HC Deb 05 April 1978 vol 947 cc439-50
The Secretary of State for Energy (Mr. Anthony Wedgwood Benn)

With permission, Mr. Speaker, I want to announce three new policy decisions on offshore oil and gas licensing.

First, the Government have decided to award licences for 10 blocks to the British National Oil Corporation and the British Gas Corporation, nine to BNOC and one to British Gas. A list of the blocks concerned is being lodged in the Library with a map showing their location. This will increase the national stake in the total area licensed and allow effective depletion polices for any reserves found in the new blocks. It will also help to ensure a continuing programme of work for the Corporations' operating teams.

Secondly, BNOC, or British Gas in suitable cases, will now for the first time have the first opportunity of negotiating to acquire any interest in first-to-fourth round licences that an existing holder wishes to dispose of by transfer.

Any licence holder seeking to make a change of this kind will normally be asked in the first instance to give BNOC or British Gas an opportunity to negotiate for the acquisition of some or all of the licence share being released. In the ordinary course of events, it will only be after a genuine attempt at meaningful negotiations by the Corporation and the assignor has failed, or that the Corporation does not want to pursue them, that applications for the transfer of a licence interest to a private-sector third party would be considered. This policy will help to improve the national equity share in earlier licences—which at present amounts to only about one-eighth of the area licensed.

The Government have also now decided in favour of a sixth round of licensing of some 40 blocks open to applications from private sector companies. In this the oil companies will be able to continue making an important contribution to our offshore exploration and development programme. I shall soon be publishing a consultative document containing detailed proposals for the terms and conditions that will govern the round, which I am sure will engage the interest of oil companies from many parts of the world.

Mr. Tom King

Although we welcome the announcement of the sixth round, which we trust will not take quite as long as the previous round to organise, will the Secretary of State take it that we have the gravest reservations about the rest of his statement? No mention was made of the fact that it flies in the face of all the assurances given by Ministers on the Second Reading of the Petroleum and Submarine Pipe-lines Bill that the British National Oil Corporation would not be given special privileges as a State oil company in this field. [HON. MEMBERS: "Why not?"] That was an assurance given by Ministers on the passing of the Act, on which basis the House passed the Act. Secondly, will the Secretary of State recognise that we regard it as very close to an abuse of ministerial administrative power to give a preemptive right on farm-ins—a first option which was not included in the legislation?

Since the Secretary of State made clear in his statement the important contribution which oil companies all have to make to the development of the North Sea, and since we regard it as essential to confidence and trust in the fair dealings of the British Government in the development of this national resource, will the right hon. Gentleman understand that we regard his statement as not helpful in that direction?

Mr. Benn

I am not at all surprised by the hon. Gentleman's questions since the Opposition have consistently resisted, from the time when they were in office until now, any extension of British control over oil in the North Sea, and on many occasions they have quite falsely forecast disasters which they said would flow from the Government's policy. Many times since I have been Secretary of State—and before then—I have heard Opposition spokesmen say that if we did this or that it would deter foreign investment in the North Sea. That has not happened. The development of the North Sea is going on apace. But we believe that it is right that the British people should have a growing share in the benefits of the North Sea, and the statements made by Ministers when the Bill was passed were absolutely in line with the statement which I have just made.

Dr. Phipps

Is my right hon. Friend aware that the current practice for farm-ins is that the companies first negotiate with private industry and then a refusal is given to BNOC on the same terms? Is it the intention that this practice should be continued? Secondly, is it intended in the sixth round of licensing that BNOC should pay for its share of exploration costs?

Mr. Benn

On the latter question, I have just announced that I shall be issuing a consultative document about the sixth round, and that will allow for consultations. I hope that my hon. Friend will not press me to anticipate that document. As regards the first point, this does represent a change, but we believe that where someone holding a block wishes to assign it to somebody else, the first negotiation on the licence share should take place with BNOC and only in the event of failure should the matter come to me for assignment to a private company.

Mr. Macfarlane

Does the Secretary of State recognise that his announcement will do nothing to attract long-term foreign investment into the North Sea and that, far from attracting foreign oil companies into the 40 blocks, which he earnestly suggested would occur, it will have the reverse effect, and this Government will once again have done nothing but deter foreign investment beyond 1985 and into the 1990s? What can the right hon. Gentleman say about that?

Mr. Benn

The hon. Gentleman's question reminds me of the comment about Wall Street having forecast 10 of the last three recessions in the United States. The truth is that, despite all the warnings which have been given by the Opposition—sometimes, apparently, as spokesmen for the private oil companies—our programme has proceeded. The investment has been available. Money has come even for BNOC financing its own development. I may add that BNOC today announced that the Thistle field came on stream, and had it not been for the role of the public sector, following the failure of the Burmah Oil Company, the development of the North Sea would have been not only slower but in hands not within the control of the House.

Mr. Grimond

Could the Secretary of State give some indication of where these blocks are, since we cannot yet see the map? Are they all in the North Sea, are they in the Channel, or are they in the Atlantic? Where are they? Secondly, how many of them could BNOC operate? Could it operate all the nine allocated to it? Finally, does the right hon. Gentleman expect that this will mean any increased demand for pipelines and terminal facilities, for instance, in Sullom Voe in my constituency?

Mr. Benn

It is difficult to convey a map in an oral statement, and that is why I suggested that it would be better to put it in the Library. In fact, them are nine blocks for BNOC and one for British Gas. A number of them are off the Shetlands, which I know is of special interest to the right hon. Gentleman. There is also something in the South-West Approaches. The intention is that there will be further work in the industry onshore flowing from these developments. There is one other point which I think I should emphasise, knowing the right hon. Gentleman's concern, namely, that if exploration is done by the public sector the capacity for depletion control is much greater since it does not follow that if the oil is explored it has to be developed at the same pace as if it were done by a private sector company. This will give us oil reserves in hand if they are discovered as we expect, which will allow us to follow a more national depletion policy than could happen under the private sector.

Mr. Dalyell

Without asking for an oral map, may I ask my hon. Friend whether any of the blocks are in deep water? If they are, is there any possibility of special help for development because we all understand that the deep water creates special problems and there are advantages for British exports if we can develop this technology.

Mr. Benn

Some of them are in deep water, but it is very difficult to convey fully some of the technical aspects without studying the papers. That is why we have put a map in the Library.

Mr. Gordon Wilson

Does the right hon. Gentleman realise that the Scottish people wish to have a realistic depletion policy? Following his answer about depletion, will he say, in relation to the sixth round on offer to the private sector, whether notice will be given to the oil companies concerned of the Government's intentions in relation to depletion policy and an improved taxation regime to cut out some of the loopholes that seem to be developing?

Mr. Benn

Taxation is for my right hon. Friend the Chancellor of the Exchequer, and I would not seek to answer on his behalf. But I will say this on depletion policy: when the oil companies were first coming into the North Sea and their investment was very heavy before the returns came—front-loaded investment, as it is called—it was necessary to give some assurances that those who invested would be able to develop their fields. Therefore, in the early days those assurances were given, relating to fields that were already under development. This was in 1974. As we move into a new phase of oil policy—particularly through private sector development, but this applies more generally—we are freed from assurances given in the past.

Having said that, I must also remind the House—the hon. Gentleman will know it—that if we wish to attract foreign technology and foreign investment, as we need and have been able quite successfully to do, we shall have to have regard to the fact that those who invest substantial sums of money must have a reasonable assurance that they will be treated fairly on depletion policy. That is the policy we have pursued entirely up to now, and it is why all the warnings from the Conservative Party have been entirely unjustified in their implications.

Mr. Palmer

Will this very welcome progress in the fortunes of BNOC have any effect on the salaries to be paid to the members of the board? If there is to be an increase, as is rumoured, what will be the effect on the pay of the other leaders of nationalised industries?

Mr. Benn

My hon. Friend is raising a point that has been the subject of comment, that board members of the nationalised industries have felt that advertising the proposed salary for the deputy chairman of BNOC raised again their anxieties about their own position. This is a matter with which the Government are dealing separately.

I hope that the House will also recognise that in fixing the remuneration for a national oil corporation we must remember that the international going rate for oil companies is at an enormous level. I think that the chairman of British Petroleum recently had an increase of £90,000 or £95,000 a year. I hope that that will be borne in mind by those who are quite properly pressing their own quite understandable claims.

Several Hon. Members


Mr. Speaker

I propose to call all those hon. Members who have been rising so far.

Mr. Forman

In the light of what the Secretary of State said a little earlier in answer to a question from an SNP Member, the hon. Member for Dundee, East (Mr. Wilson), do we take it that this statement constitutes a covert attempt by the Government to move towards a more cautious depletion policy? If so, does that mean that the statement of the Secretary of State for Industry in December 1974 no longer applies?

Mr. Benn

No, Sir. The hon. Gentleman is confusing two points. The reason the assurance was given by the then Secretary of State, my right hon. Friend the present Secretary of State for Industry, was the reason I gave, that in order to attract investment on the necessary scale in the first stage assurances had to be given about fields under development.

But the hon. Gentleman's second point is quite correct. At the present rate of development of the North Sea we are moving up from no oil three years ago to 60 million tonnes this year and possibly up to 150 million tonnes by the mid-1980s, on the basis of fields already under development. The rational and sensible thing for us to do is to retain a discretion over depletion policy so that we can push the gains from the North Sea oil further into the future instead of being committed by commercial decisions, which would happen if we left it entirely to the private companies to develop the North Sea.

Mr. Skinner

Will my right hon. Friend confirm, in order to get the record straight, first, that those initial blocks were handed over at knockdown prices by the then Tory Government to the multinational oil giants; secondly, that as of now, in all the oil-producing fields in which we have an interest, we have a 50 per cent. ability to purchase and not to control; and, thirdly, that this is likely to be an election issue of great importance, as the Opposition are still intent on waving the flags of the multinational oil giants instead of the Union Jack?

Mr. Benn

My hon. Friend is quite right, that when the licences were granted for the oil companies in the first instance there was no provision whatsoever that the United Kingdom would have an adequate equity holding or, secondly, that even the royalty which was payable would be payable in oil, or that there would be any participation. There was no petroleum revenue tax whatever under the previous Administration. All of these things we have done—

Mr. Tom King

It had already been announced.

Mr. Benn

There had been a vague hint that something might be done, but in Government there is a basic principle of judgment by results, and the hon. Gentleman's party left to the incoming Government no legislation, no participation, no petroleum revenue tax, no BNOC, and arrangements all of which we had to change. Whether that will be, as I believe it should be, an election issue, is a matter that every hon. Member can determine for himself.

Mr. Rost

Is it not also clear that it was the previous Conservative Government that set the oil moving and allowed private enterprise to get the oil, without which the right hon. Gentleman would not now be able to pretend that he was claiming the oil for the British people, when it was already well within the legal control of the British Government and the British people? Will he now admit that his announcement today is a major step towards further backdoor nationalisation and a breach of undertakings he has given to the House and to industry, and will do nothing to improve the prospects of more efficient production of this oil or improve the take that the British people will get from it?

Mr. Benn

The hon. Gentleman should consult his history, because the first nationalisation of an oil company was done by Winston Churchill, then a Liberal, taking a majority holding in the Anglo-Persian oil company, now BP, which has been a very successful venture from the point of view of the British people and the British taxpayer.

It passes my understanding why a party which used to pretend to speak for the national interest should regularly denounce any extension of British control and ownership of the oil in the continental shelf.

Mr. Flannery

Does my right hon. Friend agree with me that Dr. Johnson had a fair point when he said that patriotism was the last refuge of the scoundrel? [HON. MEMBERS: "Oh."] Wait for it. Would he further agree that members of the Conservative Party, which arrogates to itself that it is patriotic, want to sell the oil interests to foreign private enterprise instead of allowing the British people to reap the benefit of this bonus? Would he finally agree that Winston Churchill well condemned them when he was a Liberal, when he said that they poured out patriotism by the imperial pint and pointed out that they never fought for the interests of the British people?

Mr. Benn

That is all part of the history, and I shall not go over it again, except to say that there has been a great debate, which is still in progress, about what this country should do with the North Sea oil revenues. It might be useful to tell the House that if we had not had the policy of the present Government there would be no revenues to discuss.

Mr. Alexander Fletcher

Does the right hon. Gentleman recall that when he presented the Petroleum Revenue Tax Bill and the Petroleum and Submarine Pipe-Lines Bill to the House he did so on the basis that they were both very much in the national interest? Has this legislation failed? Why does he find it necessary now to protect BNOC? Is he saying that the oil companies are still bringing a disadvantage to the British people? Are they doing Britain down? Does he not agree that the oil would still be at the bottom of the North Sea had it not been for the enterprise of the oil companies?

Mr. Benn

I made absolutely clear in an earlier answer that we needed the technology and the investment to develop the North Sea, and nothing that the Government have done in order to defend and extend our national interest has in any way checked the flow of oil.

It would be very naïve to suppose that oil companies, which deal with Governments all over the world, would not expect the British Government to try to defend the interests of the British people. When the Bill was introduced, the BNOC did not exist. It was forecast in the Bill and enacted. The British Gas Corporation was last year given one sole licence. We did not have all that trouble at that time from the Opposition. Perhaps they did not notice it.

In my opinion, it is right and proper that this country, whose whole future depends upon energy—we shall be the only industrialised country in the West which is self-sufficient in eneregy in the years ahead—should have control and ownership of a growing share of the North Sea. At the moment it is one-eighth of the licence blocks that were allocated by the previous Government. We think that it should be greater and hope that the arrangements today will lead to that.

Mr. Ron Thomas

Will my right hon. Friend not agree that it is nonsense to suggest that a publicly owned oil extractive industry should not have command of the funds and technology internationally to exploit North Sea oil on behalf of this nation?

Will my right hon. Friend also agree that the response from the Opposition is quite negative? They believe that if there are losses, the public should meet them, and that if there are profits, these should be for private enterprise. Will my right hon. Friend assure us that in the sixth round we shall see an extension of the British people's control over their own resources?

Mr. Benn

I cannot anticipate the statement, except that I imagine that the drift of what I said today indicates to the House that we think it right that there should be a growing British role and that we shall seek to achieve it as best we can.

The proposal concerning the British hydrocarbon corporation was brought forward 10 years ago by a Labour Party group and was later put into the manifesto and implemented. Had it not been for the BNOC, the disaster which followed the difficulties of Burmah would have led to some interruption in the development of the Thistle and Ninian fields. The international oil companies, which are very familiar with dealing with State oil corporations, are quite ready to go along with this proposition. Indeed, I read in the newspaper that the Alaskan Senate was asking about the possibility of participating in the pipeline in Alaska.

Mr. Heffer

Will my right hon. Friend accept that there will be full support for his statement on the Labour Benches, as well as warm congratulations to him, as he is acting in line with Labour Party policy?

Is it not obvious that the Conservative Front Bench is following the tradition of one of its namesakes, namely, Tom King, who was the lieutenant of Dick Turpin, who wanted to hold people in this country to ransom? Will my right hon. Friend not agree that that is precisely the view that Conservative Members take of this matter?

Is it not right, further, that we should be moving step by step—I do not apologise for this—towards full public ownership of the oil interests in this country, so that the people of this country can have the full benefits of the oil that we have?

Mr. Benn

May I, in responding to my hon. Friend—who would not expect me to go beyond the statement that I have made—say that if the Opposition seek to persuade the British people that there is an automatic correspondence of interest between the multinational oil companies and the people of this country, the people will recall the experience in the Middle East, where for many years the grinding poverty in the Arab countries coexisted with substantial profits for the oil companies. I think that the Conservatives would be very ill-advised to try to put across their case to the British people, who will see the merit in what we have announced today.

Mr. Maurice Macmillan

Will the right hon. Gentleman put the record straight by agreeing that the late Sir Winston Churchill acquired shares in British Petroleum in order to ensure fuel for the Navy? Can the right hon. Gentleman's Government ensure that we shall have a Navy to protect the North Sea?

Mr. Benn

The right hon. Gentleman has no doubt read, as I have—and regularly re-read—the speech made by Sir Winston Churchill on that occasion. The right hon. Gentleman will have read that one of the reasons that Sir Winston Churchill introduced the Bill was, as he put it, that this country and other consumer countries were being throttled by the oil trusts and: that it was in the national interest that this country should have access—and secure access—to oil for its own purposes. Admittedly, in that case it was a matter of naval development, but why should industrial progress be seen as less important than naval development?

Mr. Tom King

Is the right hon. Gentleman aware that we totally reject his allegations that we are not proper custodians of the national resources in this respect? Is he aware that the first White Paper of this Labour Government recognised that it was a Conservative Government who brought the oil on the continental shelf into firm British ownership under the Continental Shelf Act 1964? Does he not accept that a Conservative Chancellor of the Exchequer had already announced in 1973 that a new taxation regime would be introduced, and that, as not a drop of oil was landed here until 1975, no revenue was lost? [Interruption.] Moreover, it was the rapid escalation of prices in 1973–74 which made the taxation imperative—[Interruption.]—as was recognised by hon. Members in all parts of the House.

Mr. Benn

If the hon. Gentleman is ready to base himself on the record of the Government of which he was a supporter—

Mr. Speaker

Order. The hon. Member for Bolsover (Mr. Skinner) must not give a running commentary all the time when other hon. Members are speaking.

Mr. Skinner

On a point of order, Mr. Speaker. I was merely trying to draw to your attention, and that of other hon. Members, the point that perhaps the Opposition spokesman has not the permission of his leader—

Mr. Speaker

Order. The hon. Gentleman is too shrewd a parliamentarian to think that he has done very well with that intervention.

Mr. Benn

If the hon. Gentleman is ready to rest upon his record and to justify again, in the light of circumstances, his party's hostility to the oil policy that this Government have introduced, and is prepared to justify all the false forecasts of doom which have come from the Conservative Benches since 1974, I am very happy that the matter should be put to the electorate to decide.