both of which are the purposes of the Restrictive Trade Practices Act. The Act is widely drawn so as to catch all sorts of restrictive agreements and arrangements made between firms. As I have explained, we decided to gain access to petroleum for BNOC by means of options to take it at market price in order to make sure that BNOC and the Government should keep the maximum possible flexibility. This arrangement also suits companies in that there is no doubt about it being their oil if BNOC does not take it.

I have been advised, however, that there is a possibility, though this is far from certain, that this method of gaining access to oil and other aspects of the agreements providing for exchanges of information could be held to be restrictions under the terms of the restrictive trade practices legislation and thus registrable with the Director General of Fair Trading. Even so, these are basically agreements to which the Crown is a party and which confer a public benefit to which the doctrine of Crown immunity may well apply, as quite distinguished advisers have argued. But there is an element of doubt about which legal opinion we should accept. Therefore, a prudent Government must erase this uncertainty in the law by this Bill.

The Government consider that participation agreements, whether or not they are technically caught by the restrictive trade practices legislation, are necessary for the achievement of our North Sea oil participation policy. We argue—and I hope that the Opposition will endorse this—that these agreements are in the national interest. It would therefore be inappropriate for the Restrictive Practices Court to have to examine such agreements against criteria which were designed to apply to restrictions adopted by commercial enterprise for their own purposes. Primary legislation is therefore necessary to remove any doubt about the legal position of existing participation agreements. The Bill accordingly provides exemption for all participation agreements, subject to strict Government supervision to ensure that the exemption applies only to agreements entered into for the purposes of furthering the Government's oil participation policy.

The Bill provides power for the Secretary of State to certify that if an agreement appears to him to be a participation agreement, as defined in Clause 1(3), that agreement shall be one to which the clause applies and so be exempt from the restrictive trade practices legislation. It has retrospective effect, because it is necessary to cover all participation agreements made in the past—and the House will recall that our first one was in February 1976—as well as those that we are making now and shall make in the future.

The Bill goes on to define participation agreements in broad terms. The general nature of the definition, which follows Section 2(1)(e) of the Petroleum and Submarine Pipe Lines Act 1975, is necessitated by the wide variety of participation agreements that we are negotiating. Although they have common features, there is also a sufficient variety in the ambit of the agreements for there to be no single easily identifiable and definable model participation agreement. The Bill does not, however, deal with the ordinary commercial operations of BNOC, which will remain subject to the Restrictive Trade Practices Act, like those of any other oil company.

Our participation policy is essential if we are to secure the rightful share for Britain in the exploitation of this precious national resource. Our policy, I would argue, commands the general assent of the oil industry, as witness the number of companies with which we have reached agreement. Neither the Government nor, may I stress, the companies would wish the agreements carefully worked out over months of effort to be put at risk by doubts about their status under the Restrictive Trade Practices Act. That could only be damaging to all interests. That is why we have introduced the Bill, in order to remove any shadow of doubt that participation agreements are outside the ambit of the restrictive trade practices legislation.

Mr. Macfarlane

The Preamble to the Bill refers to the Bill's financial effects and its effect on public sector manpower. It is not clear from the Preamble whether there will be any increase in central Government expenditure or manpower. Why does it not say that there will be no increase? Will the right hon. Gentleman, who seems to be nearing the end of his speech, deal with that matter before he sits down?

Dr. Mabon

I shall ask all parts of the House to help us in getting the Bill through as quickly as possible. Therefore, I must be obliging in every way that I can. Both of the statements in the Preamble are true. There is no need to increase manpower in the Department or anywhere else to deal with the Bill. We simply have to go through the process of deciding the nature of a participation agreement and advise my right hon. Friend whether it should be so prescribed within the terms of the Bill. There is no need for the Department to seek more staff for that.

As for central Government expenditure, since BNOC raises its money outwith the public sector borrowing requirement, there is no increase in central Government expenditure to deal with whatever consequences there may be for BNOC of the participation agreements exercised.

Mr. Macfarlane

Why, then, does the Preamble say that the Bill is not expected to result in any increase"? Why does it not say "The Bill will not generate any increase in public expenditure"?

Dr. Mabon

We are a modest and accurate Government, not bent on extravagant statements, and so we do not say that that will not happen. The Bill is not expected to result in any increase in central Government expenditure. It might be different if there were massive finds outwith our present expectations and a large amount of capital expenditure had to be found. Of course, there are possibilities, and I should like that good luck to come upon us, but it is not expected that there will be any increase in central Government expenditure.

11.25 a.m.

Mr. Hamish Gray (Ross and Cromarty)

I can put the fears of the Minister and his Whips at rest straight away by saying that it will certainly not be the intention of the Opposition to deny the Bill a Second Reading. We listened with great interest to what the Minister had to say about the Bill, albeit we had to wait some time because we first had to listen to the first half of a Labour Party political broadcast on participation.

When the Minister reached the Bill, he was fairly explicit, but a considerable number of points will require clarification. We believe that the removal of doubt as to the validity of the participation agreements already made with the companies is very important. Indeed, it is as important for the companies as it is for the Government. For that reason, we shall certainly not seek in any way to try to hold up the Bill. We shall be co-operative in Committee, but a number of points will require amendment, and I hope that the Minister will be sympathetic to the suggestions that we put forward.

This is a small Bill but behind its innocent appearance there lie significant implications. There are factors which require careful probing. Many points merit explanation, and the Minister has only touched on those explanations this morning. The Bill will put great power into the hands of the Secretary of State both on licences and over industry, and the end consumer who depends on the oil companies for his supplies could also be considerably affected.

The Bill removes all the safeguards provided by the Restrictive Trade Practices Act over the exercise of the power of the Secretary of State. Regrettably, there is little evidence so far that the present Secretary of State's interpretation of "broad national interest" will mean anything more than the imposition of doctrinaire Socialism in the guise of control of the availability of petroleum. As the Minister has rightly pointed out, participation agreements differ, but in the broad pattern there is a provision for the licensee to obtain the return of all or part of the 51 per cent. of oil to which BNOC has been given access at market price.

Linked with this provision is a further provision for the sharing of information by which such information is made available to the Secretary of State and BNOC by the licensee. The scope of consultation may be considerable, covering the entire operations of a company in so far as they relate to North Sea oil either directly or indirectly, and as they relate to prices. Presumably, it is in the light of this consultation that the Minister will make his decision on whether the licensee will be entitled to the return of participation oil. The Government appear unwilling to spell out the criteria that will be used. They must produce something more than "the broad national interest".

I hope that the Secretary of State will be able to assist the House by answering one or two questions at the end of this debate. First, will the right hon. Gentleman attempt to influence the export and import of petroleum and petroleum products? We must bear in wind that North Sea oil is of high quality but for many purposes it needs to be used with foreign oils to achieve economic results. Will the Secretary of State be attempting economic judgments of this kind on his own? Will the Secretary of State force the oil companies to discriminate between customers, and will it be the intention of the Government and the Secretary of State to attempt to force licensees and their customers into activities and investments favoured by him which may be quite uneconomic?

The Minister has dealt with the general policy of participation followed by the Government and he has indicated in the House and outside the general acceptance of these policies by the industry. The industry does not have much alternative but to accept these policies. If the Minister is twisting the arm of the person with whom he is negotiating by suggesting that, if he does not co-operate, he will be deprived in some other way in the future, it is hardly fair for him to say that all the negotiations have been purely voluntary and that the participation agreements have been reached without any difficulty.

The Secretary of State for Energy (Mr. Anthony Wedgwood Benn)

Before the, hon. Gentleman leaves that point, may I ask whether he can think of a precedent in the whole of human history in which people have been queueing up three-deep to have their arms twisted in the new round of licences that we have just recently launched?

Mr. Gray

The point is that the actual agreements which are being negotiated are being negotiated by the Government using this very weapon, and in future those who are queueing up will not be accommodated unless they agree with the Government. It is as simple as that. It is not fair to say that those are all wholly voluntary agreements. There are a few more points about which the Secretary of State will not, I think, feel quite so amused.

We could have a long debate about the effectiveness of Government policies or otherwise and the success of the BNOC, but I shall return briefly to those in a few minutes. In the meantime, I would just comment on what my hon. Friend the Member for Gosport (Mr. Viggers) said, because he really put his finger on the whole question of the North Sea development and its success. Suc- cessful North Sea development has been achieved despite the BNOC—not because of it. It has been achieved by the private sector. It has been achieved by BP, by Shell and by Esso and other private companies which have pumped money into the development. That is where the success of North Sea oil has come from.

The Minister is absolutely right in saying that it is a success story, but it is a success story for private enterprise and certainly not for Government control. If this Bill highlights anything, it highlights the total incompetence of the Secretary of State and his Department—sheer incompetence. The reason that I say "incompetence' is that it highlights, first, the lack of thought which went into the whole creation of the BNOC and, secondly, the lack of thought and the haste with which the legislation was produced. This provision should have been included, surely, in the Petroleum and Submarine Pipe-lines Act at the very beginning.

During the Committee stage of the Petroleum and Submarine Pipe-lines Bill, the Minister at the Department of Energy gave the following assurances regarding BNOC. During the thirteenth sitting, he said, referring to the Fair Trading Act, as the Act stands, it will apply fully to the activities of the British National Oil Corporation".—[Official Report, Standing Committee D, 24th June, 1975; c. 806.] Earlier, during the eighth sitting, he said, the BNOC will not under any circumstances attract Crown privilege or immunity…these privileges do not attach to the BNOC while it acts as agent…in all respects the British National Oil Corporation will be subject to the law in the same way as any other body".— [Official Report, Standing Committee D, I7th June, 1975; c. 404.] It is not unusual for us to have mistakes in Government legislation or to have weak legislation presented. The Minister referred to the Oil Taxation Bill. I would ask him to have a look at the original Oil Taxation Bill and then to look at the finished article. The two hardly bear any resemblance at all, thanks to the amendments forced by the Opposition in an improvement to the Bill. The Oil Taxation Bill is an example of where a responsible Opposition have worked with the Government in an effort to improve the legislation and where we succeeded in improving it.

Dr. J. Dickson Mabon

It is the function of a good Opposition always to seek to improve Bills. It would be an incredible situation for a Bill to be promoted by a Government and to be completely unamended. It would be most extraordinary for a Government to be so wise. Therefore, I accept the idea that there should be constructive amendment. But the hon. Gentleman must not confuse the business about Crown immunity, to which I referred in my opening remarks.

The BNOC as the then Minister of State described it is still precisely in the same position today as when he described it. There is no suggestion in this Bill of changing the position of BNOC at all. The argument about Crown immunity which we have heard is an argument for saying that we do not need this Bill. This is part of the Government's interest on behalf of the British people as a co-signatory of these agreements. That is where the argument for Crown immunity is brought in. But we do not wish to rely on that. We wish to rely on this Bill to remove any possible doubt about the nature of the agreements.

Mr. Gray

I am grateful to the Minister for clarifying that point. I am also interested in the fact that he has stated that he would have no objection to considering amendments, because we shall want to put down a number of amendments to this Bill. I hope that he will sympathetically consider them.

Mr. Macfarlane

In view of what my hon. Friend has been saying about the drafting of past legislation, does he not agree that most of us who have taken great interest in energy matters in the past few years have a jaundiced view of the drafting ability of the Energy Department, because in the Energy Bill, with all those discussions on crises, and the Coal Bill and the Nuclear Industry (Finance) Act, there were frequent errors of drafting? That, I think, is the criticism that we would level at the Secretary of State and his colleages in the Department.

Mr. Gray

I agree with my hon. Friend. I shall be coming to that very point on the drafting in this Bill, in which there are faults which I will mention in a few minutes.

We find the Government entering into detailed and far-reaching agreements on behalf of the nation, knowing that they are to some extent in default of the assurances that have been given in the House, to which I referred and with which the Minister disagrees, and unsure of whether they are even legal. It would be our hope and our intention to help with this Bill in order that any doubt about that should be removed, because we wholly accept that it would be most embarrassing, not only for the Government but for the nation, if it were found that agreements were not legal. Despite the time that the Government have had to consider this legislation and to prepare it—after all, it is only a two-clause Bill—they have still got it wrong. They have not yet been able to get it right.

I refer to Clause 1 (3) (c). It refers to activities connected with petroleum "beneath the waters" of the United Kingdom Continental Shelf, whereas I understand that the participation agreements apply to petroleum "won and saved." This is something which obviously the Minister will want to look at. It is something which we shall have seriously to consider in Committee, But I use it just as an example of the general incompetence of the Government in these matters. The Government have had all this time to think about this, yet they still cannot get it right. But they will get it right before it leaves Committee: we shall see to that.

On any interpretation, participation agreements between BNOC and the oil companies must be judged a restrictive practice, because, in the first instance, they reduce competition. They reduce the ability of the oil companies to market crude oil. They must ultimately affect prices if BNOC takes and markets substantial quantities. They must create a United Kingdom monopoly in North Sea crude oil for the BNOC. Therefore, it seems almost inevitable that they would infringe in one way or another.

The Bill is designed to avoid registration under the Restrictive Trade Practices Act. Should such matters have been referred to the Registrar, it is almost certain that he would have wished to have test cases, so it may be, in fact, that the Government have been breaking their own Act already. The Government already seem to be evading the Restrictive Trade Practices Act and, of course, this evasion must be legalised if we are to proceed in an orderly fashion.

Surely restrictive trade practices or the creation of monopolies and the limitation of competition are just as much undesirable collusion if they are performed by a Government as if performed by the private sector—probably even worse if they are performed by a Government. Therefore, the effect of the Bill in exempting participation agreements from appearing on the public register may be to make these treaties between the Secretary of State and the companies secret treaties.

Dr. J. Dickson Mabon

They are not secret.

Mr. Gray

They are placed in the Library after they are concluded.

Dr. J. Dickson Mabon

Yes.

Mr. Gray

That is not good enough. They were secret at the time they were concluded. Neither Parliament nor the people have any access to the vital considerations affecting them. The Secretary of State frequently talks about disclosure of information and about open government This must surely work two ways. We shall have to rely solely on the Secretary of State in this matter.

We believe that to give the Secretary of State completely unfettered control over the disposition of a very large part of North Sea oil is to introduce a degree of uncertainty into the industry which could actively discourage future investment. There is no confidence that the Secretary of State will not use his powers in an arbitrary and, indeed, capricious way, the only consistency being a determination to institute specifically Socialist planning. That is a fear widely held in the country at present. Indeed, it is a fear perhaps held to some extent by some Members on the Government side as well as Opposition Members.

Under the Bill a participation agreement is basically what the Secretary of State chooses to say it is, and the definition is at his discretion. It can be sufficiently wide to catch not only participation agreements but the associated consultation agreements. This worries us, because we think this must be controlled very carefully indeed.

Why do the Government fear the registration of agreements? Why do they dislike the thought of such arrangements being made public before they are agreed? What have the Government to hide? Have the Government anything to hide? On the present showing the agreements have the appearance of being the creation of those who seek to control one of the commanding heights, if I may so describe it, on the road towards a Socialist centrally planned economy. The Government will do more or less anything they can to achieve this.

A remedy could be to lay all participation agreements before the House. Indeed, this has already been suggested by the Public Accounts Committee. The Department of Energy has turned down that suggestion. Why should not the House have a chance of considering these agreements?

Dr. J. Dickson Mabon

I said specifically in my earlier remarks, just in case some hon. Members did not know, that we place the agreements in the Library of the House of Commons.

Mr. Gray

The Minister is quite right—of course he does—but that is after the agreements have been completed.

Dr. J. Dickson Mabon

It cannot be before.

Mr. Gray

Why not? Why should not Parliament consider what the Government are doing in these matters? The Secretary of State wants open government. He frequently talks about the necessity for everything to be available to the public and to Parliament. Why should not Parliament have a chance to discuss them? The Public Accounts Committee sees no reason why Parliament should not have a chance to discuss them.

Dr. J. Dickson Mabon

With respect to the hon. Gentleman, agreements can only be discussed after they have been agreed.

Mr. Gray

Surely the criteria can be discussed by Parliament. Surely the outline agreement can be placed before Parliament. There is no reason why that cannot be done. The Minister is merely presenting Parliament with a fait accompli by placing the agreements in the Library after the whole thing has been concluded. However, there will be an opportunity to discuss that aspect when—

Mr. Bean

I am sure that the hon. Gentleman would not want to give the impression that where any Government Department engages in consultations with industry all such matters should come before the House before any conclusion is reached. As he knows very well, many Departments are engaged continually in negotiations with industry about one thing or another. It may be about industrial location or assistance under the Industry Act 1975, and so on. In no case whatever have any Government, Conservative or Labour, ever been in a position where they so broke confidentiality that they put such matters before the House prior to the decisions being reached with the industrial enterprises concerned.

I am sure that the hon. Gentleman, in his anxiety to make a political point, would not want to give the impression that every single discussion between a Government Department and an oil company should be made public. That would utterly destroy all confidence in negotiations between Government and all industries.

Mr. Gray

The Secretary of State is certainly not correct in what he says. I would not suggest that all these negotiations should come before the House, but I would certainly suggest that in this instance participation agreements should come before the House, because they are of a very special nature. They involve enormous sums of money and enormous questions of policy. They should come before the House so that hon. Members may have a chance to discuss them. I adhere to that view.

I am not trying to make a political point at all. I am supporting the Secretary of State in his own wish for open government, and I see no reason why this cannot be done. I do not think that this view would have been expressed by a body such as the Public Accounts Committee unless it had carefully considered all the implications of doing such a thing.

I reiterate that we believe that it is right that the Bill should be given a Second Reading. We believe that it is right that all doubt as to the validity of agreements which have been made should be removed. When the Bill goes into Committee we shall be constructive and try to help the Secretary of State to get his legislation as quickly as possible, but he will appreciate that the Bill has far-reaching implications and that there are a considerable number of points that we shall wish to discuss in Committee.

11.45 a.m.

Mr. Hugh Dykes (Harrow, East)

Having had the good fortune to catch your eye early, Mr. Speaker, on compassionate grounds, I shall speak briefly in order to allow other hon. Members to make their considered speeches. I apologise in advance to Ministers and colleagues for having to leave the debate early for compassionate reasons.

I fully endorse the remarks of my hon. Friend the Member for Ross and Cromarty (Mr. Gray), as the spokesman for the Official Opposition, in expressing anxieties about the Bill. It is very easy and tempting for Ministers to say that the Bill is all right, that it is a routine and tiny matter, that there is no need for the Opposition to be worried or fussed about anything in it, and then to look impatient when we seek to prolong the arguments. All our arguments will be shown, both on Second Reading and in Committee, to be in support of legitimate anxieties. They are not matters which ought to be brushed aside as if they are irrelevant or tedious and as if Ministers are far too busy to deal with them.

I must declare an interest as an adviser —perhaps not a very good one—to a small, British, independent oil company.

I echo the anxieties of my hon. Friend the Member for Ross and Cromarty about the Bill. Often it is all too easy to assume that, because a Bill is short, it is a simple one, and, like my hon. Friend, I am concerned about its fundamental nature. I am, indeed, extremely worried about Clause 1 and in particular about subsection (1).

In the proposed certification process an enormous amount of discretion is given to the Secretary of State. It is a very substantial and extensive power, and I should have thought that the clause must be a perfect candidate for amendment, tightening up and improvement in Committee, even if the Committee stage is fairly short and realistically curtailed because of the need ultimately to get the legislation through.

I know that the definition of "participation agreement" is widened out to some extent in Clause 1(3). Even so, subsection (1) provides such a worryingly wide discretionary power to any Secretary of State—perhaps more than even the present Secretary of State would dream of in his wildest moments—that I should have thought that it needed to be tightened up. That is one aspect of the naturally continuing anxieties of the Opposition—by which I mean the Official Opposition and not the Liberals, who do not seem to be here today—about the British National Oil Corporation.

I agree with the right hon. Gentleman when he says that in the course of developing commercial agreements between companies and State entities it would be difficult to give a blow by blow account of how the outline agreement was developing. But the way in which publication is handled needs to be reinforced and strengthened so that we get to know the outline agreement either at the penultimate stage or at the final stage.

People are worried about the BNOC and its power. The industry worries about the way in which it operates in these negotiations and conversations. I had an exceedingly long Written Answer from the Minister of State on Monday about participation agreements so far concluded in the three groupings. In Group C there are still things to be negotiated and agreed, but it is much smaller in relation to the total list than the others. A lot has been done.

The Secretary of State looked angry and irritated on Monday at Question Time when these matters were put. I do not know whether that is revealing of his attitude. But it cannot be denied that many companies and boards of directors are fed up with the excessively coercive approach of the BNOC in these negotiations. There seems to be among senior officials of BNOC the idea of empire building, and some people wonder what all the 500 staff are doing. Perhaps certain senior officials are verging on being carried away by the power of negotiating with these private companies.

There is a dictatorial attitude in general terms. For example, so often is there the sending of messages which do not give boards enough time to make a considered response. The Government will be doing themselves and the BNOC a disservice if they dismiss these complaints as hyperbolic. The Secretary of State in his supervision of the BNOC should ensure that such a state of affairs does not continue or develop further.

In its news letter of 13th October, that well-known Left-wing firm of stockbrokers Wood Grundy said: The great interest of BNOC relates very much to the changing UK political scene; the importance of the North Sea in British economic life. BNOC has always issued plenty of words, but now Government Ministers and the Department of Energy seem to be sustaining quite an amazing outpouring. For example great coal reserves have been 'discovered' under the Southern UK Gas Area—they have been known for 10 years. This is surely part of the energy twaddle that will fill out Labour's forthcoming General Election campaign Unfortunately, the star in Labour's crown, BNOC, adds nothing to control over or revenues from the North Sea, and therefore does with 500 people what could be done with nobody. You 'don't need nobody to do nothing'. Perhaps "twaddle" is an unfortunate word and some other should have been chosen. That is an exaggerated version of the truth, perhaps, but it reflects genuine anxieties in the industry and among large sectors of public opinion.

I turn now to the European aspect of the anxieties about this kind of legislation and whether the BNOC should be exempted from the generality and provisions of the Restrictive Trade Practices Acts. The Secretary of State has a newfound enthusiasm for the EEC, based on the Culham decision, which, I remind him, was made by majority vote. I am sure, therefore, that he will accept that there is a Community point involved in, this matter. Does this legislation infringe any of the Community laws on competition policy, or the Treaty of Rome?

I sent a message to the Commission this week asking for an opinion. The reply is an indirect quotation of the Commission's own words. It says: The Commission felt that the financing of BNOC without reference to the normal market rates, its freedom to determine directly or indirectly, indirectly, selling prices, the point of delivery and refining and to purchase operating licences free from the competitive bidding of other oil companies were contrary to the rules on competition. Articles 85, 86, 90 and, 92 are apposite. Those are Articles of the Treaty of Rome. The reply went on: I feel that the Commission is unlikely to take action which might antagonise a Labour Government i.e. reference to the Court of Justice. That is an interesting and profound point to be raised at this stage.

Mr. Benn

It is normal when quoting from a document to lay it. Perhaps the hon. Gentleman could lay the letter he has referred to so that it could be studied. It is not clear from what he said whether it is just a letter from a friend or an official letter on behalf of the EEC. Would he be so kind as to make it available for hon. Members to study the full details of that letter?

Mr. Dykes

I shall do so with pleasure. I must emphasise again, lest the right hon. Gentleman gets the wrong impression that at this stage I am asking a question. It is a legitimate question. This is a huge issue and it is legitimate for this side of the House to ask such questions. The impression may be given by the ease with which the Bill may be passed—I am making no predictions about the future in that respect—that there is no relationship between such national legislation and anything in Community law.

The Secretary of State, with his newfound feeling for the EEC and the way it is helping this country, in all sorts of ways, to develop the high technology frontiers that he is so keen on, must undoubtedly wish to assuage any worries in the Community and elsewhere that this kind of agreement may infringe the Treaty of Rome.

11.56 a.m.

Mr. Peter Viggers (Gosport)

This Bill is an unfortunate postcript to the Petroleum and Submarines Pipe-Lines Act. I agree with my hon. Friend the Member for Ross and Cromarty (Mr. Gray) that a compulsory—call it what you will—system which requires oil companies to give 51 per cent. participation to the Government may well be a restrictive practice. I am not sure that the Minister of State is right in feeling that the Bill might not be necessary. It seems to me that it probably is.

The Government's participation policy has committed Britain to a high oil price. This was not necessary. The Government need not have committed themselves to supporting a high oil price, but they have done so by putting Government money into North Sea oil development. Many of the fields in the North Sea would not be commercial if the oil price were to fall. But, because the British taxpayers' money is committed, we are committed to keeping up the price of oil in the world because otherwise we should not be getting a proper return on our investment.

Originally the policy of the Government was to call for voluntary participation, and I am sure that the words of the Chairman of Exxon will be burnt on the mind of the Secretary of State. He said: The Government has said that the arrangement is voluntary. I am not volunteering.

Dr. J. Dickson Mabon

He changed his mind.

Mr. Viggers

The Government had to change their policy and to say that they would pay their share of the development costs from the outset of any development programme. It was that which caused many of the oil companies to take a different view. Indeed, I wonder whether, in the light of the facts which have emerged since, we would have had quite the arguments we had in Committee on the Petroleum and Submarine Pipe-Lines Bill. The more Leftward-inclined members of that Committee felt that they were getting what they wanted, but if they had realised that the Government would change their tune and fall into line with sanity, they would not perhaps have taken the attitude they did at that time in Committee.

The point made by my hon. Friend the Member for Ross and Cromarty concerning participation agreements must be that, at the time of discussion on the Petroleum and Submarine Pipe-lines Bill in Committee it was thought that there would be a pattern of participation agreements into which the different oil companies would fit. There has been no such thing. That is the document we should like to see in the Library and debate in the House. But there is, of course, no such document or pattern of agreements.

Participation is what the Government say it is. Participation agreements are the result of the kind of private arm twisting between Government and the private sector which in public the Secretary of State says he so deplores. Participation agreements are different in every case. There is no pattern. It depends on what one can get away with. I leave the House to consider whether that is a proper approach for the Government to take to oil companies.

The question of pricing is important. In the publication Coal and Energy Quarterly the Secretary of State wrote In Saudi Arabia I learnt that they would have the opportunity by 1979 to vary oil production between 9 m. and 14 m. barrels a day almost at the turn of a tap. A variation of that order—the equivalent of at least two North Seas—could have a major impact on price without affecting Saudi revenue; if the taps were turned on the price would come down but the Saudis would sell more, whereas if the taps were turned off the price would go up That sets out the case fairly accurately and clearly, but it is significant from the taxpayers' point of view that the Government have committed taxpayers' money to the development of the North Sea which means that the British taxpayer needs to see the price of oil kept up.

That risk need not have been taken, It would have been perfectly possible for the Government to get the revenue they seek from the North Sea without requiring participation by British taxpayers. It is not necessary for the risk to be run.

I have four points to advance concerning BNOC. The first is that the corporation by its existence is inflationary. When set up it needed to recruit staff. Large advertisements appeared in the heavier Sunday newspapers recruiting people. People joined BNOC only if they thought they could get better pay and conditions, and the effect in the oil industry was that a number of people were poached away by inducements to higher salaries.

I have not yet declared my interest in an oil company—it is a theoretical rather than practical interest as yet, since the company has not found any oil in the North Sea.

My second point is that the corporation is politically subservient. In the Petroleum and Submarine Pipe-lines Act power is given to the Secretary of State to give specific directions to BNOC, which means that instead of allowing BNOC to form its policy decisions on a long-term basis, the Secretary of State can meddle.

My third point is that BNOC is different from other oil companies in that it does not pay petroleum revenue tax, and it is not possible to compare BNOC's performance with that of other oil companies.

The fourth point, however, is most important of all. It is that BNOC, only recently set up, will soon be one of the 10 largest oil companies in the world. No doubt the Secretary of State is proud of that, and no doubt the Government think it an admirable creation. But the Government may well be giving BNOC duties which are beyond its competence.

How can one of the 10 largest oil companies be set up from scratch in just a few years with powers to make decisions on a wide-ranging nature of North Sea oil development when as a team it has not had the long experience of BP, Shell, Esso and the other international oil companies? Through their policy the Government have given BNOC responsibility for taking these wide-ranging decisions which may well have been better left to the experts in the oil companies than to this subservient State oil concern.

It is quite clear that the 51 per cent. majority participation—which sweeps aside the equality and true participation of a 50 per cent. stake—is a kind of political virility symbol for the Government. I visited Norway and met people who work with Statoil, the Norwegian oil company. No one can say that the Norwegians are not good Socialists, but they were puzzled by the 51 per cent. that the British Government are seeking to acquire in the North Sea. They said that that was not participation, but domination and that if the Government had wanted genuine participation they would have gone for 50 per cent. By giving 51 per cent. control to BNOC the Government are giving it more power than it can handle.

Mr. Macfarlane

Does my hon. Friend not agree that the long-term objective of the Secretary of State is to see the total annihilation of the private oil industry as it exists? This is the one main non-nationalised energy resource in the country. Its annihilation is the sole objective of the Labour Party's Home Affairs Committee in the long term.

Mr. Viggers

I fear that my hon. Friend is right. If we were to approach this issue in a non-partisan spirit I think that the Government would accept that they have moved some way towards a more commercial and sane approach in their involvement with the oil companies. We on this side would similarly agree that it would be politically immature and foolish of us to sweep away BNOC by scrapping it forthwith if we came to power. We must live with what is there.

I urge the Government, however, to reconsider this issue of the 51 per cent. As long as the emotive 1 per cent. remains, I fear that my hon. Friend is correct and that the Government are seeking to dominate and annihilate the private sector in the North Sea.

I believe that the Bill should proceed, although I feel that there are a number of areas which need to be examined in Committee. I hope that the Committee and eventually the House will have the opportunity of giving more thought to the application of funds from the North Sea. I support the Director-General of NEDO in saying that it is a scandal that we have reached this stage without giving more thought to the application of North Sea oil revenues. Those revenues are not income at all. They are depletion of capital. We are depleting capital reserves and we should be applying the finances now to rebuilding our capital base instead of regarding the money as income.

12.8 p.m.

Mr. John Hannam (Exeter)

In this short debate we have heard some excellent and well-informed contributions. We do not intend to oppose the Second Reading, but my hon. Friends and I are all agreed that sufficient doubt and worry has been expressed in the debate to underline our concern about the method which is being chosen for dealing with this problem.

Retrospective legislation such as this is obviously bad enough on any account, but especially so in view of the statements made by the former Minister of State for Energy to the effect that BNOC would be fully subject to the restrictive practices legislation and would not in any circumstances attract Crown privilege or immunity.

One would have assumed that the Government had clearly examined all the likely future operations of BNOC—oil extraction, refining, machinery for offshore technology, training and even, possibly, petrol retailing. And we would have thought that the Government would be confident that BNOC would operate under normal competitive trading rules and regulations. Presumably it was felt that Section 29 of the Restrictive Trade Practices Act, which deals with agreements made concerning the national economy, would apply to oil participation agreements. But in spite of the long debates held in Committee and the assurances given to hon. Members who were anxious about the non-competitive nature which could develop in BNOC, the Government have botched it up. There is not other word for it. The Government have brought forward retrospective legislation.

National confidence in the Secretary of State's ability to handle our affairs has been ebbing in recent weeks, especially since his equivocation on the miners' productivity deal, followed by his lack of activity during the early days of the power workers' dispute. Many hon. Members must be surprised to see the right hon. Gentleman here today to reply to the debate on this small Bill. I was surprised at first but, on second thoughts, I realised the right hon. Gentleman's anxiety to seize on any opportunity, however small, to rebuild his reputation and possibly retain his job.

I therefore hope that when the Secretary of State winds up the debate he will answer our questions on some of the disturbing aspects of the Bill. Not only is this retrospective legislation—which nobody likes, unless it is a repayment of tax or a rise in salary—but it is a belated and unsatisfactory rectification of an oversight. We find that, as usual with this politically motivated Minister, he is once again, quietly and surreptitiously, extending through this small Bill the powers of central State control into a hitherto successful private sector of industry. Just as the recent Coal Bill gave new powers for a State industry in the aggregate extraction industry, so this Bill, if it is not amended, will give the Secretary of State new powers to acquire confidential information about the activities and contracts not only of the oil companies but the oil consumption companies.

Additional powers will be given for the Government to determine the movement of oil and operating decisions of oil companies and consumers. The Minister will, without parliamentary scrutiny, be able to force British and international oil companies to bend to his will on such agreements.

My hon. Friend the Member for Ross and Cromarty (Mr. Gray) referred to the illuminating reply that the Secretary of State gave to the hon. Member for Bolsover (Mr. Skinner), wo is not here today, on 17th January. The right hon. Gentleman gave the political game away with regard to the BNOC. He explained the tactics that he would use—in applying heavy pressure and leaning on oil companies to secure participation and bullying tactics, such as the threat of non-successful applications for licences. These fears have been expressed in our discussions with oil companies. It is feared that such pressure will be used to secure compliance in agreements which will not be subject to the Restrictive Trade Practices Act. Many of my hon. Friends have a wide knowledge of the oil industry and we heard excellent contributions to the debate today from my hon. Friends the Members for Gosport (Mr. Viggers) and Harrow, East (Mr. Dykes).

We well know the sort of hidden persuaders that will be used to secure participation agreements. It will not be necessary to use rubber truncheons because there are much more effective methods of threatening the commercial prosperity and future of companies which will need licences for future exploration.

There is a great deal of unease among BNOC's shotgun partners in these oil deals. They are worried about the increasing powers of control that the Government will have over trading activities and the information that they will have to disclose. All the general assurances that have been given by the Government that the Secretary of State's decisions will always be made in the broad national interest do not necessarily reassure those who are being asked to invest the large sums of money that are necessary to develop oil in the North Sea. Knowing of the Secretary of State's activities in other policy- making areas outside the House—though not far away—one is justified in thinking that he might use his powers of direction in an arbitrary way to achieve his often-declared goal of specific Socialist planning.

The Bill covers not only existing and new participation agreements but consultative agreements and any commercial venture with which the BNOC may be involved. Such wide and unfettered ministerial powers will mean that the Secretary of State will not be accountable to Parliament. It is strange that we hear so much from the Secretary of State about democracy and open government, and yet every piece of new legislation contains further creeping powers for central Government and less accountability.

The original concept of the National Oil Corporation becoming a 51 per cent. operating partner has been replaced by the concept of control by acquisition of the oil itself. The Secretary of State will have discretionary powers of control over the sale-back of oil to the companies. Immensely restrictive powers will reside with the right hon. Gentleman. We want to know how he plans to apply those powers and why the existing safeguards contained in Section 29 of the Restrictive Trade Practices Act are not adequate. They deal with exemptions in the national interest.

The oil consuming industries, because of their agreements with BNOC, will also be affected by the disclosure of information requirement and will be dependent on the Secretary of State's decisions for their oil supplies. All this, including consultation documents leading to participation, is secret and undisclosed. We know that, following pressure from the House, the final participation agreements are put in the Library, but it is the pressure that will lead to those agreements that concerns the oil companies and the oil consuming industries.

Without doubt, this country will need vast investments in the oil sector. In the past we have seen the justifiable successes of the private sector, but in future even vaster investments will be necessary if we are to continue to release the full potential of our resources. My hon. Friend the Member for Gosport made a valid point about the way in which the creation of BNOC has affected prices. What security shall we have for these future investments if wide and unfettered powers are to rest with the State? By being exempted from the protection that is given to consumers under the Restrictive Trade Practices Act, BNOC will also be exempted from Section 41 of the Act, which provides protection from disclosure of information. It causes great concern that the Bill is so loosely drawn. We hope that we shall be able to tighten it up in Committee. We regard the hon. Gentleman's remarks about the Opposition being encouraged to tighten and redraft Bills as a good pointer for us in Committee.

Control over oil is the basis of most Government activity in this matter, but that can be achieved without endangering the confidentiality of companies involved in treaties with the BNOC. That is our concern. We want to set a time limit on these restrictive trade powers and to ensure that the Secretary of State will be fully accountable to Parliament for any directions that he may issue.

Section 29 of the Act requires that any agreement for exemption must be laid before Parliament and that requirement should be included in this Bill. It should also be extended to include the condition that any such order must, in the interests of the national economy, procure for the national economy the maximum benefit from North Sea oil. Let us retain the objectives of improving the national economy and of getting the maximum benefit out of oil instead of having politically motivated objectives. Only then could we be sure that political motivation would not be used to reduce the effectiveness of the oil industry and to extend State powers.

This short debate will not, I suppose, produce any eye-catching headlines, unless the Secretary of State announces his resignation, and that would probably cause a slight stir in the Press. Nevertheless, my hon. Friend's speeches have brought to light some important questions that must be answered if the House is to be satisfied. The Secretary of State obviously regards this legal problem with a degree of seriousness or he would not be here and he must, therefore, deal with the questions that we have put.

This short debate will not, I suppose, been resolved in the Bill or in the answers that the Minister has already given to my hon. Friend the Member for Sutton and Cheam (Mr. Macfarlane). What criteria will the right hon. Gentleman use in determining how and why oil should be resold to certain companies? How will he safeguard against the disclosure of confidential information, and what degree of control will he have over the oil sales of BNOC and other companies? We should like answers from the Government on these points and we should like to know which of the safeguards contained in the Restrictive Trade Practices Act will be removed. It is not sufficient for the Government to argue that participation is in the broad national interest. That is an argument which could be used to justify any piece of legislation. But the effect of this policy on downstream oil users could destroy the investment confidence and security which might have accrued to them by virtue of the discovery of North Sea oil.

We hope that this Bill will be amended in Committee so that some safeguards are retained from the now disappearing protection of the Restrictive Trade Practices Act. We insist especially that this Parliament should have the opportunity to check continually on the activities and decisions of any Secretary of State so that the national interest will truly be protected in a real and meaningful way.

12.20 p.m.

The Secretary of State for Energy (Mr. Anthony Wedgewood Benn)

This has been a short debate. Some important matters have been raised, and I shall try to deal with them. I notice that the debate was not thought important enough for the Opposition spokesman to attend. However, I am grateful to those Opposition Members who have been able to be here to make their contributions.

Mr. Gray

My hon. Friend the Member for Bridgwater (Mr. King), who is shadowing the right hon. Gentleman, is unfortunately absent today because he had a long-standing engagement which he could not cancel. He is extremely sorry not to be here. But I have no doubt that the right hon. Gentleman will hear a great deal from him in the future.

Mr. Benn

As a matter of fact, it is his silences which amuse me most. Obviously, he has been unable to persuade the Shadow Cabinet to give any Opposition time for the motion which he has tabled. I thought that he might be with the Leader of the Opposition today making one last effort to persuade her to support his cause.

This is an important Bill. It is important both for legal and for policy reasons. At least on the main point, which is concerned with the removal of doubt, I understand that the Opposition agree that it would be undesirable if the arrangements that I have reached with the oil companies were subject to uncertainty, and that Parliament should put that right. That is the only matter that the Bill is about, and I shall deal with that first.

Because it is doubtful, I cannot answer specifically hon. Members' questions about whether the agreements would fall under the Restrictive Trade Practices Act, whether they would be registerable and, if they were registrable, what the outcome would be, and what rôle Crown immunity might play. As we have been sensitive in dealing with each company individually, there is not a standard participation agreement. The companies persuaded us very quickly that it would be sensible to take each case on its merit.

This obviously is a lawyers' Bill. It is not a Bill which has been drafted to add anything politically to our policy. Because of that I hope that the House will feel able, after proper scrutiny in Committee, to remove that uncertainty. As I say, that is all that the Bill is about.

However, I must deal with one or two points concerning uncertainty about the RTPA, notably the question of the EEC. The hon. Member for Harrow, East (Mr. Dykes), who I know has to leave early, alluded to a document. In accordance with the courtesies of the House, when I asked him whether he would agree that it be laid, he gave me this copy, and I have it before me. I should like to take seriously the point that he made, but I begin by reading the telegram from which he quoted. It is headed "Attention Mr. Hugh Dykes" and it is from a Mr. Biller, who I gather is an energy official in the European Conservative Group in the European Parliament in Strasbourg. It is dated 17th November 1977. So that the House may consider it, the full text is as follows—this is not from the Commission at all; it is from a Conservative official, presumably employed by the Conservative group— Although competition policy falls within Alan Reid's competence, I visited DGIV about a year ago wearing my energy hat in order to discuss the position of BNOC. Lady Elles was one of the several Conservative peers with a special interest at that time. The Commission felt that the financing of BNOC without reference to the normal market rates, its freedom to determine directly or indirectly selling prices, the point of delivery and refining and to purchase operating licences free from the competitive bidding of other oil companies were contrary to the rules on competition. Articles 85, 86, 90 and 92 are apposite. I feel that the Commission is unlikely to take action which might antagonise a Labour Government, i.e. reference to the Court of Justice. I strongly recommend that you discuss this subject with Michael Portillo at the Conservative Research Department. I shall show your telex to Reid in case he has anything to add. That document is not a statement by the Commission. I want the House to appreciate that, because this is one of the most important documents to have been brought, bearing on Conservative policy. It is a statement by an official paid for by the Conservative groups in Europe which have gone as Conservatives—not representing British interests—to the Commission to seek, if they can, to mobilise the Commission against the British National Oil Corporation.

Mr. Dykes

rose—

Mr. Benn

I will give way to the hon. Gentleman in a moment. I am now interpreting the document. A year ago, the Conservative official went to find out whether the Commission would say something about BNOC. He then reported in a political telegram—for this has no official status—the view which he attributes to the Commission. Then there is a reference to the fact that a Labour Government are the best protection for BNOC, which is interesting, and then he suggests to the hon. Member for Harrow, East that the Conservative Central Office in London might get on to the Commission in Brussels to see whether it could hamper the work of the British National Oil Corporation. That is my interpretation.

Mr. Dykes

This is why the right hon. Gentleman is regarded with some dislike in this House. He does a disservice to the House when he is so anxious always to twist people's words.

May I make two main points and one subsidiary point in response to what the right hon. Gentleman said? First, I gave him the message which I had, in good faith. Secondly, it mentions the names of officials who cannot defend themselves in public. They are not civil servants. None the less, they are officials of political groupings in the European Community. Next, I made it clear when I referred to that message that there was no need for the Secretary of State to create anything sinister about the preamble and the end comments. Those are just routine administrative matters. I made it clear that the central core of the message was not the Commission directly, but was an indirect quotation of what the Commission had said at that time. Finally, I ascertained on the telephone after receiving that message that it was the interpretation put in good faith by that very competent official in the European Conservative Party in the European Parliament on the Commission's feelings, opinions and attitudes about the relevant Articles in the Treaty of Rome and the effects that BNOC's operations might have on competition policy.

It is in good faith. I ask the Secretary of State to respond to it in good faith. Why try to twist it and make it sound sinister and worse than it is?

Mr. Benn

The hon. Gentleman has now explained absolutely why documents have to be laid when they are quoted. When I heard his words—and it may be that I misunderstood them the first time—I took it that he was paraphrasing a Commission decision on this matter. I had no idea that the message was from a Conservative official who sent him a telegram about a visit he had paid a year ago, and doing something else as well.

The reason why this House has provided that people cannot quote from documents without laying them is so that other minds may be brought to bear on documents which may be open to different interpretations. I accept that the hon. Member for Harrow, East was hoping to help the House and to give his view. But he must also accept that, if he chooses to do that, others may interpret it for themselves.

I reaffirm my interpretation of this telegram. I make no criticism of the hon. Member for Harrow, East. He has fulfilled one of the greatest courtesies which can be performed in the House in sharing his information with other hon. Members.

My interpretation is that Conservative Central Office has been seeking to mobilise the European Commission against the British National Oil Corporation and that, without any message from the Commission itself, a flood of information backwards and forwards is in process and it is recommended that it be mobilised if that is possible. It is the Government's view that our policy is compatible with our obligations. The Conservatives are seeking to mobilise the Commission in order to weaken the BNOC for the benefit of the oil companies, whom they have represented from the beginning of our oil policy.

Mr. Dykes

Therefore, the Secretary of State can presumably categorically reassure us that the European Commission or the relevant DG Departments, mainly DG4, are not worried about the monopoly or the anti-competition characteristics of BNOC?

Mr. Benn

I have repeated the Government's position and I shall repeat it again. We are developing a policy that is compatible with BNOC's purpose and the nation's interest. What we have now got quite clear—and I hope the debate is fully and widely reported in light of what has happened—is that not a single Opposition spokesman from either the Front or the Back Benches—all of whom have candidly declared their interest—has at any stage spoken as if there could be any possible conflict between the international oil companies and the interests of the nation State.

Everyone knows that in the history of the oil business one of the most difficult things has been for Governments to safeguard their own interests against what could be, and historically has been, an abuse of power by the oil companies. I am talking about other countries where oil has been discovered. Anyone who has studied the history of the world oil business knows that oil companies, if they are not made accountable to the people from whose territory the oil is drawn, are capable of developing their own interests at the expense of those of the nation State.

Without naming them, there are certain countries in the Middle East which have far more oil than is in the North Sea—four or five times more—and populations that are far smaller than that of this country. Nevertheless the standard of living after the oil has been developed, exploited and exported is still very low per capita.

To have a debate in the House of Commons without a single Opposition spokesman even being ready to recognise that that could happen in this country if we did not have a vigorous oil policy is an absolute disgrace. I say that without any personal discourtesy. I am making a much more serious charge here. It is a political charge against the party opposite, not a personal one.

When the Conservatives were the custodians of our oil resources they gave licences to the oil companies without any petroleum revenue tax or any legislation to control the rate of depletion or any requirement that any gallon of the oil discovered in the North Sea would be available to the people of the United Kingdom. Of course at the next election alternative oil policies will be central. We inherited an oil policy from the Opposition that utterly ignored the interests of the Scottish people or the British people as a whole. The hon. Members for Harrow, East and Ross and Cromarty (Mr. Gray) know very well that in reality there was no provision under which the people of this country could have enjoyed the oil physically or a proper share of the revenue from it. My charge is that they have systematically represented in Parliament the interests of the oil companies at the expense of those of the British people.

Mr. Gray

The right hon. Gentleman is determined to get the headlines one way or another but he will not get them that way. He knows perfectly well that if the terms of the licences awarded by the Conservative Government have not been attractive he would not be reaping the benefits of North Sea oil today. This is a straightforward point. When one goes back a decade or more one sees that not everyone saw the potential of North Sea oil. Some people had confidence in it but a great many people would not accept that it had the potential which has since been realised. We needed to attract capital, and therefore it was essential that attractive terms were given.

The Secretary of State is making great play of a document that was quoted by my hon. Friend the Member for Harrow, East (Mr. Dykes), I had not seen this document—in fact I knew nothing of it—and Conservative Central Office had no part in it at all. My hon. Friend was perfectly entitled, as a Member of this House and with his contacts in Europe, to ask certain questions about the effects of BNOC's policies and to give a different opinion. That does not commit the Conservative Front Bench or the party in any way. The Secretary of State is always putting his own interpretation on things, and twisting them to suit his own arguments.

Mr. Benn

The hon. Member, to whom politics are personal, does not understand a political charge when he hears one. The hon. Member for Harrow, East behaved with total propriety, and I have acknowledged that. All I am saying is that his speech and the document which he made available makes it quite clear that the Conservative group in Brussels is trying to get the Commission to say something that would damage the interests of BNOC and is suggesting that this should be taken up with Conservative Central Office in London. That is a political charge.

What the hon. Member for Ross and Cromarty has said utterly confirms what I said earlier. These terms that the Conservatives gave to the oil companies were damaging to British interests. They were terms that were given consistently by the previous Government. After we had pursued our policy, which has been much criticised over the last two and a half years, we had 53 applications. With our deferred terms these applications involved 150 companies, and 51 blocks were applied for as well. The argument that they would not have applied under our terms is absolutely belied by what has happened. We have sought consistently to use the powers open to us by legislation in the Petroleum Revenue Tax to safeguard the national interest.

Not only have our terms not damaged the number of applications in the fifth round, but my relations with the oil companies have not been damaged. The oil companies think that the Opposition are a pushover. The Opposition make little squeaks at us but the oil companies soon forget that. I still maintain that the Conservatives are not safe to safeguard British interests against the oil companies.

This is a non-controversial Bill and I would not have dealt with these matters if they had not been raised by the Opposition. I had a two-minute speech prepared thanking hon. Members for their participation in the debate and their cooperation, but they have raised these other matters and I must reply.

We have introduced PRT. The Conservative Party should have introduced it when they were in power, but they did not. We have introduced an Act which provides for depletion control and a regime for the oil companies. This entrusts to the Secretary of State certain powers for which he is accountable in the House of Commons.

We have set up the BNOC, which operates commercially, and which is not in its commercial operations in any way exempt from the RTPA. We have negotiated participation which gives to the British Government and the British people the right to know what the oil companies are doing in certain important areas. It gives us the right to know about the policy which they pursue. This is done on a clear principle, which the House knows is the principle of "financially no better and no worse".

The reason why our relations with the oil companies are better than the Opposition think is that we have been open with the companies. We are not seeking to use participation to increase the tax. That is done through PRT, the licensing arrangements, royalties, and so on.

What we are doing is trying to put the Government of the day—whoever the Government happen to be—in a position to know the crucial decisions being made by the oil companies, and giving the Government of the day, with the assistance and authority of Parliament, some bargaining power in the matter. We are doing this without having broken with any of the companies with which we are dealing. This is because of long days of discussion and detailed examination of the problems. This brings absolute openness. The companies know our interests, and they would think us foolish if we did not defend the national interest, because nobody believes that the national interest and that of the major oil companies automatically coincide.

That is the basis on which we work, but anyone listening to the debate would think that the oil companies find their relationship with us in some way disreputable. There is this hard debate, but the agreements that have been reached have been concluded after dealing with every point that the oil companies have raised, and any Government who failed to do that would be guilty of a serious derogation of duty.

Mr. Hannam

Will the right hon. Gentleman accept that the powers that are increasingly residing in him personally as Secretary of State will allow him to discriminate in allocating the sales of oil, and the movement of oil, and that he, personally, can secretly use that power in the future without reference to the RTPA? That power will allow him, without coming to Parliament, to favour BNOC as against the private oil companies. It is therefore legitimate for us, as parliamentarians, to try to ensure that, in the national interest, development and research takes place before the right hon. Gentleman starts meddling in the affairs of these companies.

Mr. Benn

I say to the House what I say to the oil companies. I am on this side of the table to safeguard, as best I can, the national interest in terms of jobs, the balance of payments, the utilisation of oil and investment, and the companies know that. If I were to sit at the table and not say what I have said to the House, the oil companies would think that I was a fool, or that I had something up my sleeve.

I hope that the House has read the history of the oil industry. I hope that they have read the discussions between the Shah, the Saudis, the sheikhs and the American Government. What do Conservative Members think President Carter is doing now, but seeking, according to his lights, to get the oil companies to pursue a policy that he thinks is more in the interests of the American people? These discussions are open. What we have said is that this will be done on a no better and no worse financial basis. The basis of our revenue is the PRT, the royalty arrangements and the share investment where there is a 51 per cent. holding. The shareholding was a matter of tough bargaining, and anyone who says that we should sit back and leave it to what is called private enterprise—and any relationship between the oil companies and laissez-faire in the history of oil is entirely accidental—is wrong.

There are enormously powerful forces at work in the world. The oil companies have large interests, large investments, large employing capacity and a large capacity to transfer money from one part of the world to another. If anyone thinks that that is not the reality of the international oil business, he is making a mistake. The only way in which a Minister can do what is necessary—I hope that it does not happen, but if by any chance the hon. Member for Ross and Cromarty has the responsibility for this task I hope that he will follow this practice—is to sit down and argue with the oil companies about safeguarding our interests. I do not object to the oil companies arguing about the interests of their shareholders, but when setting out an oil policy one has to ensure that the British interest is upheld.

The hon. Member for Bridgwater said a short time ago that BNOC was a regulatory body. Had he telephoned my office he would have been told that it is not. It is a State oil company, of which there are many all over the world. The Americans have even been considering the idea. BNOC operates commercially in an advisory capacity to me and exercises no regulatory powers.

There are no planning agreements. There are participation agreements to which BNOC is a signatory, but it exercises no regulatory powers.

One thing that emerges from all the speeches made from the Conservative Benches on the subject of energy is their ignorance. The speech of the hon. Member for Bridgwater showed that. Had he attended the debates, read the Bill, and heard the arguments he would not have said that BNOC was a regulatory body. It is not. It is a State oil company operating commercially as a company. It acts in an advisory capacity to me, and I am answerable to Parliament. BNOC is also a partner, by equity investment or through participation arrangements, with a seat, voice and vote.

If we are to devise an oil policy, the first thing that it is reasonable to do is to ask the Opposition to study the facts. The second reasonable thing to do is to ask that they show some sign of being aware of the national interest, instead of just being spokesmen for the oil companies, because that is wrong. Thirdly, it is reasonable to ask that they should help us in removing doubt.

Question put and agreed to.

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).