OIL SUPPLIES AND PRICES

HC Deb 11 December 1978 vol 960 cc29-113

3.30 p.m.

Mr. Peter Viggers (Gosport)

I beg to move, That this House recognises the need for stability in oil supplies and prices; welcomes the massive opportunities which have been offered by the discovery of oil reserves offshore and onshore the United Kingdom and their successful development so far which has been primarily by private enterprise; believes that nationalisation would be counter-productive when applied to areas of such high commercial risk; and therefore calls upon Her Majesty's Government: (a) to provide an economic climate in which private enterprise can continue to make its contribution to oilfield development, (b) to end the uncertainty which has been caused by the Secretary of State for Energy's approval of a motion at the Labour Party Conference calling for further nationalisation of North Sea oil, and (c) to clarify their intentions with regard to British Petroleum in the light of the Secretary of State for Energy's remarks on that company made at the Labour Party conference. I see with some surprise that the Minister of State, Department of Energy is sitting on the Government Front Bench. My motion is severely critical of Government policy and names the Secretary of State for Energy. It is surprising that comments made by the Secretary of State at the Labour Party conference are to be explained by his deputy and not by himself. On Thursday evening I gave notice to the Secretary of State of the exact wording of my motion. That doubles my surprise that he is not here today.

There are several reasons why I choose this subject as being appropriate for today's debate.

Mr. Bob Cryer (Keighley)

On a point of order, Mr. Speaker. So far the hon. Member for Gosport (Mr. Viggers) has not declared what I understand to be his interests in oil. I know that the rule is that if an hon. Member has declared his interest at some dim and distant point in the past that is deemed to be enough.

I am sure that you, Mr. Speaker, and the hon. Member will wish members of the public who read the debate to have the fullest and immediate understanding. Surely it would be for the convenience of people outside the House and hon. Members who refer back to the debate if all financial interests relating to the subject under discussion were declared in each debate. That would mean that those who do not have copies of Hansard for several years past immediately available can draw their own conclusions from the simple record of the debate.

Mr. Viggers rose—

Mr. Speaker

Further to the point of order—Mr. Viggers.

Mr. Viggers

I have no wish to make any comment further to that point of order, Mr. Speaker.

Mr.. Speaker

It is up to hon. Members what interests they declare.

Mr. Viggers

I am grateful to you, Mr. Speaker. I propose to make my own speech in my own way. I shall not be thrown off course by any hon. Member who seeks to try to interfere in the manner in which I present my case.

The first reason why I choose this subject is the sheer size of the amount of money involved and its importance to the national economy. North Sea oil landed in the United Kingdom in 1977 had a value of about £2,000 million. Gas contributed a further £2,000 million. By the mid-1980s the tax yield from North Sea oil alone will be worth £4,000 million a year to the British economy. The amounts involved are so large that most people cannot comprehend them. Professor Northcote Parkinson's laws operate, and the rule in this case is that of high finance, or the point of vanishing interest.

Parkinson shows that a committee will resolve to spend £10 million in two and a half minutes but will spend much more time arguing whether to spend £350 on a bicycle shed, simply because people can comprehend £350 whereas most people find £10 million difficult to visualise.

The amounts involved in North Sea oil run into thousands of millions of pounds, but it has not been the subject of a debate in the Chamber during the four and a half years that I have been a Member of Parliament. The only reference to the subject in general terms was made during a Friday debate on a Private Member's motion tabled by my hon. Friend the Member for Worcestershire, South (Mr. Spicer).

The second reason why we should now debate the subject is that the Government have been in power long enough for their policies to begin to have some effect. Oilfield development involves a long time scale. It takes about 10 years from the time of oilfield discovery to the time when there is a flow of production from the field. The present Government have been in power for only about five years, but it is possible to see some effects of their policies on offshore oil development.

The third reason is that this is a subject in which I have always had a particular interest. The proper development of North Sea oil was the subject of my maiden speech in the House. I record that I have for many years been involved in the financing of North Sea oil development. That was before I became a Member. I retain some interest.

The hon. Member for Keighley (Mr. Cryer) feels that that is some kind of slur to throw at an hon. Member. But we need some hon. Members with a knowledge of the subject to contribute to the debate. To seek to deprecate and diminish an hon. Member simply because he has some background knowledge is unworthy of the House.

The final reason is that the proper development of North Sea oil is a subject that needs detailed debate. It is not suitable for raising at Question Time, or in response to statements, because the Secretary of State and other Ministers have become adept at side-stepping the main issue. They always invoke the national interest. There is a ritual invocation of the national interest.

When one examines the national interest as interpreted by the Government, one finds that it just means boring, old-fashioned nationalisation. It means nationalisation as it is practised with such notable lack of success in the aircraft and shipbuilding industries and British Leyland. Nationalisation is not the answer. A State-controlled agency is uniquely unsuited to grapple with the major commercial problems of North Sea oil development.

I shall first state my general views of the way in which we should approach oilfield development. First, we should recognise that oil and gas are minerals. They are part of the land mass of the United Kingdom. By using them, we are taking away part of the United Kingdom itself and burning it. It is not unfair to say that we are doing something that is com- parable to carting away truckloads of arable land and dumping it in the sea. We should, therefore, regard oil and gas reserves as a depletion of capital. It is wrong to think of the benefit as if it were revenue. We should balance the depletion of capital by a reinvestment in alternative energy sources and in other capital projects through the State oil fund.

Secondly, we should regard the oil and gas benefits, which took millions of years to develop, as if they were intended for all generations rather than one. It is wrong for us to act as one generation of society and to think that we can squander the benefits of North Sea oil without proper regard for future generations.

Thirdly, the Government's duty is to provide a stable background for the enormous commercial ventures that are needed to develop oil and gas. The fact that oil companies have been prepared to commit funds in the past does not mean that their investment can be taken for granted in the future.

Fourthly, we should stress conservation of oil and gas in our planning. We must cut out the wasteful flaring of gas as far as possible by bringing forward projects such as the secondary gas-gathering pipelines. We must spread the availability of oil and gas over many years and avoid peaks and troughs of supply. In doing that, we need to utilise all the skills available in the international oil industry for the benefit of the British people as a whole.

With that background, what has been the Government's record? They have two main legislative planks. The first is the petroleum revenue tax. A tax of that nature is similar to the proposal which, no doubt, a Conservative Government would have introduced in 1974 had they had the opportunity. The second plank of Government policy is the creation of the British National Oil Corporation. BNOC's birth, which I remember well, was accompanied by protestations that it would operate commercially. In reality, BNOC is privileged and hampered. Its relationship with the Department of Energy is unclear and unhealthy.

BNOC is the Government's chosen vehicle for North Sea oil nationalisation, and to achieve this purpose it operates as an oil company but also has many other roles linked with Government policy.

BNOC's overt operations allow it to operate as an oil company and it receives licences and does indeed operate as an oil company. Until 1975, 94 per cent. of the money needed for North Sea oil development came from private enterprise and there was no shortage of funds.

How commercial can BNOC be in its present operations? First, it has the right to apply for licences at any time, or the right to receive a suggestion that it should apply for licences at any time. Secondly, it acts as adviser to the Minister. That means that it is the referee in the game as well as a player. Thirdly, it is exempt from petroleum revenue tax, which the Government intend to increase for other companies. Fourthly, it has access to funds through the national oil account. Fifthly, it has access to the Treasury through one nominated director and has access to the Department of Energy through another nominated director. Sixthly, it has the right to take up to 51 per cent. of oil from existing discoveries if it chooses.

This means that BNOC will be trading in 1 million barrels of oil a day by the early 1980s, representing an annual turnover, at current prices, of more than £2,000 million a year. It takes many years to build up a good commercial team in an oil company, yet all these risks are being taken by a company that did not exist three years ago. The link between BNOC and the State is unhealthy, because BNOC has been given too many roles. We cannot expect BNOC to be an impartial observer and adviser and a fully commercial company at the same time. Something has to give, and it has done.

No one in the oil industry now believes that BNOC is impartial. The Government links are too cosy. One oil man, with more bitterness than wit, said recently that the Secretary of State is turning Britain into a banana republic.

BNOC's commerciality is difficult to assess because it has not yet been set up on commercial criteria and the House has had difficulty in gaining detailed access to BNOC, as the Public Accounts Committee and the Select Committee on Nationalised Industries have said. To give one example, I would mention the planning agreements between BNOC and the oil companies. One oil company told me that originally it took a six-page document to encapsulate the agreement but that it now takes a 220-page document to do the same thing. How can BNOC be commercial when it has so many roles to fulfil, some of which are not intended to be commercial?

It is the general climate in North Sea oil development that has been getting worse, not the weather. Costs are increasing fast. We are looking at oil wells that can cost £10 million each. An authoritative summary of prospects has been prepared by the United Kingdom Offshore Operators Association, UKOOA. We on the Conservative Benches are accustomed to receiving jibes from the Government side that we accept what the oil industry states as gospel. I do not seek to establish this document as authoritative, but unless it is answered by the Minister arid the Government are prepared to show facts that contradict it, one must accept it as authoritative and worthy of reference. Energy Commission Paper No. 17 spells out some facts which should be accepted or refuted.

First, the UKOOA. document says that we need new discoveries to provide production of 2 million barrels a day. Secondly, it points out that one well in five has found oil so far and that one well in 14 has had a commercial discovery so far. The critical question is what is a commercial discovery? If the financial and tax climate is right, quite small fields can be developed. If the climate is unfavourable, only big and heavily productive fields can be undertaken. This is the meaning of the "threshold field size ". The larger the threshold field size, the fewer the oil fields that are likely to be developed. Oil companies assess the cost and the potential advantage and then decide whether to take the risk of speculative drilling.

The threshold field size has been rising and now threatens North Sea oil development. What has the oil company assessment been of North Sea oil development recently? How likely are we to get our 2 million barrels a day of extra production?

Let us examine exploration rig activity. I refer to the questions stimulated by my hon. Friend the Member for Ross and Cromarty (Mr. Gray), to which replies were recently given by the Government. Figures for June to August in the past three years show that 17 exploration wells were started in 1976, 22 in 1977 and three in 1978. The full-year figures are 58 in 1976, 67 in 1977 and 39—estimated —for this year. When my hon. Friend the Member for Bridgwater (Mr. King) stated in the summer that North Sea oil development was slowing down, the Minister did three things in quick succession. First, he categorically denied it. Secondly, he explained it away. Thirdly, he set up an inquiry to find out why it was happening.

It is too early to be dogmatic but it seems that the sixth round of oil licence applications was not a success. The world's largest oil company, Exxon, was not represented. Many of the major companies have apparently put in nominal applications. The undertaking work programmes will be the acid test whether the sixth round has been successful. It is too early yet to say. I invite the Minister, as is done in Holland and the United States, to state which companies have applied for which blocks, so that we can see what applications have been made and judge for ourselves whether, as we suspect, the pace of North Sea applications is slowing down.

Ministers say that they have done no harm to North Sea oil development so far, but they underestimate the time scale of decisions. Politicians often do. They are like men driving a car travelling at a fast speed. They put their foot on the brake, and when nothing much happens they put their feet down harder and harder on the brake until eventually the vehicle comes to a screaming, shuddering halt. There is a risk that that will happen in the case of North Sea oil.

I would like to tell the Minister of State where I think the Government have gone wrong. There is alarm over the drop in work on new wells. It was the heading to an article in Offshore Oil dated 23rd November, in which the Minister of State is quoted as saying what he thinks could happen. He knows and will not deny that the increase in petroleum revenue tax and in costs in the North Sea have threatened the development of marginal oilfields. The article says that On the vexed question of the marginal fields, Dr. Mabon has challenged the companies to approach the Government for tax relief, and referred back to existing legislation permitting of relaxation of royalty payments for marginals. ' Test our bona fides on tax relief' says Dr. Mabon. Fair enough, but I think that is looking at the problem through the wrong end of a telescope. The Government are taxing the commercial oil companies out of existence, so that they cannot afford to operate in the North Sea, and then offering them concessions on marginal fields. They ought to be doing the opposite. They should do what the Conservative Government would have done in 1974; they should introduce a clear rate of tax and then bring in an excess level of tax where fields have been excessively or highly profitable.

It is wrong for the Government to use overkill on private enterprise and then give relief. They should deal with it the other way by providing a proper, commercial environment and taxing where appropriate. When the private oil companies' demand to participate in North Sea development drops away, the Government will do what they did in the City of London two years ago, which led to an investment strike, and then say that the country has been let down by private enterprise. The truth is that the climate created by the Government is so unattractive that private enterprise has no alternative but to think twice about investing.

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

The hon. Member said that he was in favour of the petroleum revenue tax, which was introduced in 1975, because the Conservatives would have introduced it if they had won in 1974. If so, is he against the proposals made on 7th August under the PRT? That is not the impression that one gains from his Front Bench.

Mr. Viggers

The right hon. Gentleman knows that an individual Opposition Member is in no position to say whether a second level of taxation is right or not, because he has no access to Treasury or departmental civil servants and advice. While I admire the right hon. Gentleman for attempting, with his customary charm, to tie my shoelaces together, I must seek to avoid that.

I trust that the Conservative Party in Government will provide a tax regime that is attractive to private enterprise but does not prevent development of the marginal fields and then operate on the more attractive and successful fields rather than use a policy of overkill and then give reliefs on marginal oil.

The first part of my motion is general in its application. It deplores the increase in nationalisation and calls for more stimulus for private enterprise. The second and third parts are specific. They derive from comments by the Secretary of State for Energy at the Labour Party conference this year. How the Minister will seek to exculpate, explain or correct his right hon. Friend, only time will tell, but clarification is needed of the right hon. Gentleman's mischievous remarks when replying to that debate.

For the benefit of those who were fortunate enough not to be at the Labour Party conference, I had better explain that a resolution was passed to take oil resources into public ownership. The Secretary of State accepted that resolution on behalf of the national executive committee of the Labour Party.

Mr. Sydney Bidwell (Ealing, Southall)

Hear, hear.

Mr. Viggers

The hon. Member expresses agreement, but what does the resolution mean? The Conservative Government nationalised North Sea oil in 1964, and oil resources have been nationalised. How can they be renationalised, or further nationalised? In one sense, therefore, the resolution was silly, as The Times commented in a leading article on 6th October 1978, saying that Labour Party conferences have a capacity to do plain silly things…Yesterday's passing of a motion calling for the taking of North Sea oil into public ownership falls squarely into this category. So to that extent it was silly, but we cannot merely dismiss it, particularly when the responsible Minister welcomes the resolution and gives further thought to the issue.

The Secretary of State said, according to The Times of that same day: In time, the oil companies will have to be moved from being concessionaires to being con- tractors, so that ownership of the resources is in the hands of the nations themselves. I used the word "mischievous" advisedly. The Secretary of State used the word "nations" in the plural. Which nations is he thinking of? Is that a hint of sep- arate funds for parts of the United Kingdom? If so, it is a complete departure, and implies a change of policy by the Government.

One cannot feel that the Secretary of State says anything in vain. He usually means something, however obscure and Delphic his utterances appear. Let us consider the effect of this comment on the oil companies, on their confidence in longterm contractual arrangements and on their uncertainty in respect of the compensation that they may be given should their interests be nationalised. Let us also think of the effect on the taxpayer who would have to foot the bill if the oil companies were nationalised. Have the Government any further intention to renationalise North Sea oil, and, if so, how? What would it cost? Whether the Minister can interpret the remarks of his absent right hon. Friend, only time will tell.

According to The Times, The passage of yesterday's motion by itself must have created some element of that uncertainty about the future. It is mischievous for the Secretary of State to behave in this way and not to explain himself. It is surprising, if not also mischievous, that he is not here to explain himself today.

My third point is a request for some clarification of the Government's intentions with regard to British Petroleum, Britain's biggest company, which is 51 per cent. State-owned and which operates wholly commercially, with great success world-wide. So far, successive Governments have been restrained in their attitude towards the company and have been rewarded by an excellent capital growth and income. Before the Minister points it out to me, let me say that I know that the Conservative Government arranged for the taking of that stake in BP.

The success of BP does not please the Secretary of State, who has described the Government's relationship with the company as "not a satisfactory one ". He said, again at the Labour Party conference, that a resolution to bring BP and its subsidiaries under full public control, along with another motion, represented an important addition to Labour's armoury of policies. What is the right hon. Gentleman planning? What would happen if he tightened State control? First, he would damage the commercial spirit of BP. Secondly, he would damage BP's international operations. For example, BP developed the North Slope oilfield in Alaska, involving enormous commercial risks, which a Government agency would have found it difficult to justify to its sponsoring Department. Some of the greatest obstacles facing the oil company were environmental objections to the pipeline. A State-controlled company would have been hampered by its national connections and halted by political pressure if it had tried to push through such a project.

It is arguable that Labour Party conference resolutions are one thing and Government policies another, but in this case the Minister responsible for an important Government Department has approved the conference resolutions and made it clear where he stands. That is why my motion calls on the Government to say where they stand.

When the Secretary of Staate was moved from the Department of Industry, the Prime Minister was congratulated on the skill of the appointment. According to The Times' political correspondent, Ronald Butt, the move took place because the Prime Minister had come to believe that the Secretary of State was a major obstacle to the return of confidence to industry. The Department of Energy is not a siding into which to shunt a Minister who is damaging elsewhere; it is a major Department of State, responsible for decisions that will affect this country for decades. That is why the Government must recognise the problems that their own policies have created and, in particular, must clarify and perhaps correct the mischievous remarks of the Secretary of State.

3.58 p.m.

Mr. J. Grimond (Orkney and Shetland)

I congratulate the hon. Member for Gosport (Mr. Viggers) on giving us this opportunity to discuss North Sea oil. His motion raises many important points.

North Sea oil development is now reaching a crucial point. In Orkney, it is several years since oil began flowing to Flotta. On the whole, the operation has been handled to the satisfaction of the oil company, the local authority and the Government. There have been snags, of course, and we should learn the lessons which have emerged.

Once again, as I often do, I urge the Government to look more closely at what is happening in Orkney and Shetland, because there they can see under semi-laboratory conditions what may happen on a wider scale in the United Kingdom. The main point is that the oil terminal is on a separate island in a confined area and it is possible to some extent to control such matters as labour and transport.

Further north of Sullom, the position is very different. Many people think that oil has been pouring into Shetland for years. The first oil arrived in Shetland about a fortnight ago, and the whole operation is many years behind time. It has run into a number of snags, one of which, already mentioned by the hon. Member for Gosport, is the escalating cost of exploration and of bringing oil ashore.

The operation on Shetland is much bigger than that on Orkney. It is on the mainland of Shetland, and a number of difficult problems have arisen. One concerns the Government's pay policy. The oil companies pay immensely high rates of wages and salaries, but the pilots, harmour-masters and so on who man the terminal are prevented from keeping up with these high rates because they must conform with the Government's pay policy. That presents a difficulty.

There have been difficulties at the terminal not only in respect of people's pay but also in respect of island allowances. I beg the Government, therefore, to look at this whole position. I hope that we have got over the worst of it, but it is still liable to cause trouble at a very important terminal.

The running of the terminal is a joint operation between the oil companies and the local authority. It has taken a long time to iron out the various snags. Now the oil is flowing, and I beg the Government, now at least, not to interfere with the arrangements that have been made. The Government may feel that other arrangements might have been better. So may I. Nevertheless, the matter has been decided, the terminal has been built and the oil is now coming ashore.

A certain amount of concern has been caused by talk of further nationalisation. But what would be nationalised? The oil in the oilfields has long been nationalised. There are the British National Oil Corporation and the semi-nationalised British Petroleum. Therefore, the only other items that could be nationalised are either other oil companies or terminals. I trust that we may have a reassurance that that is not the Government's intention.

Many people regard oil as the salvation of the British economy. I do not. If access to raw materials was the making of a country, Russia would be the richest country and Switzerland the poorest. The situation is almost exactly the reverse. Many people feel that we can look to the oil to solve all our difficulties. However, oil—certainly locally—is extremely inflationary. It has boosted every form of payment, price, salary and wage, but those who do not enjoy the advantages of working in the oil industry still have to pay the higher prices.

This factor has put the local authorities in great difficulties. Immense sums have had to be laid out before any oil revenue has appeared. The authorities are already in serious difficulties over their rates, and they are seeking Government assistance in this matter. I hope that they will get a satisfactory answer. Nationally, though the oil may help the balance of payments, it is by no means certain yet that its net effect in the long run may not be inflationary. It will only not be so if there is a great improvement in productivity, and oil will not by itself achieve that.

The hon. Member for Gosport also mentioned investment. He is right that we should be investing in alternative forms of energy. However, the Government's estimate is that these other forms of renewable energy will only at best provide about one-eighth or one-tenth of our energy requirements, assuming that all the experiments succeed. I hope that the Minister of State will say something about that. It is most important to look ahead to the time when the oil runs out.

In the North of Scotland there is very little spin-off from oil. As far as I know, practically no subsidiary industries connected with oil have sprung up. It is, therefore, a question not only of investing to produce energy after the oil is exhausted' but of giving work to the people who are now employed in oil construction or other oil-related work. That will be a most serious matter for my constituency.

The population of Shetland has risen from 18,000 to 21,000 in the last few years. There are 4,000 labourers in camps. They will return home, though what they will find to do when they get there is anyone's guess. At any rate, people who come to live in Shetland will have to be supplied with work, and our native industries will have to be built up again.

I hope that the Government will say something about the flaring of gas. I have pressed repeatedly for better use to be made of the gas which at present is still being flared off at Flotta. I do not know how much of the gas at Sullom can be used for the power station, which will be very large and in the long run will be able to meet all of Shetland's demands.

I come to the question of pollution. The Government's attention seems to be fixed too closely on pollution on the high seas. However, pollution in narrow waters would be devastating. If there was pollution on the approaches to Sullom, none of the figures that the Government have quoted concerning their capacity to clear up sea pollution would make any sense. If Yell Sound was filled with oil, that would be an appalling disaster, and it would be only marginally less bad if the disaster took place in the Pentland Firth.

I see the hon. Member for Ross and Cromarty (Mr. Gray) here. He may well find that some large tanker on its way to Scapa Flow could cover the beaches of his constituency and many others with oil before the Government's rescue operation got under way. I am told that the great depot of materials for clearing up oil pollution is to be at Bristol. Bristol, I think, is not one of the major oil terminals of the British Isles. I should like something to be put nearer to Scapa and Sullom.

There is ambiguity about the control of oil. My fear is not only that BNOC is being put into an impossible position. I agree with the hon. Member for Gosport that it is extremely difficult for it to be a Government adviser and a major contractor competing with other companies. That seems to be true also, to some extent, of local authorities and even the Government, and I hope that the Minister of State will clarify who is the referee in all these matters. It is not enough for the referee to expose his commercial interests. It is essential for him not to have any. I trust that the Government will say something about that.

I hope that the Minister will say something, too, about exploration. I tend to get rather confused about whether exploration has gone well or badly and about how much more exploration we want. The hon. Member for Gosport said that it was important to conserve oil. It might therefore be a good thing for there to be no exploration. I am not certain what is the ideal.

Will the Government say what is happening in the Norwegian sector of the North Sea? Is any oil reaching Norway? What will Norwegians do with it? Will they bring it across to this country? How is their exploration going?

In spite of a short-fall from the North Sea, there is no shortage of oil at current prices.

The history of North Sea oil is at an important stage. There is genuine concern about the future. There is considerable alarm at the escalation of costs, and I believe that it would be fatal to begin altering the basis upon which all calculations have been made. I hope that the Government will give us a firm assurance that that is not their intention and that further nationalisation will not be carried out. I trust that they will be able to reassure us on some of the other points that I have raised.

4.10 p.m.

Mr. Eric S. Heller (Liverpool, Walton)

The hon. Member for Gosport (Mr. Viggers), in moving the motion, spent much of his time discussing not issues but my right hon. Friend the Secretary of State for Energy. I am not surprised that that was his line. It also seems to be the line taken by a great number of our political commentators, who spend most of their time trying to build up my right hon. Friend as the great bogyman of the Labour Party. Even when my right hon. Friend takes a step to the extreme Right, we see it interpreted as being on the extreme Left. That is all part of the present game.

In replying to the debate at the Labour Party conference, my right hon. Friend was not speaking as Secretary of State for Energy, nor was he speaking of Government policies ; he was dealing with the policy accepted by the national executive committee of the Labour Party. That was his job. Those of us who speak on behalf of the NEC at Labour Party conferences are not giving our personal views, whatever they may be; we are undertaking the job of replying to a debate on a motion. We are putting forward the interpretation of the NEC. At the conference, the NEC agreed to support the motion put forward by the Amalgamated Union of Engineering Workers—a motion moved ably to Mr. Gavin Laird on behalf of that union.

I wish to put these matters on record, because it appears that whenever my right hon. Friend speaks on any issue—and even if he does not speak—his speech is built up on the lines of "Benn clashes with Prime Minister ", with the suggestion that my right hon. Friend wishes to take everything into public ownership and to bring about a Soviet-controlled State, and all the rest of it. That is absolute nonsense.

Mr. Hamish Gray (Ross and Cromarty)

It is not nonsense.

Mr. Heifer

If the hon. Gentleman does not regard it as nonsense, he obviously has not got much on top to know whether it is nonsense. Anybody who has any intelligence knows that that is absolute nonsense if alleged against my right hon. Friend the Secretary of State for Energy.

I wish to emphasise that my right hon. Friend was speaking for the Labour Party national executive; he was not defining the position of the Government. We all know that the Government are elected on a manifesto for five years. The point of a Labour Party conference resolution is to define what we wish to do for the next five or 10 years. Mr. Gavin Laird, in moving his union's motion, said: We demand complete public ownership of the oil resources. What is wrong with that?

Mr. Gray

A great deal.

Mr. Heifer

One has only to mention "nationalisation" or "public ownership" for Opposition Members to go into a quiver, just like a jelly. What is wrong with asking that the resources of this country—resources that are not owned by any private enterprise group—should be brought within public control in the interests of the nation as a whole? I see nothing wrong with it. The Conservative Party sees everything wrong with it because it puts profits and private enterprise before the interests of the nation.

Mr. Gray

And jobs.

Mr. Hefter

If the hon. Gentleman wishes to discuss the subject of jobs, he should remember that under private enterprise Rolls-Royce got into such trouble that a Conservative Government had to bring that firm under public ownership to protect jobs.

Mr. Nigel Forman (Carshalton)

Does the hon. Gentleman realise—if he ever pays any attention to events beyond Smith Square and the national executive of the Labour Party—that the overwhelming majority of public opinion, whenever it is told of anything to do with further nationalisation, is strongly opposed to such a course? That applies to the North Sea as to anything else. Secondly, does he appreciate that the main difference between my hon. Friend the Member for Ross and Cromarty (Mr. Gray) and himself is that he himself has got plenty on top, but nothing between the ears.

Mr. Heller

We are always hearing that people are opposed to public ownership or nationalisation as reflected by public opinion polls. We have heard that since the year dot.

Mr. Forman

It is true.

Mr. Hefter

If it is true, why does Labour still pull a considerable vote, and why will it continue to do so? It does so because it puts forward the interests of the nation and of ordinary working people rather than the interests of profit and private enterprise.

Mr. Gray

Which section of Labour —yours or the Right wing?

Mr. Speaker

Order. I do not have one.

Mr. Heifer

The hon. Member for Ross and Cromarty (Mr. Gray) reacts exactly as one expects. One has only to mention bringing the nation's resources under public control in the interests of the nation rather than in the interests of private enterprise for Tory Members to go off like a bomb. They put squibs here, there and everywhere. Why do they do it? They take that course because they do not give a damn about ordinary people. They think in terms only of the profit-making system, not of the interests of the mass of ordinary people.

Mr. Tom King (Bridgwater)

What does the motion passed at the Labour Party conference mean? The motion said: The Conference calls for the Government to take into public ownership North Sea oil". When the hon. Member for Liverpool, Walton (Mr. Helfer) was a Minister in the Labour Government, they published a White Paper which said that Britain's oil was already publicly owned. The White Paper added that public ownership had been achieved under a Conservative Government. Does not that make the hon. Gentleman's last remark seem a little silly?

Mr. Helfer

The hon. Gentleman can find out exactly what the motion means by reading what was said by the speakers in the debate and by my right hon. Friend the Secretary of State for Energy, who was speaking on behalf of the NEC. My right hon. Friend said that the Government should become the contractors rather than the concessionaires and that the Labour Party intended to extend the whole concept of complete public ownership of the oil industry.

There are some of us in this House who, from the beginning, argued that the oil resources of our nation should be entirely publicly owned and controlled, and that the contractors should also have been the Government, on behalf of the British people, rather than private enterprise. We have argued that line consistently. We believe that the oil was put there by the gift of God and not by the Conservative Party or private enterprise. The same is true of coal and all the other resources, such as water. Private enterprise had nothing whatever to do with the origin of those resources. They are the gift of God and not the gift of political parties. Therefore, they should be utilised by the nation, on behalf of the nation, and in the nation's interests, and not because private enterprise wants to utilise those resources for its own profit and interests.

Mr. Tom King

That was why the Conservative Government passed the Continental Shelf Act in 1964. It wanted to bring oil into the nation's ownership. I am grateful to the hon. Gentleman for clarifying the meaning of the Labour Party motion. Will he go a little further? Is it intended that that motion will remove retrospectively from the present oil companies the licences that they now hold? Furthermore, will he comment on the reason why the Labour Government are now issuing a further licence round? Is it his intention that a future Labour Government should remove retrospectively the rights achieved under those licences?

Mr. Heller

The hon. Gentleman knows better than to put a question like that to me. That is a matter for the next Labour Government to determine. Moreover, the hon. Gentleman knows that whatever the Government are doing now in relation to the present, licensing will continue. We are bound by the manifesto commitments upon which we were elected. This matter is not yet in Labour's manifesto, and the hon. Gentleman knows quite well how we will do it. The process of working out new legislation is that when one comes into Government one discusses a question with advisers and with civil servants and works out how such legislation will be put into operation and what form it will take.

The hon. Gentleman must not think that I was born yesterday. I did not come down from Mars. I entered the House 15 years ago, and I have had a lot of experience of the way in which legislation comes before this House. He knows that as well as I do. He also knows how these things work in relation to a resolution of a Labour Party conference—or a Tory Party conference, for that matter. Tory Party conferences have passed resolutions on one thing or another which never see the light of day, or, if they do, appear not in exactly the terms passed at the conference. That is a catch question on which I am not prepared to be caught.

The reality is that this is an expression of opinion by the Labour Party. which will want something of that kind in the party manifesto. The actual details will be worked out by an incoming Labour Government. The hon. Gentleman knows that very well.

Mr. Tom King

So we now have this quite clear. I understand why these matters have to be discussed and the details of how we can do so. But do I understand the hon. Gentleman to be saying that, in his view, it will be a matter for discussion with civil servants, if a Labour Government were returned at the next election, as to how the existing licences would be re-possessed by that Government? That is one of the matters which would be discussed.

Mr. Heller

It seems that we agree on something—that is, the actual process of legislation being carried through.

I come now to another point made by the hon. Member for Gosport. He spoke of the nation's resources as though my right hon. Friend the Secretary of State for Energy was talking about some sort of special position for Wales or Scotland—about the nation in the sense of the four nations which make up the United Kingdom. It is clear from the speech of the Secretary of State for Energy that he was talking about the British nation as a whole, not its constituent parts. He was talking of the whole, including the English, the Scots, the Welsh and the Irish. If one reads the speech one sees that the point is further clarified. The Secretary of State spoke of the EEC, because, he said—I quote from the report in The Times of 6th November this year —there were a number of challenges from the EEC to Britain's energy policy. With the help of the unions the Government had succeeded in fighting off a serious attempt to give the EEC Commission effective control of Britain's refinery policy and to determine the throughput, although the oil was British and Britain was overwhelmingly the greatest oil producer in the Community. It is clear from that reference alone that my right hon. Friend was talking about the British nation as a whole and not the component parts.

On the other hand, the resolution suggested that a fund should be administered by the National Enterprise Board to ensure the regeneration of the United Kingdom manufacturing industry. That is absolutely essential. One of the problems we have to face—this should be recognised:specially by the Opposition—is that our oil resources are not gigantic ; they are fairly transient and will not last for ever. But the Opposition would use them, if they ever got control, to bring down taxation and make certain that people received more in their pay packets, instead of concerning themselves precisely with the regeneration of British industry, which would create more jobs and ensure that we achieve a turnround from the difficult situation we have had for so long.

I see some shaking of heads. I hope that there will be an authoritative statement from the Tory Opposition that they have no intention whatsoever of using the oil resources in that way. We have not as yet heard such an authoritative statement. In relation to our oil resources, we on the Labour Benches have long argued for the regeneration of British industry. It is essential that we use this opportunity to make certain that areas of high unemployment, such as those in Scotland, Wales, Northern Ireland, the North-West and the North-East, are relieved through the creation of new jobs, the oil resources being used in that way. That is what we have been talking about.

The hon. Member for Gosport said that we were being silly in this matter. He alleged that we said silly things. I do not know what he means by that. If the hon. Gentleman had watched the debate on television he would have witnessed a first-class discussion on the need to get to grips with the problem of our oil resources. He would have heard the demand that the fullest possible use of those resources should be made for the nation as a whole.

Obviously, the Government cannot, and should not, say that they will implement the Labour Party resolution carried at conference. That is not their remit. Nevertheless, I hope that that conference resolution, suitably brought within the framework of legislation in the House, will be properly used so that we may extend public ownership in the oil industry and use the resources of the nation in that industry, and in others as well, in the interests of the whole country.

4.27 p.m.

Mr. Nigel Forman (Carshalton)

I am delighted to pay my tribute to my hon. Friend the Member for Gosport (Mr. Viggers) for the excellent way in which he introduced this interesting debate. I echo what he said about what a shame it is that the House does not have more opportunities in Government time to discuss these important issues. I also regret very much, as I am sure my hon. Friends do, the absence of the Secretary of State for Energy from the Front Bench, delighted though we are to see his right hon. Friend the Minister of State there. It is always nice to see him in his place, though I suspect that the reason why the Secretary of State is absent is that, as always, he has other fish to fry in Smith Square and Transport House. We know that he seems to give higher priority to those activities than he does to satisfying the House in its legitimate task of cross-examining and investigating Government policy.

Dr. J. Dickson Mabon

Perhaps I should have explained the Secretary of State's absence at the beginning. His first obligation, of course, is to the House of Commons, but he is engaged on business involving Cabinet committees, which I cannot mention but which are very much involved with the subject of this debate.

Mr. Forman

I am somewhat reassured to hear that, but I still feel that the point stands concerning those matters in which the Secretary of State is most closely interested. The important point made by my hon. Friend was that any Government of this country have to establish a relationship of equity and stability between themselves and the oil companies. I therefore feel that the time has come, at the end of 1978, for a further set of Government reassurances that carry credibility with all concerned in these operations in the North Sea.

I believe that the recent actions and statements by the Secretary of State, in particular, have gone a long way to destroying that essential credibility. My hon. Friend instanced the example of the Exxon company, which did not apply for the sixth round, and I myself have been made aware recently of considerable unhappiness on the part of many of the oil companies about the uncertainty and the unsatisfactory way in which they have been treated by the Government.

It is worth itemising the factors necessary to create sufficient confidence among the oil companies in order to ensure that the oil is brought ashore and, equally, that the nation gets its fair share of the profits. The main three factors are the geological potential of the area, the economic cost-benefit calculations, and the political stability that the companies expect to see—or not to see, as the case may be—over the long periods in question.

First, on the geological side, it is obvious to all hon. Members that the North Sea is a very attractive proposition on those criteria, although we are well aware that many dry holes are bored and that there is a wide range of difficult practical problems—perhaps the most difficult that have to be overcome anywhere in the world.

We are well aware that the companies are working in water depths and weather conditions that put them on the frontiers of oil industry experience, but nobody would pretend that geological factors on their own are an insuperable obstacle to our achieving what we want in the North Sea.

When we move to the more contentious area of the economic cost-benefit calculations that are involved, it is fair to say that some large North Sea fields are obviously extremely attractive, in economic terms, for both the companies and the Exchequer. Obviously Forties comes in mind, with its estimated recoverable capacity of 1,800 million barrels.

The Government argued, when they announced their proposed changes in PRT on 2nd August, that the Exchequer was not obtaining a large enough slice of the action. As I pointed out to the Chief Secretary to the Treasury, that was accepted by successive Governments. It was always foreseen that in the early years of commercial exploitation the Government's take would not be as great as might have been expected because of write-offs, allowances and other provisions. However, it is well to remember that in future developments in the North Sea the Exchequer stands to gain more than 70 per cent. of the available profits. By anybody's reckoning, that constitutes a fair return for the nation.

It is right and proper that that should be so, but we should not allow confidence in the rules of the game in the North Sea to be so eroded that the oil companies no longer want to take part. It is no good so trimming the geese that lay the golden eggs that we end up by killing them. We do not get anywhere by taking that course. That is a practical proposition that those outside the House might understand better than do some of the ideologues below the Gangway on the Labour Benches.

The oil companies concentrate increasingly on only a few promising blocks to the detriment of some of the marginal fields. As the Minister knows, that has implications for the ultimately recoverable totals that will be available to the nation. The stage at which a field becomes so marginal that it is not worth developing will vary greatly, according to the commitments of the companies concerned world-wide and the severity or generosity of Government policy at any one time. Much depends on the presence or absence of confidence in the future treatment by Governments of the oil companies' activities. It is fair to say that the so-called Varley assurances, which lasted for only three years, cannot be said to have maintained the degree of stability and continuity of expectations that is commensurate with the long time scales involved in North Sea activity.

I have been advised that there are some promising new fields in the range of 80 million to 120 million barrels recoverable capacity that have not been developed and that might have been developed but for the reasons that I have been adducing. That is serious. The fields involved are commercially recoverable fields of a size that is definitely not to be sneezed at in the context of our total effort in the North Sea. That means oil temporarily lost to the consumer. It means revenue that is temporarily lost to the Exchequer, which is equally important. On 2nd August the Chief Secretary was talking about PRT changes. He said that the Government estimated that such changes would, when in operation, increase the public take by about £150 million in the financial year 1979–80 and increasingly more thereafter.

The balance that has to be considered by the House is whether the immediate gain in revenue is worth the potential long-term loss to the country because the conditions are such that the quantities of oil that might have been brought ashore are not recovered. I have already referred to the balance in terms of the general interests of the oil companies and their willingness to stay in the North Sea. That is not to be ignored.

The Chief Secretary said that he thought that the changes would result in the fact that '' most of the fields in the North Sea will be able to obtain what I have described as a reasonable return."—[[Official Report, 2nd August 1978 ; Vol. 955, c. 759.] The right hon. Gentleman is, of course, a very honest man. He used the word "most"; he did not say "all". There is legitimate fear that fields will be excluded on commercial terms because of the changes in the conditions applying, and that we will be forgoing oil that would have been available for consumers and, more importantly, revenue that would have been available to the Exchequer in future. That is oil and revenue that we need not forgo.

Dr. J. Dickson Mabon

The hon. Gentleman must remember that there is the royalty refund section that exists in the original Act. That section has never been tested. I am told that if we ran at about 121 per cent. it would mean about 8 per cent. or 9 per cent. in real returns. We are arguing with the companies whether that is a significant factor to put into the equation.

Mr. Forman

If the Minister manages to persuade his right hon. Friend the Secretary of State that it is worth while putting such a saving clause into Government policy, that should be reflected in new assurances. As I have said, we have reached a stage of uncertainty that is not in the nation's interests, and some bankable assurances are now needed to ensure continuity of supply at the levels that we wish to see.

The Government may think that some of the arguments to which I have drawn attention do not matter. They may say—especially those below the Gangway on the Labour Benches—that BNOC is being developed and could recover the oil in due time itself if it were developed as a commercial company. That is to take a rather chauvinistic and short-sighted attitude. BNOC could not possibly do all that is involved on its own. For instance, we find that well over 90 per cent. of all oil landed in this country until very recently has been through the auspices of experienced and skilled private companies that have been involved in similar operations, world-wide, for many decades. We would be foolish to do anything to cut them out of that activity, which is for the benefit of the nation in the long run.

Mr. Hafer

Does the hon. Gentleman agree that when the Suez canal was about to be nationalised by the Egyptian Government the howl went up in Britain that it could not possibly be taken over by that Government as they did not have the expertise? It was said that the canal would become silted within a very short time. The canal was taken over most effectively by the Egyptian Government. They overcame the problems. The canal still belongs to Egypt. What was done with the Suez canal could be done by any other nation if it were determined to act in its own interests.

Mr. Forman

The hon. Gentleman has picked upon an unfortunate analogy in making his case. He will know that since the Egyption Government took over the Suez canal it has been closed for many years, for reasons not unconnected with events taking place in Egypt. There have been sunken ships lying in the canal. There have been many other difficulties involving, for example, a shortage of suitable pilots.

Mr. Heffer

There have been military reasons.

Mr. Forman

And civilian reasons as well.

Mr. Viggers

My hon. Friend may not know that the Suez canal stayed shut for some time and was cleared eventually by the Royal Navy. Many of the Navy's divers now work for commercial oil companies.

Mr. Forman

The key consideration of the three factors is political stability. As long as any Government in an oil-producing area can be firm and fair with private sector companies, there is a mutual balance of advantage for all concerned. But this means, as has been said, setting out clear ground rules and assurances to govern this area and sticking to them. It means adequate consultation with the interests involved, prior to any changes that might affect them. It means resolving, in the case of the United Kingdom, the anomaly of BNOC, which is now both poacher and gamekeeper within the North Sea, and which is in a position where the observance of commercial confidentiality is in doubt as between BNOC and the Government, when the former participates with the oil companies in the existing arrangements. It means removing stupid and damaging threats, first, to take BP into full nationalisation, whatever that may mean, and, secondly, the eventual possibility—even worse—of sequestration of oil company assets within United Kingdom jurisdiction.

The vital point to understand about these rather controversial arguments is that none of these steps, if carried out, would do any good to the interests of the British people. But, above all, policy requires the creation of a new climate of good will, confidence and stability, so that oil companies can press ahead with their business and the Government, for their part, can secure their fair slice of the larger cake for the benefit of the nation.

If a course of action such as I have described is not followed, and soon, we shall see a further decline of drilling activity in United Kingdom waters. We shall see the movement of scarce and skilled men and material to Mexico, China or the Baltimore trench, off the eastern coast of the United States, and elsewhere. These are highly mobile and truly international companies, and there are many interests involved.

Finally, if this policy comes about we shall see the collapse of many of our material hopes in this country which have been built far too much on the North Sea when the real faults and answers lie elsewhere. We have now reached the stage in the North Sea development where the Secretary of State and his ilk on the Left of the Labour Movement are a luxury which this country can no longer afford.

Mr. Helfer

What does the hon. Gentleman propose to do—shoot us?

Mr. Forman

We are more civilised than that. As we have seen from press reports of the Secretary of State's work on the national executive committee of the Labour Party and other bodies, this is a view which seems at least to be shared by the Prime Minister himself. The danger is that in the case of the North Sea, perhaps more than in other areas of policy where the Secretary of State seeks to impose Socialism which is red in tooth and claw against the wishes of the British people, the Labour moderates will once again move too feebly and too late to counter these dangerous tendencies, and a few years later they will have found their way into Government legislation via the Labour manifesto. We must not, in this House or anywhere else, allow the wild men of the Left to smash the prospects of one of the few uncovenanted blessings offered to this country.

To that extent the hon. Member for Liverpool, Walton (Mr. Heffer) was quite right. It was not Socialists or Conservatives who put the oil and gas where it is; it was natural processes over thousands of millions of years. It is private enterprise which has discovered and recovered the great bulk of oil and gas so far. It is the present Secretary of State and his cronies who are in the process of spoiling everything by sacrificing progress on the altar of Socialism.

It will therefore be left to the next Conservative Government to repair the damage by ensuring a reasonable return to the nation and to the oil companies. Indeed, the whole message of the debate this afternoon is that the one cannot be achieved without the other.

4.44 p.m.

Mr. Gordon Wilson (Dundee, East)

We are all grateful to the hon. Member for Gosport (Mr. Viggers) for having used his opportunity in the Ballot to introduce the question of Government oil policies.

I was rather amused about the debate which developed over the possibilities of the Labour Party adopting the principle of nationalisation in some future manifesto, largely because we had the same amount of heat over the question of participation three or four years ago. At the end of the day, it turned out that participation did not mean very much, at least in regard to those licences which had already been allocated. The formula then adopted of no gain, no loss did not give much return to the State, whether that State was representative of the United Kingdom or the integral parts of the United Kingdom. Indeed, one of the problems that the Government would have to face if they decided to go ahead with nationalisation in the future would be the amount of compensation which would have to be paid as a result.

One factor which has not been mentioned in the debate to any great degree is the level of price which applies. The fields which are now being exploited are generally the larger ones which were discovered within a certain time scale. They are more profitable to develop. When there is reference to petroleum taxation, it must be primarily in relation to those fields which are now in production or are likely to be in production, and on oil company calculations they are most likely to be those which will give the best return.

With regard to the other fields—some of which have been discovered but not developed and others which have yet to be discovered—other questions arise. Let us consider some of the fields which are likely to be developed soon. There is the Cormorant North field, which was discovered in 1974 and is only now approaching the stage of development. One which was discovered even earlier is the Maureen field, for which a platform is now being designed, incidentally, by an Italian firm, and the contracts are likely to go out shortly. All these marginal or smaller fields are more likely to be developed in the future as and when the world price for oil goes up.

The price of oil has declined over the last few years, and the situation has not been helped by the depreciation in the value of the dollar. That is a factor which affects the incomes of oil companies, since the dollar is the currency in which oil prices are paid. Most experts accept that it is likely that oil prices will increase. There are some arguments developing as to what impact the new fields in Mexico might have or what might occur if other countries start exporting.

But, leaving those arguments aside, the general view of people in the industry and of petroleum economists is that world oil prices are likely to go up in the next 10 or 15 years. This would have an immediate impact upon fields which are not considered to be worth developing at present. A considerable number of smaller fields fall into that category. If those fields which are not now considered to be profitable were based on land, they would certainly be developed because of the cheaper development costs.

I should like to ask the Minister of State some questions about the policy of the Government. I followed the observations which were made about the sixth round licences, and it remains a matter of interest to find out to what extent that licensing round has been over-subscribed. It would be interesting if the Minister of State were to publish the names of the consortia and the blocks for which applications have been made. So far, the Department of Energy has published only the list of oil companies which have applied for the blocks offered.

I hope that the Minister of State will take note of an observation which has been made to me—it has no direct relevance to the severity or otherwise of licensing rounds—namely, that in each licensing round the conditions fluctuate quite widely. I appreciate that the Government have over a period been learning from the experience of the past and may also have been adapting their licence terms to suit the geological nature of the blocks which are going on offer. However, the time may be fairly near when the Government can perhaps adopt model clauses for exploration rounds, since I am told that there is a degree of criticism over the constant fluctuation in the amount of time taken in the evaluation of licences and the conditions under which these will be given.

What progress has been made on the South-West Approaches? I noticed recently that the Minister wrote off the Celtic Sea, at least in relation to potential oil reserves. Will he indicate what progress has been made on the South-West Approaches? Do the Government intend to hurry ahead with these developments? Alternatively, as I suspect and have said in the past, is the intention to allow Scotland's oil resources to be depleted while retaining the reservoirs in the South-West Approaches for future English use?

In relation to depletion, I refer the Minister of State to the statement that he made in "Good Morning Scotland", a BBC programme, on Wednesday 18th October, of which somehow I received a transcript. Mr. Robin Wylie asked: It's not a case, is it, that too much oil has been extracted too fast and you are having to slow down? I know that we would all like the Minister to slow down occasionally. The Minister's answer was: In a way it is. In a way we can see ourselves getting to self-sufficiency in 1980 quite fast and also getting into a surplus in the '80s quite fast, and we are not therefore necessarily anxious to open up new fields. Or, if we are going to open up new fields, it will be at a slower pace than before. I welcome the Minister's conversion, because only six months ago he took me to task on depletion. I know of the pressure which the TUC, for instance, is bringing on him through the Energy Commission to try to adopt a depletion policy which will stand up. The right hon. Gentleman knows, as I do, that, as and when world oil prices go up in the 1990s, the United Kingdom will be importing 50 per cent. of its oil at atrociously high cost. Has there been any change in the Government's depletion policy?

Reference has been made to the important matter of flaring of gas. What is the estimated value of the gas which was consumed in, say, 1977? Will the Minister give the House an idea of the value of the raw material which has been disposed of in that fashion?

Will the Minister tell us something more about downstream activities and refining? I know that in this respect the Department of Industry and the Scottish Office have a role to play. However, the Minister may have seen the headline in The Scotsman on Thursday 7th December: Scotland losing out on spin-off from oil. The expert concerned indicated at a conference that the only development likely to take place was at Moss Morran, in Fife. Since the Department of Energy issued a declaration in the House in relation to the Cromarty refinery and the need for refining in downstream activity, does the right hon. Gentleman consider that report to be true? Or is there still room for development of the Cromarty refinery, in which the hon. Member for Ross and Cromarty (Mr. Gray) has an interest, or of Barry Buddon, in which I have an interest, as have my constituents?

My last point relates to revenues. I do not wish to make too much of this matter as we had a spirited debate on it on 22nd June. I suspect that the Minister, in his secret heart, agrees that it is necessary that the revenues be used for industrial development in Scotland. The hon. Member for Liverpool, Walton (Mr. Hafer) referred to what was said at the Labour Party conference about the National Enterprise Board being given control of the oil revenues for industrial development. No reference seemed to he made to the Scottish Development Agency. I hope that the hon. Member for Walton missed that out inadvertently. Perhaps the Minister, as a member of the Labour Party and being enthusiastic about nationalisation and so on, will tell us whether the SDA will be given recourse to the oil revenues in the same way as the NEB.

4.55 p.m.

Mr. Robert Hughes (Aberdeen, North)

There is no doubt that the discovery of oil in the North Sea has been a tremendous bonus to this country and offers tremendous potential. I should have expected all right hon. and hon. Members, in whatever part of the House they may be, to be only too delighted with what is happening in the North Sea and with the oil which is coming ashore and which is potentially available for the future.

Conservative Members, almost from the day that the Labour Party took office, have been looking for something bad. They seem to be looking for a cloud in every silver lining. They have to look for someone to blame for their own obsession with failure. They must always find a bogy man. The current bogy man, whether in the Daily Telegraph or other Conservative newspapers, is my right hon. Friend the Secretary of State for Energy. We are given a picture of multinational oil companies, with assets of hundreds of millions of pounds—more assets than many nation countries even within the continent of Europe--and decades of expertise in oil exploration, sitting in their massive tower blocks, perhaps not far from the House, trembling every time my right hon. Friend makes a speech. The mind boggles at these people who have all this expertise, who have been courageous in the exploration and development of North Sea oil and farsighted beyond the wit of Governments, looking in the newspapers every day, seeing statements by my right hon. Friend the Secretary of State for Energy and being terrified.

The oil compjanies—it is legitimate for them to do so, but I think they are wrong —feel that they must protect their commercial interests. Therefore, they are busily engaged in a commercial propaganda war to try to get the best terms possible from the Government. In earlier days, when we used to speak about participation, we got the same old business. The argument was that, if the Government got their way with participation agreements, all hell would break loose in the North Sea, the oilfields would not be developed and so on.

Mr. Neil Macfarlane (Sutton and Cheam)

Will the hon. Gentleman give way?

Mr. Hughes

Not at the moment. I got into considerable trouble on Friday for giving way too much. If I make as long a speech today as I did on Friday, I shall get into very serious trouble.

Mr. Macfarlane

It is on this very point.

Mr. Hughes

If the hon. Gentleman will wait until I have finished this point, I shall then give way to him.

Whenever licensing rounds have been about to take place, we have had major propaganda exercises by the oil companies saying that if this or that happened there would be gloom, doom and disaster. I take the view that the latest exercise by the United Kingdom Offshore Operators Association is another round in the gambit of trying to screw the Government at a time when it is felt that the Government are vulnerable.

We should not leave out of account the period when this propaganda began. We had the consultative document on the sixth round of licensing. There was speculation at the time that there might be an election and that perhaps the Government would be defeated. I believe that part of the general exercise to try to discredit my right hon. Friend the Secretary of State for Energy, who has done a first-class job, was the hope that the Government, being a little afraid of facing an election and under intense propaganda attack, would give way on some of the agreements.

Mr. Macfarlane

I should like to revert to the hon. Gentleman's remarks when he was denigrating the commercial record of the oil companies. Is it not true that the oil consortium in the hon. Gentleman's constituency has brought a great number of jobs to the region of Scotland? Is that not a valid fact which he should recognise?

Mr. Hughes

That only goes to prove the point that I was making. I was trying to be ironic, but it was above the heads of Opposition Members. The point was that these companies, with all their expertise and commercial instinct, were trembling in fear every time my right hon. Friend the Secretary of Energy made a speech.

Mr. Gray

He is a menace.

Mr. Hughes

I am glad that the oil companies will now read in Hansard that they are made of jelly and are terrified of my right hon. Friend.

On the sixth round of licensing there were 100 applications for the 46 blocks on offer. It is perfectly true—I do not seek to evade the fact—that some of the major oil companies did not involve themselves in this round of licensing. But the interesting fact is that some of the people who are showing an interest in this round of licensing have not so far been involved in the North Sea. I appreciate that here we are concerned not only with the North Sea but with the South-West Approaches, the Bristol Channel and so on, but there are some people who so far have not been involved.

The Swedish State oil company is interested in a consortium which is involved. The Spanish State oil company is interested. It may be argued that these are not major companies, but at least there is diversity of involvement in this round of licensing, which is to be welcomed. Of course, we do not know precisely what the details of the offers are. We shall have to wait and see. But if we contrast this round with the previous one, which was two years ago—the fifth round —there were then only 55 applications covering 70 per cent. of the blocks on offer. But here we have 100 applications for 55 blocks.

Mr. Tom King

Perhaps the hon. Gentleman would like to check his figures with regard to the number of companies involved. Since he attaches great importance to the success of the round by the number of companies involved, will he check the figures and establish whether 133 companies applied in the fifth round and whether 94 applied in the sixth?

Mr. Hughes

I did not say that there were 100 companies. I said that there were 100 applications for 55 blocks. That is the information given by the United Kingdom Offshore Operators Association.

Dr. J. Dickson Mabon

On 1st December 1978, in answer to my hon. Friend the Member for Dunbartonshire, West (Mr. Campbell), I listed the companies in Hansard, and there are 94.

Mr. Hughes

I have not added them up, but that is still oversubscribed compared with the previous round. Indeed, in earlier rounds, a massive number of blocks were on offer. But the uptake was very small compared with the number of blocks on offer.

If, as I believe—I hope that we shall have this confirmed—the Government's strategy is to put on offer a smaller number of blocks more frequently, it is my opinion that that makes good sense. Rather than have huge areas, it is much better to have selected blocks on offer in different parts of our shores so that by narrowing down the number of offers we can judge what the interest is.

If we did that, I believe that we would get a much better return. Both Conservative Front Benchers and Back Benchers are very coy, silent and hesitant about telling us what happened when they were in charge of licensing. Would they tell us how much money their Government lost the nation by their licensing policy? I bet that they would not, because it runs into a very large sum of money indeed.

Mr. Forman rose—

Mr. Hughes

I must not give way. I want to make a brief speech, because I got into trouble on Friday. I do not want to go on too long. The facts are there. The previous Government lost a hell of a lot of money, which is why Conservative Members are so quiet about it. It is an absolute scandal which must be put right.

Mr. Forman rose—

Mr. Hughes

I shall not give way. They certainly lost £65 million at least, and probably a good deal more. Although I do not have the figures with me, my impression is that it was about £750 million overall. Of course, the major difference between them and us is simply that they always want the private commercial interests to get the best returns while the State suffers.

Mr. Tom King

Will the hon. Gentleman give way?

Mr. Hughes

No. The hon. Gentleman can catch the eye of the Chair when the time arises, but I shall not give way. The Conservative Opposition always want the profit to go to the oil companies. That is the truth, and that is why Conservative Members are getting excited about it. They do not like the truth being told to them.

When we consider the history of the exploitation of energy sources, and the way in which the coal mine owners actually raped the resources of this country and damned the miners to a hellish existence, such as lack of safety and loss of life, do we really expect commercial interests to look after the welfare of the people in the North Sea? When we consider the loss of life in the North Sea, are we really saying that the oil companies should be allowed carte blanche?

The hon. Member for Gosport (Mr. Viggers) said that it was a good job the Government did not have control of BP, because there was a tremendous environmental battle in Alaska and he did not believe that had the Government had control they would have forged ahead in the face of environmental interests. I do not believe that commercial companies throughout the world have ever taken account of environmental interests, so why should we leave it all to the oil companies?

Mr. Gray

I am most grateful to the hon. Gentleman for giving way when he has been under pressure. Is it not the case that this Labour Government did have control of BP? They had more than 16 per cent. above the 51 per cent., and they got rid of it. How on earth can they possibly say that they want to take BP into more complete public ownership?

Mr. Hughes

That does not answer the point about whether the Government would have forced through the Alaska pipeline business against environmental interests had they had a greater control of BP, as was suggested by the hon. Member for Gosport. I do not believe that the oil companies should simply be allowed to go ahead without any control whatever. In the earlier days of the oil companies' activities in the Middle East, the ordinary people of the Middle East did not benefit from those activities. It is certainly true that since the oil shortage, and since the Middle East countries tightened up through OPEC, many more resources have gone back into the Middle East. But, if one goes to any part of the world where oil has been discovered, one does not find that the ordinary people of those countries have reaped the kind of benefits which ought to have been available from the wealth which was exploited.

Of course, Labour Members believe that a tremendous number of jobs are at stake, not just in the oil industry or in spin-off. We want to see the money go to the nation in order to regenerate British industry generally, which has had an appalling record of investment, and also to redevelop city centres, where there is also a great need for regeneration. We want to see these matters pursued in favour of the nation and the people.

The fact is that Conservative Members cannot hide their hatred—indeed, their detestation—of the British National Oil Corporation. On every occasion they denigrate BNOC and say that it is doing a bad job. The hon. Member for Carshalton (Mr. Forman) said that there were some worries about the poacher-gamekeeper activity of BNOC. He said that he was worried that some of the oil companies might have to make available to BNOC information which I think he said was commercially confidential. He was concerned lest that confidential information should be made available to the Government. Surely the hon. Gentleman is not suggesting that the oil companies have some information up their sleeves which ought to be within the knowledge of the Government but which is being hidden by the oil companies, which are unwilling to make their commercial activities available to this country. We ought to make quite certain that they do.

Mr. Forman

The point I was making was that it is the dual and anomalous role of BNOC, both as adviser to the Government and in some cases as partner with private oil companies, which is so invidious to the oil companies concerned and so damaging to their confidence that the commercially confidential information, which must be present in oil company dealings, is being passed over in a backhand way to the Government.

Mr. Hughes

If the oil companies have information of their commercial dealings in this country, and of their dealings in relation to exploration and production in the North Sea, it would be quite atrocious if they tried to keep it from the Government. If that is what the hon. Gentleman is saying, I hope that BNOC will make it available, because if commercially confidential information about activities in other parts of the world came within the purview of BNOC I am quite certain that it would be passed on. But that is not really a matter for debate now.

I ask Opposition Members precisely where they stand in relation to BNOC. I am sure that the hon. Member for Ross and Cromarty (Mr. Gray) will forgive me for making reference to a television programme in which he and I were involved. It was in Aberdeen about a month ago. It was a very good programme. I thought that I was good and the hon. Gentleman thought that he was good. I do not know what the customers thought.

We were discussing the question of BNOC. I asked the hon. Gentleman in that programme—and I do so again now —whether he would tell the country what the Conservative Party's policy was towards BNOC. For the benefit of those who did not see this excellent programme from Grampian Television, I shall tell the House what the hon. Gentleman's answer was. He said "We shall have to wait and see until we become the Government." That was his answer. The hon. Gentleman is nodding his head to confirm it. That is not good enough. If Opposition Members claim the right to be part of the government of this country and are continually attacking BNOC and my right hon. Friend the Secretary of State for Energy, they must do the other thing as well and say positively what they see as the role of BNOC.

The hon. Member for Ross and Cromarty went on to say, I think, that the Conservatives would like to see the role of BNOC reduced. How far reduced? I believe that they would like it to be reduced to the point of extinction.

I end as I began. I believe that the Conservatives are solely concerned with putting forward the commercial views of the oil companies. I believe that it is the old slogan when the Conservatives are in difficulty on their own policy—" When in doubt, find a scapegoat." They have allies in what is left of Fleet Street that is still operating. I do not know what the hon. Member for Gosport will do next time he speaks, because The Times is not printing any more and there are no helpful leaders. It seems to me that Conservative Party policy is made in the leader columns of The Times, and that certainly is not the best source.

I hope that whoever replies to the debate for the Opposition will tell us clearly what the Conservatives see as the role of BNOC and whether they will, for once, stop running down the great benefits we get from the North Sea, will show a bit of patriotism for once, and will do a litle less kowtowing to their paymasters in the City.

5.12 p.m.

Mr. Neil Macfarlane (Sutton and Cheam)

The speech of the hon. Member for Aberdeen, North (Mr. Hughes) was extraordinary, particularly the latter part. I do not know quite what the residents of Aberdeen, North will make of it when they read Hansard, if indeed they do, or if he ever becomes a spokesman on the various energy requirements within the Labour Administration. It was quite clear that many of his observations were palpably incorrect and totally untrue. I find it very difficult for us to accept his accusations—in this case, that we are always looking for somebody to knock. One could easily counter that particular argument and say that the hon. Gentleman was knocking entirely the oil industry, which has brought enormous employment to his region and untold benefit for the future of this country.

I certainly do not intend to make any observations from the Opposition Back Benches about our policy for the future of BNOC, except to say that many of us believe that there is a role for an organ isation to co-ordinate the energy infrastructure of the United Kingdom.

What we on these Back Benches want to know about is precisely what BNOC is up to. It seems to receive special favours. It seems to receive all kinds of benefits and advantages which are not open to scrutiny by the House. The hon. Gentleman must surely be only too delighted to exercise some kind of parliamentary privilege. I can only repeat that the people of Aberdeen, North must be well aware—more aware than their own Member of Parliament—of the number of jobs which have been brought to that region as a result of the oil industry and North Sea oil policy.

I suggest that the hon. Gentleman really ought to spend time, if he has not done so—he will forgive me if I am wrong in suggesting this—in making a series of visits to Sullom Voe and to oil rigs and the Aberdeen offshore activity. He may have done that as a former Minister. I do not know. But the time has come for him to renew some of the information which may have temporarily got lost somewhere in the backwaters of his mind.

I congratulate my hon. Friend the Member for Gosport (Mr. Viggers) on introducing this important subject and particularly on the way in which he highlighted so many points of concern during the course of his excellent speech.

I want to examine two or three aspects of this matter. I do not want to go into the flights of fancy in which the hon. Member for Liverpool, Walton (Mr. Heller) engaged. I want to discuss matters which I think the Government have overlooked—not necessarily only the Department of Energy but the Treasury as well—in the past three or four years. I think that their most recent actions have contributed to the general lack of confidence which prevails in the North Sea at this moment and in the whole activity of underwater exploration around the United Kingdom.

We have had bland assurances from various Ministers, but I think that most of us are—certainly I am--prepared to accept the blandishments of the Minister of State, Department of Energy, not only in the long hours that we have spent in Committee over the past two or three years, but also in some of the warm replies which he has given at Question Time. But, despite that, there is undoubtedly a declining confidence in further investment in the North Sea. It coincides, alas, with a number of known factors.

At the risk of incurring the displeasure of a number of Labour Members, including the hon. Member for Walton, I must say that one of those known factors is the presence of the Secretary of State. Whilst it may be encouraging to be told by the Minister of State today that his right hon. Friend is currently appearing before a Cabinet committee, the fact is that he is not present in the House this afternoon when the specific wording of the motion goes into some detail and criticises his own role in the last couple of years. It is a great pity that the Secretary of State is not present this afternoon.

I come back to the point that the hon. Member for Walton raised, this mock insult which he seems to think that the press and we are always hurling at the Secretary of State. The hon. Member said that he could not understand why we were always selecting the right hon. Gentleman to fire our shots at. All I can say to the hon. Gentleman—I lo not want to take up too much time, although, in view of the empty Benches on both sides of the House perhaps I may have to—is that one has only to look at the right hon. Gentleman's record from the 1960s, when he became a member of the first Labour Administration in 1964.

Alas, looking at the right hon. Gentleman's record in great detail. we find that it is strewn and littered with failure. It goes from the Post Office and moves to the Ministry of Technology. Alas, there is then a period in Opposition when the destructiveness which the right hon. Gentleman then vented upon the trade union movement in opposing the policies of my right hon. Friend the Member for Sidcup (Mr. Heath) is well known. The right hon. Gentleman then moved to the Department of Industry. He had to be moved from there. He was then moved to the Department of Energy. If any Department requires a constructive mind to be brought to bear upon planning in the United Kingdom, it is certainly that Department.

Unhappily, there is one continuing theme throughout the right hon. Gentleman's record in public life. It may have been a thoroughly effective record in the latter years of the war, but the fact is that he is a lifelong politician and he brings no commercial or industrial experience or discipline to anything that he does in the House of Commons or in public life. That is the great tragedy.

The worst feature is that in recent years the right hon. Gentleman has read the book The Seven Sisters ". We know that because he has frequently quoted from it during debates, at Question Time and in Committees. He now sees himself as the man who will break the great international oil company cartel and try to change the constitution of commerce The simple fact is that he has not been the same man since he read that book.

Mr. Heffer

The hon. Gentleman again says something about my right hon. Friend and accuses him of doing something when in fact he was not involved at all. The fight against the Industrial Relations Act was not in any way the fight of my right hon. Friend the Secretary of State for Energy. He had absolutely nothing to do with it. I sat on the Opposition Benches with my right hon. Friend the Member for Blackburn (Mrs. Castle), week in and week out, month in and month out, fighting the Industrial Relations Act of the Conservative Government. As far as I know, my right hon. Friend the Secretary of State for Energy hardly expressed an opinion in relation to that question.

The hon. Gentleman, as on so many occasions, takes the opportunity to say that my right hon. Friend does things which he does not do. Last Monday there was a meeting of the organisation committee of the Labour Party, of which I happen to be chairman. The next day the press said that my right hon. Friend was responsible for a motion, that he was going to lead a deputation to the Prime Minister, and so on. It was absolutely untrue. I moved the motion. I am the chairman of the organisation committee. But, of course, it is convenient to attack my right hon. Friend. That is exactly the point that we have been making. On all these occasions, my right hon. Friend is: blown up into a great bogy man because it is convenient for the Opposition to do so.

Mr. Macfarlane

I return to the point mentioned by the hon. Gentleman at the beginning of his intervention. The hon. Gentleman said that it was he and the right hon. Member for Blackburn (Mrs. Castle) who, in Opposition, fought the Industrial Relations Bill in the early 1970s. Shall I tell him what the present Secretary of State for Energy was doing then? While the hon. Gentleman and the right hon. Lady were here being good parliamentarians, the right hon. Gentleman was cavorting around various strongholds of the trade union movement, harnessing them before they marched down Whitehall and Holborn. The hon. Member for Walton is like us and the vast majority of the people—he is being hoodwinked by his parliamentary colleague.

What is the worst feature? I imagine that many people in the constituency of the hon. Member for Walton have received employment as a result of the oil industry over the last decade or so. But, alas, Britain's economic condition seems of no concern to the Secretary of State for Energy. That is the worst feature as it strikes many of us in industry. The right hon. Gentleman may well succeed in rolling over the oil industry in the long term, and in changing the course of the international oil industry, because, alas, the oil industry does not seem to be determined to fight for its survival.

I do not admire many of the tactics and habits of the oil industry over the past 20 or 30 years, but it has given employment to hundreds of thousands of people throughout the United Kingdom. In the 1960s and into the 1970s, it has become a classic example of private enterprise giving an exciting and dynamic lead to the future of our economy.

But there is a question mark over the future of more exploration in our waters. Once again, Socialism has imposed its traditional tax regime which, as many of us warned two or three years ago, is deterring further activities. That is shown by the Written Answer given by the Minister of State on 4th December. One sees the picture from that. My hon. Friend the Member for Ross and Cromarty (Mr. Gray), in Oral Question 18, asked how many oil exploration wells were drilled in the North Sea during the period June to August for each of the years 1976, 1977 and 1978, respectively. That Question was not reached for oral answer, and the reply was circulated as a Written Answer. In it, the Minister of State said: During the period June to August in each of the past three years, the numbers of exploration wells spudded in the United Kingdom continental shelf were 17 in 1976, 22 in 1977, and three in 1978. That is the situation after three or four years of intense Socialism. That is the sort of thing that worries so many of us.

Dr. J. Dickson Mabon rose—

Mr. Macfarlane

I will give way to the Minister of State. I always do. I never fail to give way to him either on the Floor of the Chamber or in Committee. I would never fail to do so. It will be a bad day for the House of Commons when I refuse to give way to the Minister of State. The right hon. Gentleman went on to say: The Department is analysing the reasons for this reduction with the United Kingdom Offshore Operators Association and BNOC ".— [Official Report, 4th December 1978 ; Vol. 959, c. 470.] The conclusion that one draws is that the Department is not aware of what is happening and is not in a position to try to instigate a greater degree of activity in the North Sea.

Dr. Mabon

I, too, regretted that we did not reach that Question orally. One can only answer Questions as they are asked. When there is a chance for supplementary questions, one can supplement one's answer and make it more reasonable. The hon. Member for Bridgwater (Mr. King) used that misinformation, if I can call it that. That answer was misleading. It was true in itself but misleading in its generality, because so far in 1978 we have drilled not three but 58 exploration and appraisal wells. That is a very big difference from three.

Mr. Macfarlane

It is a very big difference from the answer that the right hon. Gentleman gave exactly a week ago. The fact is that he knows that even those statistics are down on previous years.

Mr. Tom King

This situation is quite extraordinary. In the last four days we have had the most rapid expansion of exploration drilling ever in the history of the North Sea, because the Minister of State said that the number expected for North Sea exploration drilling was 58.

Dr. Mabon

No. I said that we have actually drilled 58 exploration and appraisal wells in 1978.

Mr. King

My hon. Friend will have noticed that the estimate given on 4th December was 39. I should be grateful if the Minister of State could clarify that point.

Mr. Macfarlane

This highlights the fact that the Secretary of State and the Department of Energy are not really aware of what is happening, because I have merely quoted from the answer which the Minister of State himself gave a week ago. I am not criticising him because he did not answer the Question in the House. I recognise only too well that Mr. Speaker got to Question 14 or Question 15 and that it was not the Minister of State's fault that he could not get to Question 18 and answer it in detail on the Floor of the House. I have quoted from the Written Answer given a week ago, which gave a figure of three in 1978. The Minister of State's concern was justifiably highlighted, but why he needed to analyse this detail which has suddenly become available to the Department of Energy and the UKOOA is mystifying. If only a UKOOA representative sat in the chair of the Energy Commission, it might have been in a better position to make its presence felt a little more.

Dr. Mabon

The Energy Commission met on 1st December, and the UKOOA was the first item on the agenda. It presented a paper in which it argued—I believe that the hon. Gentleman has seen the paper—the case about the position of exploration and appraisal wells. My complaint about Question 18 last Monday is that it confined itself to three specific months of the year when it should have been concerned with the entire picture. Otherwise, it is guilty of selectivity. I am trying to help the House by showing that the number of wells drilled in 1978 is 58—and that is not an estimate. The hon. Member for Bridgwater (Mr. King) must realise that the figure"three" is a grotesque version of events such as he recited at the weekend.

Mr. Macfarlane

It is extraordinary that the Minister of State, who is an experienced parliamentarian, did not take the opportunity to tell the House that over the whole year the picture might have been slightly better. It is unlike him to ignore such a point. But I am interested to hear him say that when the Energy Commission met on 1st December the UKOOA was first on the agenda. Perhaps I can attract the Minister of State's attention from the assistance of the Prime Minister's Parliamentary Private Secretary, whose presence we always welcome. No doubt the Minister of State will keep him closely alongside. That afternoon, was the UKOOA represented by its own representatives or by the chairman of the Petroleum Industry Advisory Committee, who is chief executive of Esso? One of the difficulties we have is in trying to find out just what the Energy Commission is doing and just how powerful it thinks the UKOOA should be or is.

Dr. Mabon

The answer is that Mr. Dyk, chairman of the UKOOA, was present, together with the secretary-general, Mr. Williams, who presented the paper.

Mr. Macfarlane

That is encouraging to note, and no doubt the right hon. Gentleman will enable the House to have a copy of the exchanges that took place by placing one in the Library. We attach great importance, as the right hon. Gentleman knows from previous exchanges, to the UKOOA being represented at the Energy Commission. It is of paramount importance, because there is only one representative from the oil industry at that table.

The Government must come to terms with understanding the problems facing private enterprise. The industry is now beginning in great detail on the production side of oil activity. Operating costs in the North Sea have soared. They have more than doubled in the past year as a result of operating expenditures. The biggest increases have occurred where the fields are at last producing oil. Miss Sue Cameron wrote in the Financial Times some weeks ago of the rise in estimated operating costs for the Heather Field at 220 per cent., for Fulmar at 156 per cent., Thistle 133 per cent., Piper 143 per cent., and Claymore 144 per cent. All these, except Fulmar, are producing oil. Cost estimates have continued to increase dramatically in the case of operating expenditures…Now that several fields have been in production for over a year, more realistic estimates are possible, and increases of 100 per cent. or even more over our previous estimates are common. In addition, there are rapidly escalating costs of inspection and maintenance, and capital costs have risen in many fields. Yet I believe that by their recent tax impositions the Government have shown no detailed understanding of this new dimension to the North Sea operation. I do not think that their timing could have been any worse.

Another area of concern to oil companies is the unknown cost and life specifications of production platforms. The House well knows the extremes in which the oil companies are operating in the northern North Sea. It is almost a certainty that the costs of maintenance above and below the water will exceed the most accurate forecasts by the experts. It is reckoned that it will cost the industry at least £400 million in the first year of full production by the 1980s. The figure may well rise, because there is no certainty as to how structures and pipelines and other semi-submersible and fully-submersible structures will react in the conditions of utmost severity, which are without equal anywhere else in the world.

Some of us used our time in the Summer Recess to visit those waters in September and October. Shortly after we began our visit to the Brent field and Sullom Voe, there was a blockage in the pipeline which resulted in enormous cost and delay to the oil companies in bringing the oil to Sullom Voe. It was the kind of thing they could not have forecast when they were budgeting for what the entire range of North Sea commitments would mean.

The companies need time to assess such costs. They do not require a series of tax threats by this Government. They certainly do not want the deterrent of nationalisation, such as the Minister's right hon. Friend called for at the Labour Party conference this year and from other platforms.

The kind of article that one reads in the newspapers highlights the reason why not all companies have participated in the sixth round. The whole atmosphere of confidence is declining, as was shown by an article by Roland Gribben in The Daily Telegraph a few days ago. I do not know the full details. I would not pretend that I do, because it is now five years since I have had day-to-day experience in the oil industry. However, the article highlights the concern felt by international oil company finance chiefs. It said: Concern that the Government would again break its word and change North Sea oil tax regulations was expressed yesterday by a senior Royal Dutch Shell executive ", who was reported as saying that he feared the moves to increase petroleum revenue tax from 45 per cent. to 60 per cent. may be the forerunner of further changes which will alter the rules again '. Exploitation and production operations were always something of a gamble but how can you assess the degree of risk when the odds are likely to be changed after some of the cards are down? ' That is the kind of atmosphere created by this Government. It is not entirely the responsibility of the Minister of State. It results from some of the observations of the wilder men of his party, who are absent today. Companies are concerned, and there is a lack of confidence. The timing of so many Government tactics, spearheaded by the Secretary of State, could well kill off the longer-term exploration required by the United Kingdom.

The sixth round has not been the success that Ministers claim. How can they claim that it has been a success when some of the majors have not even bothered to apply? The reason is clear, for many of them are looking in other waters. If the United Kingdom is to locate more oil potential, it needs to have all the international companies competing, and that is not happening.

What is clear is that the United States, with its massive problems of the dollar, unemployment and huge oil imports, which are affecting Western civilisation generally, will mount a vast offshore exercise for its own good. The fact that there is so much potential in the Gulf of Mexico and the Baltimore Canyon, together with the disincentive under this Government to maintain exploration here in view of the different tax regimes in America, will act as a double incentive to those companies with the most to offer in resources. Already we can see the exodus beginning from United Kingdom waters to waters in the Middle East, the Far East or America.

There is the further fear that the Government will again break their word and change their North Sea tax regulations. When we add together the dramatic production costs, the falling price of crude oil in real terms and a cash flow problem in the oil industry, we have a whole range of serious economic deterrents to risk-taking. That is what North Sea exploration is all about—risk-taking. I only wish that the Secretary of State were here tonight. He has not bothered about that kind of equation.

I return to the point, because it is so important, that the right hon. Gentleman does not even consider that UKOOA is worthy of a seat at the Energy Commission. Indeed, all that he requests is the presence of the chairman of PIAC. UKOOA makes an enormous contribution, and it is a great pity that the Secretary of State does not acknowledge that contribution and the contribution of the number of small oil operators that are now beginning to move into the North Sea as a result of the sixth round applications. They should be represented, and the only way in which they can be represented is by being at the Energy Commission table.

I hope that the Minister of State will urge his right hon. Friend to start taking an interest in energy matters, to begin to put them first in his daily routine. Many of us, not only in the House but throughout the country, have the impression that the Secretary of State's time is consumed by heading up Labour Party caucus meetings—the national executive committee or the home affairs committee—and drafting documents, and that the last thing he takes any interest in is energy. His destructive presence is a matter of great disappointment to those of us who believe that energy demands a constructive mind to plan for the United Kingdom's future.

The Secretary of State should realise that the oil industry has given the United Kingdom an enormous opportuniy, one that it has not had for 60 years. That opportunity is self-sufficiency. But it must be recognised that we must plan for future generations. Between now and the early 1990s we may well be in a period of good oil production, but planning for future generations means keeping up the rate of exploration and maintaining in the oil industry a desire to work in the waters off the United Kingdom.

The industry's whole record in recent years is one of remarkable achievement. Those of us who have been to Sullom Voe, Aberdeen and rigs in the North Sea, particularly in the northern North Sea, have seen for ourselves the traditional manner in which oil companies have overcome extreme conditions. At Sullom Voe, as in so many international oil projects associated with the North Sea, the companies underestimated the complex nature of the task of construction, whose cost is likely to top £800 million. The project has given work to 6,000 people, and by the 1980s it will be handling more than half the United Kingdom's crude oil requirements.

I ask the Minister of State to bear those statistics in mind when he is conferring with his right hon. Friend, because I believe that some of those important statistics are lost sight of. The development at Sullom Voe is an enormous achievement. At long last, it is now on stream. When the oil industry is planning for the future, it is not always aware of the cost. It can never know for certain. So if we are to maintain confidence, the Secretary of State and his Ministers at the Treasury must not introduce a deterrent. The Government are not making it easy for the oil companies at the moment. It is as simple as that.

The Government are not helping to attract and retain further foreign investment in our country. It is essential to ensure easier terms to explore in the northern North Sea arid elsewhere in our waters. The number of discoveries reached a peak in 1975 when 75 wells were drilled. In 1976 and 1977 there were 10 finds from 51 wells and 58 wells respectively. Since the middle of the 1970s there has been a decline. That decline has coincided with a general lack of confidence and a decline in the taxation record of this country and of this Administration.

If the Government and the country are to survive and take the exploration of more oil wells through into the 1990s and beyond, they must attract foreign investment. Unhappily, Socialism and further nationalisation have usually acted as a severe deterrent to foreign investment in the United Kingdom.

I give that message to the Minister of State and hope that he will ensure that his right hon. Friend understands the arguments about which we feel so passionately. We want to see long-term employment in this country, just as much as the hon. Member for Walton and the hon. Member for Aberdeen, North. We may argue about the means of getting there, but the fact is that the oil industry has given untold employment to hundreds of thousands of people throughout this country and is still doing so. I hope that the Government will not continue with the policies that they have followed for the past three or four years in deterring future foreign investment. We owe it to future generations to maintain the level of exploration and investment. I urge the Minister of State to apply his mind in great detail to this argument when he replies.

5.42 p.m.

Mr. John Hannam (Exeter)

I apologise for the huskiness of my throat. I do not know whether it is Mao, Brezhnev or "Wedgie" flu, but it is working effectively on my throat at the moment.

I congratulate my hon. Friend the Member for Gosport (Mr. Viggers) on initiating this valuable debate on the state of our North Sea oil industry. Governments and Secretaries of State are always happy generally to conceal the true state of affairs of their Departments under fairly self-satisfied assurances that all is well and developments are going according to plan. Whenever doubts are cast upon their actions, certainly in the oil sector, they retreat behind those well-worn allegations that anyone who dares to criticise them or question their activities is in the pockets of the oil companies.

There is grave disquiet over the effects on our whole energy sector of the Secretary of State's unconcealed political machinations. Whether it is in his own particular subservience to the National Union of Mineworkers or his refusal to give way over the restructuring of the electricity industry, or because of his declared political objective of the nationalisation of North Sea oil, I do not know, but what he is really doing is creating a gulf within the Department of Energy and causing a serious loss of confidence in the future stability of North Sea oil investment.

Labour Members may huff and puff about the oil companies. It is easy to frighten the public into believing that they may be taken for a ride by the multinational companies. I owe nothing to the oil companies. I am just interested in securing a good energy policy for Britain. and party politics should not enter into that objective.

During the past four years I have repeatedly questioned the Government's fixation with State control of the oil exploration and development companies. I am convinced that State control equals State bureaucracy, which equals lower investment, efficiency and production. The control of oil, the depletion rate, and the tax take could all be determined without BNOC and its 51 per cent. stake.

However, BNOC, and nationalisation through BNOC, are an argument for another day and it is no use trying to convince the Labour Party that Socialist planning is self-defeating. It learns that lesson only when its ventures collapse and the taxpayer has to bail it out.

As an unbiased oil observer, I would not accept blindly the demands from the United Kingdom oil companies for a more liberal tax regime, but I am convinced that there is a dangerous decline of confidence on the part of the larger expert oil companies in the continuing political and financial stability of the United Kingdom sector.

Mr. Helfer

Can the hon. Gentleman explain to the House why, if companies collapse only because of public ownership. Rolls-Royce had to be bailed out? Why was British Leyland on the point of collapsing? What about Alfred Herbert? What about the shipbuilding companies in this country that were all on the point of collapsing and have had to be rescued in order to keep the shipbuilding industry in operation? The list is as long as my arm, and they are all private companies.

Mr. Hannam

Nearly all of those companies got themselves hooked into State control, either through ordering or through dependence upon the State. That is another danger which faces great companies when they find themselves drawn into and intertwined in State ordering and State programmes of buying. That is what has happened in many of those industries and is happening in British Leyland.

We now see the danger of its happening in the North Sea.

I am convinced that there is a dangenerous decline of confidence on the part of the larger expert oil companies, and we must do something about it. The evidence for this belief comes from a wide range of sources and is borne out by the underlying trends of the sixth round and the declining drilling activity. Every week we see reports of a decline taking place. The absence of The Times does not necessarily mean that these reports are not coming through, because I have a whole host of them which I could quote if necessary. There are reports of lower estimates of reserves, and, interestingly enough, this represents an ultimate loss of £18 billion worth of oil. Drilling rigs are under-used and are beginning to move abroad for work. I have seen reports of this. There is less marginal field development, and we depend upon that in order to meet in 1985 the target of 2½ million barrels a day. With vast new fields being developed in Mexico and possibly elsewhere, there is a temptation for the expert oil men to up rigs and leave.

While the rewards for vast risk investments were of such a size as to attract investments, there was no problem in attracting both the oil experts and the financial backing. The picture has begun to change and it is now obvious that the oil companies have had to move non-resource financing at the same time as potential yields of oil are beginning to fall. If one adds a Government who, because of their political objectives, are changing the very premises on which the original investment programmes were worked out, we begin to see that there is a dwindling of confidence.

Risks are now greater in all directions of oil activity, and, with the increased tax and royalty take, smaller oil companies will have to take greater risks and will find greater difficulty in raising development finance. If we begin to drive the larger oil companies away from United Kingdom waters and rely on BNOC, we may please the Socialist planners, but we shall be destroying the real profits which this country needs from the North Sea.

My hon. Friends have presented adequate proof in their arguments today that the sixth round has not been the unbridled success that the Government held it to be. The Minister of State, being a reasonable man—and we all accept that he is a reasonable man—is concerned with the situation. He will no doubt engage in his usual knockabout "pockets of the oil companies" retorts when he replies to this debate. But, come the spring Finance Bill, I would not be at all surprised if the tax and royalty proposals are not modified. What will provide proof of the Government's policies will be the full details of the sixth round applications and the projected exploration programme which will follow. The proof of the pudding lies in the eating. Unfortunately, in this case that will mean the inevitable shortfall in our North Sea expectations.

Much of the argument today has revolved around the role of the BNOC. and I should like to deal with a few of the financial implications of the creation of this State oil agency. The Secretary of State for Energy and the Minister of State are always diligent to seize every opportunity to laud the Government's creation of the British National Oil Corporation. They do not often mention the magnitude of expenditure of public funds that will be necessary before the nation can ever hope to receive any return on those excesses of public spending.

To demonstrate this, I refer to the minimum commitment that BNOC has assumed following the decision of the Secretary of State to give it a 51 per cent. working interest in the 1977 fifth round of United Kingdom offshore licensing. In that round, 44 of the 71 blocks on offer were awarded conditionally to selected private company applicants, provided that in every case they concluded operating agreements with the BNOC.

On the not unreasonable assumption that an average North Sea well costs $5 million and that any further seismic work that has to be done on the blocks before the drilling site can be chosen is relatively small in amount compared with the average well cost, the following set of figures can be developed. In the exploration phrase, at least one well will have to be drilled on each block. BNOC involvement, therefore, worked out on the basis of 51 per cent. of the £2.5 million times the 44 blocks, equals £56 million, and these figures arc probably out of date already from when I put them together.

On the assumption that one-third of the exploration wells will give sufficient encouragement to call for the further drilling of two appraisal wells to assess the discoveries made, the BNOC will have a further involvement of 51 per cent. of the £2.5 million times 28. Therefore, we have a further involvement of £36 million.

Thus, to complete just the exploration and appraisal phase of the fifth round, the BNOC will probably have spent £92 million. That figure is the one which the Secretary of State would not give when he was questioned in the House on 9th February 1977.

On the final assumption that one-third of the appraisal drilling will result in decisions to formulate development plans for oil and gas production and that a modest development programme is likely, therefore, to cost a minimum of £300 million, the BNOC will have a further involvement of £765 million. So the grand total of exploration, appraisal and development involvement of the BNOC alone in the fifth round thus becomes £857 million.

I stress that this involvement is a minimum estimate which in reality could be considerably higher. It is no wonder that the terms for the sixth round of offshore licensing which closed on 20th November were changed radically so that the BNOC would have only a working interest initially in the sixth round blocks where it was designed to be the operator. On the other 40 blocks of the round the private company applicants were required to meet the BNOC's potential involvement in the exploration and appraisal phases until such time as development was agreed upon by all the parties to a licence when, of course, BNOC would change its status and become a working interest participant which would refund earlier drilling costs.

I turn now to the time scale on a similar minimum basis. At best, appraisal drilling could be completed two years from the date of the confirmed award of a licence. Any resulting development plan would take at least a year to devise and to be officially sanctioned. The completed execution of that plan would require at least three years. So the total time scale to first production is therefore six years after the confirmed award of a licence.

That is not the end of the story, however. Due to the fact that the finance raised for a development project has to be serviced and redeemed before any positive cash flow is achieved, most public economic analysts state that at least a further three years would be required to reach that position.

To sum up, we have some £857 million of public funds to be spent by the BNOC in the by no means certain attainment of oil and gas production from the confirmed awards of blocks contained in the fifth round. Despite the claims from the Government Benches, it is unlikely that there will be any profit from that investment until 1985 at the earliest. Is there any justification other than dogmatic Socialism, therefore, for spending such amounts of public funds when private industry is willing and eager to finance offshore operations, provided fiscal conditions are not too onerous? As my hon. Friends have shown clearly, with the present Secretary of State in charge of our energy affairs, political dogmatism reigns supreme, and the country will bear the cost.

5.54 p.m.

Mr. Raymond Whitney (Wycombe)

I am happy to join my hon. Friends in offering congratulations to my hon. Friend the Member for Gosport (Mr. Viggers) on his foresight and percipience in giving the House the opportunity for this debate. I am also sad that this seems to be the second debate on successive parliamentary days which should be unnecessary with any sensible Government in office.

On Friday, thanks to the enterprise of my hon. Friend the Member for Edinburgh, Pentlands (Mr. Rifkind), the House debated the prospect which seems to be before us of the Government acknowledging and acceding to a demand to impose economic sanctions on South Africa—a prospect which obviously has appalling consequences both for our economy and for South Africa.

We now face another appalling prospect for our economy. It seems to me that the debate should be unnecessary, but, as I say, I congratulate my hon. Friend the Member for Gosport because we have to bring home to the Government the need to create, as the motion points out, the necessary economic climate for the correct development of Britain's oil resources and to end the uncertainty with which they have been surrounded by the Government and their spokesmen.

Sadly, this debate seems to be all too necessary, and the need for it was underlined a few moments ago by the hon. Member for Liverpool, Walton (Mr. Heffer). I arrived to hear his speech, and I had the feeling that I was cast back to 1945 or 1946. I had the impression that this was the re-run of a rather flaky black and white old-time "B" picture or, to mix the metaphor a little, that we were back again with the Bourbons, who forget nothing and learn nothing. There is no doubt that the hon. Member for Walton and his right hon. Friend the Secretary of State are latterday Bourbons.

Yet again, we have the tired old projection of the idea of the British people wanting to control the oil. Of course, they do. But we must ask ourselves whether the British people enjoy the control of Britain's coal and Britain's steelmaking. Are they happy with the way things are going? Of course, they are not. The prospect of Britain's oil being controlled even more tightly than at present by the Secretary of State for Energy is enough to send most British people storming to the polling booths. It is only a slight consolation to accept that the Prime Minister is well aware of the effect on the British people of such a threat. Therefore, it remains to be seen how this internal debate within the Labour Party continues and how it is reflected in the manifesto which eventually is presented to the British people when the time, which cannot be escaped, arrives.

Whatever this may do to the inner advice and counsels of the British Labour Party is of no direct concern to Conservative Members or, I hope, to most people in the country. But what happens to Britain's oil is of interest to 'us all, and it is the effect which the alarming debate within the ranks of the Labour Party is having on the British oil industry which must concern us.

Looking at the economic facts, we have to understand that we cannot get away from reality, much as the Secretary of State for Energy tries to. We come into an area where it is not enough to indulge in parlour-pink dialectics. We have to look at an international oil industry. This means that it has to be conducted with responsibility by a Government who create fiscal stability and who clearly are ready to honour the commitments which they undertake.

We have every indication at the moment that within weeks, or perhaps even days, it will become clear that Government undertakings are again in jeopardy. Indeed, it is clear already.

I hold no particular brief for the oil companies, but I recognise their achievements throughout the world. The international oil companies are faced with the uncertainties of this depressing domestic debate by the Labour Party. They are also faced with the realities of the external factors. They are faced with the rising costs in the North Sea lo which a number of my hon. Friends have referred. Operating costs have more than doubled.

With the pressure of the political storm which is being whipped up for purely domestic purposes on the one hand and the realities of the commercial and fiscal problems on the other, it is no wonder that confidence in the British oil industry has declined to such a degree. It is no wonder that the state of exploration in the North Sea is at such a low ebb.

As a complete non-expert in this area, I confess that I was left in some doubt by the tripartite exchange between my hon. Friends the Members for Sutton and Cheam (Mr. Macfarlane) and Bridgwater (Mr. King) and the Minister of State which we enjoyed earlier. Whatever the result of that exchange, the level of exploration in the North Sea certainly is some way down to the 1973 level. The Minister of State will correct me if that is wrong.

That situation causes the greatest concern. I understand that about 25 oilfields are currently in various stages of operation. In the early 1980s those 25 fields will offer about 2.5 million barrels a day. According to the expert evidence which I have had some opportunity to examine, there will be a rapid decline after the 1980s. That means that shortly afterwards national self-sufficiency will be lost again and we shall be back as a net importer. By 1990, on present figures, Britain will be a large net importer.

There is a need for a massive increase in exploration. The situation is deteriorating daily as the internal debate continues. We are most unlikely to achieve any level of increase in exploration, let alone the degree of increase which will be needed if the proper exploration of the North Sea's riches is to be set in train.

The danger that we now seem to face is that a great deal of the wealth under the North Sea could be left unexploited. Unless we run into some highly uneconomic operations, with the Secretary of State personally in charge, we shall be in serious trouble. Much of the oil that is there to be discovered might not be discovered.

The danger is increased by the Government's relationship with the BNOC and the Government's refusal to acknowledge the need to bring the BNOC under much closer parliamentary control. Their attitude to the BNOC gives the rub to the song and dance that was so well manifested earlier today by the hon. Member for Walton when he spoke of "the people's oil". Let the people, in the shape of hon. Members, have the right to a much greater control over the operations of BNOC. Without that, how is people's control to be manifested? I doubt whether most of the British people consider that the present arrangements are satisfactory—if they understand them, because I do not. 1 doubt whether they would approve of the relationship between the Secretary of State for Energy and the BNOC. I doubt whether they would agree to the extension of the role of the BNOC as a manifestation of people's control. It is far from that.

I shall explain the financial dangers. I am no expert on the subject of oil, and I am slightly less inexpert in the financial side, but I should like to draw the Minister of State's attention to the forecast produced in the Treasury's economic progress report no. 103 which was published in October of this year. The forecast for this year is that the net contribution of North Sea oil and gas to the current account of the balance of payments will be £3-2 billion—that is at 1977 prices. This happy prospect is to expand in 1979 to £4.5 billion, and in 1980 to £5.7 billion. In 1985, all being well with the exploration and the development of resources, the Treasury forecast is that oil and gas will add £8.6 billion to our current account.

I should like to ask a number of questions about that. I do not wish to detain the House, but it seems to me that it is highly questionable that, on the present course, that projection or extrapolation will be maintained. I should be interested in the Minister of State's forecast. I should be even more interested to see where we are in two years' time if we continue on our present course. Should we embark on a course which has been foreshadowed by the NEC of the Labour Party, I think that the Treasury will be able to throw these figures away along with the computer of which the Chancellor of the Exchequer seems to have such a low opinion.

This year alone, our balance of payments is alleged to have benefited to the extent of £3.2 billion, yet when we look at the likely outturn of our balance of payments this year the probability is that we shall be lucky if we strike even. This is a measure of the financial and fiscal incompetence of this Government and the dreadful prospect for this country and the economy if the Government continue in office for many more months.

I suggest that, in the interests of the economy and the oil industry, the Prime Minister should acknowledge the logic of the position and give the choice to the people. When he does, he will find that the British people understand that private enterprise forged the way in the oil industry. They are not scared of private enterprise. They recognise that any sensible Government can achieve a modus vivendi and exert proper control over international companies—the same degree of control as international companies have accepted throughout the world.

They recognise that the real way of exploiting our resources is through the initiative and hard work that can come only through the free market system. It cannot come from groups of civil servants or politicians sitting in Whitehall or Westminster.

6.8 p.m.

Mr. Hamish Gray (Ross and Cromarty)

I did not intend to participate in this debate, but in the true spirit of debate I was prompted to do so by some of the remarks of Labour Members. 1 am sure that my hon. Friend the Member for Wycombe (Mr. Whitney) will understand if 1 do not comment on his remarks.

I draw attention to the terms of the motion, particularly to that part which reads: to provide an economic climate in which private enterprise can continue to make its contribution to oilfield development ". This is extremely important. We should bear in mind, despite what has been said by Labour Members, that until January 1976 no less than 94 per cent. of the capital investment in the North Sea was private capital. It came from Britain and Europe and, largely, from American sources. With that in mind, we should examine the present situation. I am sure that the Minister will wish to draw attention to the sixth round at which a number of applications were made. We all welcome them. What is important about the sixth round is that one major oil company, with billions of pounds worth of investment already in the North Sea, has seen fit not to participate. This is the writing on the wall. Perhaps, we have been a little severe in our criticism of the Secretary of State, but his very presence in the post of Secretary of State for Energy must inhibit further investment in the North Sea.

Anybody who can be as irresponsible as the Secretary of State in his speeches at Labour Party conferences must undoubtedly be a liability for the Government. Probably the Prime Minister already realises this. Certainly we do. He is a liability to this country because of his attitudes.

It is sometimes forgotten that the Secretary of State is not alone. Below the Gangway on most afternoons sit a collection of Members—

Mr. Forman

Faceless men.

Mr. Gray

—who between them present a real challenge to the future prosperity of this country. If their attitudes and their collective utterances are to be taken seriously by oil companies or anyone else who wants to invest in this country, we will certainly find it difficult to encourage those people.

The Secretary of State for Energy, by a series of pronouncements, made not just over recent years but over a very long period, must cast grave doubt on the future intentions of this Government. The time may come when the Secretary of State will hold an even more important position in this Government. Should that ever happen, it is little wonder that many major companies have doubts about future investment.

I am glad that the hon. Member for Aberdeen, North (Mr. Hughes) has returned, because he made some truly amazing utterances. He comes from the heart of Aberdeen, an area that has benefited to a great extent from 60,000 jobs created in Scotland. These jobs were created not by the British National Oil Corporation, except in its own office, but by the private oil companies. That is where the development prospects have emerged, but those prospects are being inhibited by this Government's policies.

I should like to refer to the third of the specifications laid down by my hon. Friend the Member for Gosport (Mr. Viggers). He called on the Government to clarify their intentions over British Petroleum in the light of the remarks of the Secretary of State for Energy at the last Labour Party conference. That selfsame Government, in which the Secretary of State was a Cabinet member, decided not to retain the 16 per cent. additional shareholding that they inherited in British Petroleum. They discarded the shareholding and yet at the same time they are calling for greater public ownership in British Petroleum.

Who can attach any importance to the utterances of a Government who behave in that way? I am not criticising the Government for not keeping the 16 per cent. shareholding. They were right. But they cannot now pretend that they want greater public ownership. This is all a sop to the Left wing, the people below the Gangway, the absentees from the House. There is not one Tribunite to be seen.

The Tribune group in this House now consists of more than 80 MPs. That is a fact of which people outside this House are taking note. They are not taking note of the moderates like the Minister of State. They are listening to the Left wingers who rule the Labour Party and whose views in this House are pooh-poohed by those in power but who make the policies: the people on the Labour Front Bench are merely the people who have to administer and implement them.

6.14 p.m.

Mr. Tom King (Bridgwater)

I can understand how my hon. Friend the Member for Ross and Cromarty (Mr. Gray) felt impelled to speak in view of some of the rubbish to which he had to listen from the other side of the House. I do not think that any of my hon. Friends would disagree with his conclusions about the power of the Left wing of the Labour Party in the House of Commons.

I should like to congratulate my hon. Friend the Member for Gosport (Mr. Viggers) on his choice of subject for debate and also on his excellent speech. Like him, I much regret the absence of the Secretary of State. My hon. Friend did him the courtesy of sending him an advance copy of the motion last week so that he would be aware that it concerned his own involvement in this area, particularly the relationship, to which the hon. Member for Liverpool, Walton (Mr. Heller) referred, between his position as a member of the Cabinet and as a member of the national executive committee of the Labour Party.

The Minister of State will understand that we do not feel in any way inhibited from making certain comments about the Secretary of State's conduct. We gave him the opportunity to be here. We are bound to express disappointment. It is not the most closely guarded parliamentary secret that the Minister of State is not totally ad idem with the Secretary of State in every positive aspect of Socialist party thought. If we had a free vote, I have no doubt that there are certain aspects of the motion upon which the Minister of State might look more sympathetically than he is able to do.

We shall address ourselves to these issues. My hon. Friend the Member for Gosport has brought before the House one of the most crucial issues affecting our economy at present and for the future. The handling of North Sea oil, as my hon. Friends have said, has undoubtedly been a great success story so far. The allegation by the hon. Member for Aberdeen, North (Mr. Hughes) that we take any pleasure from any failure to succeed is a canard that is hardly deserving of reply. We take great pleasure from the success so far, but that success was marked in the early stages by considerable enthusiasm and incentive which led to the rapid development of the North Sea oil territories.

As my hon. Friend the Member for Carshalton (Mr. Forman) made clear, there is worrying evidence that the climate has changed and that there is now considerably less enthusiasm and considerably greater concern. I want to address myself to three issues. The first is whether it is really true that the situation has changed. If it is true, why has it happened? If it has happened, does it really matter that the situation has changed? Before answering those questions I should like to deal wit' one comment which I think the Minister of State will make. I hope that he can raise the level of argument above that adopted by the Secretary of State, who dismisses every comment by saying, "There goes the Conservative Party, listening to every tittle-tattle of propaganda from the oil industry. This is just another campaign by the oil industry."

With respect to the Minister of State, we were not born yesterday. The Secretary of State announces to the House as though it is a blinding revelation that the interests of the oil industry and the oil companies are not necessarily identical to the national interest. I should have thought that that was the palpably obvious comment. Of course, they are not. They operate in different disciplines. They have different obligations and commitments, and that is well understood. They are perfectly entitled to run a propaganda campaign. I should have thought that the Secretary of State was the last person to suggest that people should not run propaganda campaigns.

It is the duty of politicians to assess the merit and value of the comments that are made. Some of us who have spent a considerable time in industry and have seen campaigns of this kind before and the way in which they are orchestrated—perhaps this is the difference between our attitude and the attitude shown by the Secretary of State—will actually listen. We will inform ourselves as fully as possible on the issues and we will make our own judgment. What we will not do is make the instant prejudgment that the Secretary of State seems to have made, that any comment by the oil companies cannot have a grain of truth in it. It is totally prejudicial and not worthy of the attention that should be given to this area.

I hope that we shall hear no more of that canard. We stand for the national interest, which we believe is best secured by harnessing the widest range of skills in the world in the development of the most difficult oil territory yet tackled.

Mr. Heifer

Will the hon. Gentleman give way?

Mr. King

Very briefly.

Mr. Heifer

I gave way to him about four times.

Mr. Macfarlane

No.

Mr. Heifer

I gave way to the hon. Gentleman four times, and the hon. Member for Sutton and Cheam (Mr. Macfarlane) was not in the House at the time.

The hon. Member for Bridgwater (Mr. King) talks about the Secretary of State saying that the statements from the oil companies do not have a grain of truth in them. When did my right hon. Friend say that? Is that not a typical Aunt Sally, put up by the hon. Gentleman only to be knocked down?

Mr. King

If the hon. Gentleman will read the Official Report of the last two sessions of energy Questions he will find ample chapter and verse for my comments.

My first question is: is there a changed climate? The Minister may seek to make out that the sixth round is a great success. It seems that only two-thirds as many companies applied this time as applied before, that one major oil company abstained altogether and that four major companies have made only limited applications. It is difficult to get the full facts because they have not been published yet, and I agree with the suggestion that these applications should be published in full. The Secretary of State made confident boasts in a press release, which appeared to have been issued almost before the closing date for applications, about what a success it was. The resources available to the companies, and the number of companies, must be much smaller.

The Secretary of State misled the House at Question Time last week when he said: …the sixth round was the most successful round of applications…in terms of…the number of companies that applied ".—[Official Report, 4th December 1978 ; Vol. 959, c. 1019.] As only two-thirds as many of the companies applied for the sixth round as applied for the fifth, the Minister of State may at least like to correct that.

Anyone who knows the oil industry knows that even that does not tell the whole story about the sixth round, because what will determine it is the work commitment that they are willing to undertake. That may produce some interesting shocks.

I do not want to dwell on the further facts about the change in exploration drilling. In a tripartite exchange with my hon. Friend the Member for Sutton and Cheam (Mr. Macfarlane), the Minister left me thoroughly confused about my having made a selective quotation, when I had quoted the whole of his parliamentary answer. It is hard to be accused of choosing answers selectively.

Although my hon. Friend the Member for Ross and Cromarty covered the three months at the peak of the drilling season, the Minister also gave the figure for the whole year. He has now said that the figure for the whole year is likely to be 59, yet his answer on 4th December gave a figure of 39. If that is not a misprint in Hansard, it is a remarkable change. It represents half the exploration drilling of the year before—a worrying feature.

Lord Kearton said at his press conference in Glasgow that great pressure was needed on the oil companies for virtually every well drilled this year. That does not show evidence of a massive enthusiasm. Tragically, there is a real threat of unemployment among United Kingdom drilling crews. That is a new high in the Government's failure to maintain jobs in an area which should be potentially so exciting for employment.

I have some sympathy with the original statement which was made when the facts about drilling emerged. The Minister of State went on record as saying that he was sure that Government policies were not the cause, although he added that he was not sure what the cause was and then said that he would have further discussions to try to find out.

If we accept that possibly there is not just a propaganda campaign, that perhaps the comments of oil companies may have a grain of truth in them, why has this happened? Of course, there are technical problems. There may be a deterioration in the quality and the geology of the prospects. We may have found the best prospective fields. There is the impact of inflation, as my hon. Friend the Member for Carshalton said, with the enormous expansion of costs. My hon. Friend the Member for Exeter (Mr. Hannam) drew attention to the cost commitments and the risk element which will now face the BNOC. The risk-reward ratio has changed, apart from any taxation considerations.

But the biggest problem is not technical or geological: it is the basic climate of confidence. More than almost any other major industrial area, the North Sea is a world of long-term investments. There is no return on the cash flow for perhaps six, seven or eight years. Only in the twelfth, fifteenth or even the twentieth year does one see a return. The industry's methods of assessment are sophisticated, dealing with all sorts of unknowns, like the world price of oil 10 or 15 years ahead. If one adds political disturbance and economic uncertainty, one sees how damaging that is.

As for the Government's contribution to the uncertainty, one thinks of the tax situation. I do not criticise at this stage, because it is very complicated, the actual levels of tax. I think that the Government have got it wrong, but this will be debated in due course, no doubt on the new Finance Bill, if the Government last that long.

What I criticise is the way that these changes were made. I challenge the Minister to say whether there was any consultation before they were announced. I understand that there was none. The Minister may say that it is not for the Government to consult, that they are free agents, but it was his right hon. Friend the Member for Birkenhead (Mr. Dell) who introduced these tax changes. The right hon. Gentleman said in Standing Committee in 1975 that he hoped that the industry would take a joint assurance from him and my right hon. Friend the Member for Wanstead and Woodford (Mr. Jenkin) that there was no intention that it should be anything other than "a stable tax". In 1974 he said that the Government's policy would be to avoid frequent changes of the rate but that they would be prepared to review the rate of tax it substantial changes in the situation were to occur.

The Minister of State knows that the only change is that relatively the world price of oil has fallen and that inflation has increased, so that, if anything, the changes have moved adversely against the companies and not in the way envisaged in his right hon. Friend's examples, which was that the rate might be changed if the price went up substantially, increasing the profits of the companies.

What has happpened, therefore, is that the Government feel that they got their sums wrong the first time round after all that exhaustive examination. The Government are entitled to say that. They did not get it wrong because of a change in external factors. They believe that the terms they arranged are not fair to the nation. If, in that situation, the Government are to change the tax climate, it is vital for there to be proper consultation with the oil companies. It is not necessarily the level of taxation that has done the damage. The trouble arises from the feeling in the oil industry that, the Government having done it once, they can do it again and again until it becomes an annual regulator used by the Chancellor of the Exchequer. Over a 20-year investment that is death.

Mr. Gordon Wilson

Does the hon. Gentleman recollect that when the oil taxation Bill came before the House an amendment was put down by myself and my hon. Friends to increase PRT to 75 per cent.? At that time the Financial Secretary to the Treasury indicated that the Government had looked thoroughly at the tax figures and believed that 45 per cent. was correct. I disputed that, and I still disagree with it—I would prefer it to be higher—but one can now see the two standards adopted then, three years ago, and now.

Mr. King

I am sure that the Scottish National Party acts with the benefit of hindsight in all these matters. I do not know what evidence it is drawing on in these matters. The Government were dealing in an area in which they had no previous experience. That is why I accept that there may be a case for change, but it must be handled with great care if one is not fundamentally to undermine confidence throughout the industry.

This change of tax seems to embody the general hostility so often shown by the Secretary of State to the oil industry in his comments. It has contributed to the lack of confidence. The Secretary of State's quotations and comments at the Labour Party conference have been about as damaging as they could be.

The final question to which I must address myself is whether it matters if there is a lack of confidence. It is worth remembering a statistic which I had not appreciated until quite recently. Half the world oil industry's offshore effort is at the moment concentrated in British waters. There is no sacred God-given reason why that should be. Increasingly we are moving into competition with Brazil, the Baltimore Canyon, Mexico, China, Japan and a number of territories which want oil exploration and the skills and abilities of the oil companies.

The hon. Member for Walton will know what I mean by mobile investment. Here is a classic example of it. The oil industry has the ability to go elsewhere and to take its skills with it. One of the oil companies that showed a significant lack of interest in the sixth round has been quoted as having a keener interest in the Norwegian fourth round. That is what I mean by competition.

It will make no difference to us this year or next year. That is why in some ways the Secretary of State's attitude is so criminal. He is playing here with what is to happen five, six, or seven years ahead when the effects of this policy will be felt. The simple fact is that it is within the international oil industry that the skills and experience lie. Some of those who possess them are British, and others come from other countries. We have to establish a climate which fairly and firmly provides a proper return for the British nation while maintaining an incentive for the international oil industry to find it worth while to keep its skills available for and to harness them to the achievement of British national objectives. That is where the Government are falling down.

The damage that has been done by the Secretary of State through his contribu- tions to the Labour Party conference cannot be overstated. It is all very well for the hon. Member for Walton to say that the Secretary of State was speaking not as a Cabinet Minister but as a member of the NEC. The right hon. Member for Bristol, South-East (Mr. Benn) is Her Majesty's Secretary of State for Energy, and it is no use his espousing policies at the Labour Party conference, or any other gathering, and expecting oil companies and investors to assume that those policies are just a figment of someone else's imagination in which the right hon. Gentleman has no personal interest.

The biggest damage is that the energy industry and the North Sea are caught up in this appalling power struggle between hon. Members below the Gangway and the NEC on one side and the Labour Cabinet on the other about who fixes Government policy. It is intolerable to suggest that the Secretary of State for Energy can wear one hat on one occasion and speak responsibly, and on another represent only the NEC. The damage was done on the question of nationalisation, whatever that meant, and the hon. Member for Walton told us that it meant retrospective confiscation of licences in the North Sea—

Mr. Heiler

I did not say that.

Mr. King

—or indicated that it could do so

Mr. Heifer

Will the hon. Gentleman give way?

Mr. King

No.

Mr. Heifer

On a point of order, Mr. Deputy Speaker. This is a point of correction. I did not say what the hon. Member for Bridgwater (Mr. King) alleges I said.

Mr. Deputy Speaker (Sir Myer Galpern)

Order. I call Mr. King.

Mr. King

I specifically invited the hon. Member—

Mr. Heifer

I did not say that.

Mr. King

I put the point to him—

Mr. Heifer

I did not say that.

Mr. King

Hon. Members will recall that the hon. Member for Walton said that that was a matter—

Mr. Helfer

You are a liar.

Mr. Deputy Speaker

Order. I must ask the hon. Member for Liverpool, Walton (Mr. Heller) to withdraw that observation.

Mr. Heifer

Will the hon. Member for Bridgwater withdraw his statement? I did not say what the hon. Member alleged. If he persists in that allegation —[HON. MEMBERS: "Order."] ft is wrong for an hon. Member to impugn another hon. Member, suggesting that he said something that he did not say. I am prepared to withdraw the word "liar" if the hon. Member for Bridgwater will withdraw his statement.

Mr. Deputy Speaker

I must ask the hon. Member for Walton to withdraw his observation. I hope that he will respect the wish of the Chair. The facts can be discovered in Hansard tomorrow. Will the hon. Member please withdraw?

Mr. Heller

If you so instruct me, Mr. Deputy Speaker, I withdraw it. The hon. Member for Bridgwater should now be good enough to withdraw his statement, because I did not say what he says I did, and he knows that I did not.

Mr. King

If the hon. Member could only contain himself for long enough to listen to the end of a sentence without bellowing like a bull in the middle of it, he would know what I said. I specifically asked him whether the policy could involve the retrospective confiscation of licences. He went off into a long diatribe asking how he could make up policy in advance and saying that it would be necessary to discuss the matter with civil servants. I then intervened again to make clear that that was something that could be envisaged, and it was something that he did not in any way contradict. That is what he said, and if he wishes to check Hansard he will find it there.

Mr. Heifer

I did not say what the hon. Member accused me of saying.

Mr. King

The damage that the hon. Gentleman's statement will do is typical of the sort of damage created by irresponsible statements by Labour Members. They are damaging the whole of our North Sea oil efforts. I should like to say a lot more, and I would but for my promise to allow the Minister of State the maximum time to answer the serious points in the debate.

6.38 p.m.

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

I am glad at last to get into this debate. I thought for a moment that I would not manage it.

There is a lot of good sense in what the hon. Member for Bridgwater (Mr. King) said in his closing remarks on what I regard as part (a) of the motion. The hon. Member for Ross and Cromarty (Mr. Gray) asked about BP. It is true that we decided to retain no more than 51 per cent. of the shares of BP with the uncovenanted situation that arose from the position of Burmah Oil, and so on. However, the shares are held by the Treasury, not by the Department of Energy. They are founded on the old agreement made by that well-known ex-Liberal Winston Churchill, who in about 1910 or 1914, under the so-called Bradbury agreement, entered into an arrangement with the Anglo-Iranian Oil Company.

In view of the point made in part (c) of the motion I thought it right to quote an appropriate section of the speech by Mr. Churchill, as he then was, justifying why a Liberal who became a Conservative wanted to take a 51 per cent. share in an international company. He said: it would be much easier and pleasanter for us simply to sit still, and loll with supine ease, while we watched the absorption of every independent oilfield—to sit still and observe the whole world being woven into one or two great combinations—to treat those combinations with the utmost consideration, to buy from hand to mouth in the so-called open market what we wanted from time to time, to pay the great oil trusts what they would consider an encouraging price…It is for Parliament to balance the modern element of fair commercial risk which is inseparable from business enterprise of all kinds, against the certainty of overcharge which follows on monopoly."—[Official Report, 17th June 1914 ; Vol. LXIII, c. 1152–53.] I regard that pre-Seven Sisters declaration as quite something. The later agreement that came about, the so-called revised Bradbury-Bridges agreement, is the basis of our present relationship with BP. I do not wish to anticipate any debates which we may have quite shortly on the recent relationship between past Prime Ministers, including the right hon. Member for Sidcup (Mr. Heath), who had serious reservations about British Petroleum at a certain time in our national history, or our own connection with the Rhodesian affair.

I think that, having regard to a possible future debate, it is well worth while considering our position in regard to BP. Nobody can say that the position is static and that it can never be resolved. Therefore, I reject part (c) of the motion.

Mr. Tom King

In rejecting that part of the motion, will the right hon. Gentleman say where that places the Chancellor of the Exchequer in his undertakings to Wall Street and American investors?

Dr. Mabon

Precisely where they now are. This House will have to debate our relationships with this great company in the light of the reports which have been discussed, and also in the light of our involvement with the company in other parts of the world. It is important for us to realise that the Labour Government took the option of having to nationalise BP entirely and use it as an instrument in the North Sea, or to create a new company 100 per cent. nationally owned. We took the latter course. We respect the great achievements of BP, particularly in Alaska and many other parts of the world as a most successful British international oil company. But I do not think we can accept part (c) of the motion.

My hon. Friend the Member for Liverpool, Walton (Mr. Heifer) explained part (b) very well. I do not doubt that the convolutions of constitutionalism in the Labour Party are remarkable. Our policy emerges almost as Conservative leaders emerged in the past, namely, by processes that are not understood by our opponents. However, I do not want to comment further on that.

Let me deal with the substance of the motion. I wish to join in congratulating the hon. Member for Gosport (Mr. Viggers) on introducing the motion. The substance lies in part (a) relating to the economic health of the oil province which we are now developing.

There has been a great deal of to-ing and fro-ing in the arguments about the health or otherwise of the present system, but let us at least agree a few markers. First, in regard to PRT, it is the custom for the Chancellor of the Exchequer to propose and for the House of Commons to dispose on any tax changes. It is not the custom in all circumstances for Chancellors of the Exchequer to consult the industry in great detail about taxation changes. Therefore, when my right hon. Friend the Chief Secretary to the Treasury, on 2nd August, announced the proposed changes in PRT, this was intended to open up discussions with the company. We have no reason to believe so far that the figures we have chosen—and the hon. Member for Dundee, East (Mr. Wilson) will be interested to hear this—are wrong. The hon. Gentleman's comments on this subject were not unreasonable.

We arrived at our decision after due consideration. We have certainly no reason to believe that the figures so far are wrong. We are still willing to listen to representations. However, we are very concerned on the subject of the royalty relief clause, which was touched upon by the hon. Member for Carshalton (Mr. Forman). The hon. Member for Gosport touched on the importance of what he called marginality. We have dealt with the rate of return on these smaller fields whose development so far is in question because of the rate of return. Furthermore, the question of additional taxation has also been seriously considered, as have all the other matters.

When Ministers have conducted consultations and presented their case to the House in the form of a Finance Bill, it is up to us all to debate these matters and to get these rates and circumstances right. Although this may not be the way in which the United States authorities go about these matters, it is the way in which we deal with these subjects in the United Kingdom.

I have tried patiently to explain to the companies that no disrespect is involved in the fact that we announce these changes, discuss them and then allow Parliament to decide whether they should be buttressed. However, I take the point that it is disconcerting to the companies in the case of an investment which may extend over seven to nine years, or perhaps longer, to have to experience changes of that nature. We do not intend to seek changes annually which would make the process somewhat absurd. However, we intend to get the matter right. We do not want the British people to see themselves, in the words of President Carter, ripped off by the great oil companies which have managed to strike a bonanza in the North Sea—a bonanza which not necessarily everybody was able to determine precisely.

Let me deal with the health of the fields. There are 11 fields on stream, with a twelfth field to come on stream this month. The first field began in June 1975. It is remarkable that in three and a half years we have moved from nothing to nearly 12 fields. We have moved from virtually nothing to production of over 1 million barrels a day. Indeed, at the present rate the figure is higher than that.

There are eight fields under development and they all have a forecast startup date. I see no reason why, with perhaps one exception, they should not come on stream on time as at present scheduled. We are appraising three other fields—Magnus, Cormorant North and Maureen. Discussions are taking place with the companies concerned. After that there are five more fields for which development proposals have not yet been submitted.

All of this activity illustrates that the development of the North Sea is going ahead on schedule. However, I take the point that if exploration and appraisal wells are not maintaned at a high figure we cannot expect much more in later years.

The hon. Member for Bridgwater got the situation wrong when speaking at the Conservative Party conference. I know that he was given a great cheer, but he was mistaken. The year 1977 was not our worst year, but our best year.

Mr. Tom King

Why?

Dr. Mabon

Because in that year we saw the end of the fourth round. The figure was 105. The best year had been 1975, with a figure of 116. There are other reasons for that figure.

This illustrates vividly the point made by the hon. Member for Dundee, East. He suggested that the model arrangements in regard to the time taken by companies to explore and appraise wells should be reviewed in the light of experience. That was a fair comment. Companies are given considerable leeway at present, but they gave their answer to us. We do not know the entire answer for the present year because, unlike the hon. Member for Bridgwater, we do not presume to be omnicompeteut. We are modest in our appreciation of events. We are prepared to examine this matter with the companies.

It means that 20 rigs were drilling last year and only 16 this year. That is the extent of the fall-off, which is not quite as dramatic as it sounds. We are discussing the situation with the companies and we had a vigorous comment—the first I have heard from that quarter in three and a half years—from UKOOA that perhaps we had the acreage wrong. The Secretary of State for Energy and I were present at the Energy Commission meeting when that point was made.

The House has never dissented from the argument that there should be small rounds often rather than one large round. However, UKOOA now believes that the acreage is not enough. I do not know to which Conservative I should give the John D. Rockefeller prize for the best anti-Socialist speech of the day, but the oil company concerned, Exxon, has made it clear that although it does not regard the round as attractive geologically, and although it has heavy commitments in the North Sea and does not wish to bid for the sixth round, it is still interested in the future rounds to come. I have been authorised by the chairman, Dr. Pearce. to make that statement tonight.

I am making that statement to the House tonight so that everybody understands that it is not a case of one large company boycotting us. But even if there were such a boycott, that would not be the end of the world for Great Britain. Many young independent British companies are coming into the field and bidding for the first time, hoping to get allocations in this sixth round. Indeed, hon. Members made representations to me about this on the fifth round. They felt that British companies did not get enough—that is, that independent British companies did not get the share of the fifth round which they felt they should have got. It makes it easier for us if the larger companies are not in there bidding. [HON. MEMBERS:" Oh! "] I am appealing to hon. Members' patriotism, obviously without success.

It is not true that Shell has withdrawn. Shell made a bid, and so did Conoco. There can be no suggestion that the companies are running away to more attractive parts of the world. The North Sea still represents a politically stable and financially secure oil province in the world. The proof of that is the hon. Gentleman's confession that half of all the investment in the world at the moment in offshore activity is in the North Sea province.

I take it that hon. Gentlemen are arguing not so much on the motion tonight—that is, on the present picture—but rather on what they fear the picture might be. They have proved nothing. They have not proved that anybody has deserted the North Sea, they have not proved that investment has fallen off or that there have been bankruptcies all round. They have proved nothing more than that there has been a marginal falloff in appraisal and exploration drilling. That is all. I regret that as much as anyone else does.

There were 71 blocks or part-blocks in the fifth round and 133 applicant companies. There are 44 blocks this time and 94 companies. "Never mind the quality, feel the width." It is fair to say that it depends on what one is talking about. I realise that hon. Members cannot make an assessment because these matters are confidential to the Government. The companies would not want it otherwise. If they do, they should tell us, but at the moment they do not.

My right hon. Friend the Secretary of State has given in Hansard, in answer, I believe, to my hon. Friend the Member for Dunbartonshire, West (Mr. Campbell), a list of the companies which are involved to show the House of Commons and the world that the British oil province still remains the most attractive area for investment in the oil industry, and I call upon my right hon. and hon. Friends to reject the motion.

6.54 p.m.

Mr. Viggers

I remind the House of these words: Is there any point to which you would wish to draw my attention? said Dr. Watson. To the curious incident of the dog in the night-time said Sherlock Holmes. But ", said Dr. Watson, the dog did nothing in the night-time. That was the curious incident ", remarked Sherlock Holmes.

The curious feature of this debate is that two of the three sections of the motion relate to the Secretary of State for Energy, who has come into the Chamber in the last few minutes. The curious thing about the whole debate is that he has done nothing during the debate. It is quite extraordinary.

We have had two replies from the Government side. One came from the Minister of State, Department of Energy, who tried to explain away the reasons why the Government feel unable to accept the motion. The other reply was from the hon. Member for Liverpool Walton, (Mr. Heller), and I think it is worth reminding the House that he was at one time a Minister of State working for and with the present Secretary of State for Energy, so there is reason to believe that his reply might be as authentic as that of the present Minister of State, Department of Energy.

The reply by the hon. Member for Walton was frightening in its clarity. The hon. Gentleman made clear exactly how he felt the Labour Party would deal with North Sea oil development, and that prospect is daunting. I shall not bring the hon. Gentleman to his feet again in anger, as he was a few minutes ago in response to my hon. Friend the Member for Bridgwater (Mr. King), to say whether or not he intends—

Mr. Heffer

Repeat what the hon. Member for Bridgwater (Mr. King) said, and I will.

Mr. Viggers

No doubt, I shall persuade the hon. Gentleman to his feet in due course. The prospect that he laid before us was one of further nationalisation in the North Sea.

I come now to the reasonable remarks made by the right hon. Member for Orkney and Shetland (Mr. Grimond). I so often agree with him that I find it difficult to believe that he is in a different party. He said that it is difficult to imagine what else is left to nationalise in the North Sea since North Sea oil has already been nationalised by a Conservative Government. But the right hon. Gentleman asked for an assurance that no further oil companies would be nationalised and for an assurance that oil terminals would similarly be left alone.

The Minister of State did not reply to that question. I think that we probably received a more authentic reply from the hon. Member for Walton, the ex-Minister of State.

The right hon. Member for Orkney and Shetland asked also for an assurance on the flaring of gas at Flotta, and he asked whether this could be used at Sullom Voe. The Minister did not comment on that. Nor, indeed, did he explain why the antipollution centre should be based at Bristol, conveniently adjacent for dealing with pollution problems in Bristol, South-East and other constituencies, when it should be nearer to Sullom Voe.

The right hon. Member for Orkney and Shetland referred quite rightly to the vexed question of who is the referee in the North Sea. It is not good enough to have a company which is both referee and player.

The hon. Member for Walton tried to clarify what he thought was meant by complete public ownership of oil resources. He was dealt with quite adequately by my hon. Friend the Member for Bridgwater. He did not, however, deal with what was meant by "nation" when the Secretary of State for Energy made that reference at the Labour Party conference. That remains outstanding. He also objected to my use of the expression "silly" concerning the resolution at the Labour Party conference. I did not say that; it was The Times that said it. But it was indeed silly, and I confirm that The Times was right.

At the outset of the speech by my hon. Friend the Member for Carshalton (Mr. Forman) it became apparent that the Secretary of State was absent on Cabinet business and unable to attend the Chamber. We were told that that business concerned the subject of our debate. It is certainly a new rule which says that Cabinet Ministers may have their absence explained by their deputies during a debate relating to them specifically and personally because they are busy elsewhere. This is an excuse which could perhaps be used by many other people.

The hon. Member for Dundee, East (Mr. Wilson), who is in his place, speak-

ing for the Scottish National Party, reiterated my request that there should be publication of a list of blocks and applications. This is perhaps something the Minister might wish to look at.

I shall not go into the speech of the hon. Member for Aberdeen, North (Mr. Hughes), which has been taken to bits on a number of occasions in the last hour or two. One point, however, is worth making. The hon. Gentleman sought to say that the Conservative Party had cost the country many millions of pounds by giving oil away cheaply. The most valuable oilfield in the North Sea is the Forties, which is owned and operated by British Petroleum. That allocation was made by a Labour Government—a fact which is often overlooked.

My hon. Friend the Member for Exeter (Mr. Hannam) pointed out that BNOC has not added a single drop of oil to North Sea production. It is a fact that BNOC has not contributed anything apart from nationalisation of the operations.

The motion which I put down for debate, discussion and vote this evening could not be more moderate. Part (c) simply asks for clarification of the Government's intentions with regard to British Petroleum in the light of the remarks of the Secretary of State for Energy at the Labour Party conference. I understand that the Minister of State is not prepared to accept that, and 11; urges his hon. Friends to vote against it. It is difficult to understand why. Part (b) asks the Government to end the uncertainty caused by the Secretary of State for Energy's approval of nationalisation of North Sea oil. That also has been refused. Part (a) asks for an improvement in the economic climate. That is refused as well. I ask my right hon. and hon. Friends to support the motion.

Question put:—

The House divided: Ayes 159, Noes 197.

Division No. 20]	[6.59 p.m	AYES
Altken, Jonathan	Bitten, John	Brittan, Leon
Alison, Michael	Biggs-Davison, John	Brooke, Hon Peter
Atkins, Rt Hon H. (Speithome)	Blaker, Peter	Buck, Antony
Atkinson, David (B'mouth, East)	Boscawen, Han Robert	Budgen, Nick
Baker, Kenneth	Bottomley, Peter	Bulmer, Esmond
Banks, Robert	Bowden, A. (Brighton, Kemptown)	Butler, Adam (Bosworth)
Bell, Ronald	Boyson, Dr Rhodes (Brent)	Channon, Paul
Berry, Hon Anthony	Brains, Sir Bernard	Clark, Alan (Plymouth, Sutton)
Clarke, Kenneth (Rushcliffe)	Jones, Arthur (Daventry)	Paisley, Rev Ian
Cope, John	Kershaw, Anthony	Parkinson, Cecil
Cormack, Patrick	Kilfedder, James	Pattie, Geoffrey
Craig, Rt Hon W. (Belfast E)	Kimball, Marcus	Percival, Ian
Crowder, F. P.	King, Tom (Bridgwater)	Powell, Rt Hon J. Enoch
Dodsworth, Geoffrey	Knight, Mrs Jill	Price, David (Eastleigh)
Douglas-Hamilton, Lord James	Lawson, Nigel	Prior, Rt Hon James
Drayson, Burnaby	Le Marchant, Spencer	Pym, Rt Hon Francis
du Cann, Rt Hon Edward	Lewis, Kenneth (Rutland)	Raison, Timothy
Dunlop, John	Loveridge, John	Rees, Peter (Dover & Deal)
Durant, Tony	McCrindle, Robert	Renton, Rt Hon Sir D. (Hunts)
Dykes, Hugh	McCusker, H.	Renton, Tim (Mid-Sussex)
Eden, Rt Hon Sir John	Macfarlane, Neb	Ridley, Hon Nicholas
Edwards, Nicholas (Pembroke)	MacGregor, John	Roberts, Michael (Cardiff NW)
Emery, Peter	MacKay, Andrew (Stechford)	Roberts, Wyn (Conway)
Eyre, Reginald	McNair-Wilson, M. (Newbury)	Royle, Sir Anthony
Fairgrieve, Russell	McNair-Wilson, P. (New Forest)	Sainsbury, Tim
Farr, John	Marshall, Michael (Arundel)	Scott, Nicholas
Fisher, Sir Nigel	Marten, Neil	Shaw, Giles (Pudsey)
Fletcher, Alex (Edinburgh N)	Mates, Michael	Sims, Roger
Fowler, Norman (Sutton C'I'd)	Mather, Carol	Smith, Dudley (Warwick)
Fox, Marcus	Maudling, Rt Hon Reginald	Smith, Timothy John (Ashfield)
Fry, Peter	Maxwell-Hyslop, Robin	Spicer, Michael (S Worcester)
Galbraith, Hon T. G. D.	Mayhew, Patrick	Stanbrook, Ivor
Gardner, Edward (S Fylde)	Meyer, Sir Anthony	Stanley, John
Gilmour, Rt Hon Sir Ian (Chesham)	Miller, Hal (Bromsgrove)	Stewart, Ian (Hitchin)
Glyn, Dr Alan	Mills, Peter	Stradling Thomas, J.
Goodhart, Philip	Miscampbell, Norman	Tapsell, Peter
Gorst, John	Mitchell, David (Basingstoke)	Taylor, R. (Croydon NW)
Gray, Hamish	Moate, Roger	Tebbit, Norman
Grieve, Percy	Molyneaux. James	Thatcher, Rt Hon Margaret
Grimond, Rt Hon J.	Montgomery, Fergus	Townsend, Cyril D.
Hamilton, Archibald (Epsom & Ewell)	Moore, John (Croydon C)	van Straubenzee, W. R.
Hamilton, Michael (Salisbury)	More, Jasper (Ludlow)	Vaughan, Dr Gerard
Hannam, John	Morgan-Giles, Rear-Admiral	Wakeham, John
Hastings, Stephen	Morris, Michael (Northampton S)	Walker, Rt Hon P. (Worcester)
Hayhoe, Barney	Morrison, Hon Peter (Chester)	Whitelaw, Rt Hon William
Health, Rt Hon Edward	Neave, Airey	Wiggin, Jerry
Higgins, Terence L.	Nelson, Anthony	Wigley, Dafydd
Hodgson, Robin	Neubert, Michael	Winterton, Nicholas
Hordern, Peter	Newton, Tony	Wood, Rt Hon Richard
Howe, Rt Hon Sir Geoffrey	Normanton, Tom	Young, Sir G. (Ealing, Acton)
Howell, David (Guildford)	Nott, John
Hunt, David (Wirral)	Page, John (Harrow West)	TELLERS FOR THE AYES:
Hunt, John (Ravensbourne)	Page, Rt Hon R. Graham (Crosby)	Mr. Peter Viggers and
Hurd, Douglas	Page, Richard (Workington)	Mr. Nigel Forman.
Jenkin, Rt Hon P. (Wanst'd&W'df'd)
NOES
Abse, Leo	Cook, Robin F. (Edin C)	Grocott, Bruce
Allaun, Frank	Cowans, Harry	Hamilton, James (Bothwell)
Anderson, Donald	Cox, Thomas (Tooting)	Hardy, Peter
Archer, Rt Hon Peter	Craigen, Jim (Maryhill)	Hayman, Mrs Helene
Armstrong, Ernest	Crawshaw, Richard	Heffer, Eric S.
Atkins, Ronald (Preston N)	Crowther, Stan (Rotherham)	Home Robertson, John
Bagier, Gordon A. T.	Cryer, Bob	Horam, John
Barnett, Guy (Greenwich)	Cunningham, Dr J. (Whiten)	Howell, Rt Hon Denis (B'ham, Sm H)
Barnett, Rt Hon Joel (Heywood)	Davies, Bryan (Enfield N)	Hoyle, Doug (Nelson)
Bates, Alf	Davies, Rt Hon Denzil	Hunter, Adam
Bean, R. E.	Davis, Clinton (Hackney C)	Irving, Rt Hon S. (Dartford)
Benn, Rt Hon Anthony Wedgwood	Deakins, Eric	Jackson, Colin (Brighouse)
Bennett, Andrew (Stockport N)	Dean, Joseph (Leeds West)	Jackson, Miss Margaret (Lincoln)
Bidwell, Sydney	Doig, Peter	Jay, Rt Hon Douglas
Bishop, Rt Hon Edward	Dormand, J. D.	Jenkins, Hugh (Putney)
Blenkinsop, Arthur	Douglas-Mann, Bruce	John, Brynmor
Booth, Rt Hon Albert	Duffy, A. E. P.	Johnson, James (Hull West)
Boothroyd, Miss Betty	Edge, Geoff	Johnson, Walter (Derby S)
Bottomley, Rt Hon Arthur	Ellis, John (Brigg & Scun)	Jones, Alec (Rhondda)
Boyden, James (Bish Auck)	English, Michael	Jones, Barry (East Flint)
Bray, Dr Jeremy	Ennals, Rt Hon David	Judd, Frank
Brown, Hugh D. (Provan)	Evans, loan (Aberdare)	Kaufman, Rt Hon Gerald
Brown, Robert C. (Newcastle W)	Evans, John (Newton)	Kerr, Russell
Buchan, Norman	Ewing, Harry (Stirling)	Kilroy-Silk, Robert
Callaghan, Rt Hon J. (Cardiff SE)	Faulds, Andrew	Kinnock, Neil
Callaghan, Jim (Middleton & P)	Fernyhough, Rt Hon E.	Lamond, James
Campbell, Ian	Flannery, Martin	Lee, John
Canavan, Dennis	Foot, Rt Hon Michael	Lestor, Miss Joan (Eton & Slough}
Carmichael, Neil	Fraser, John (Lambeth, N'w'd}	Lewis, Ron (Carlisle)
Carter, Ray	Garrett, John (Norwich S)	Mabon, Rt Hon Dr J. Dickson
Carter-Jones, Lewis	Gilbert, Rt Hon Dr John	McElhone, Frank
Cartwright, John	Ginsburg, David	MacFarquhar, Roderick
Cocks, Rt Hon Michael (Bristol S)	Golding, John	McKay, Alan (Penistone)
Cohen, Stanley	Graham, Ted	MacKenzie, Rt Hon Gregor
Coleman, Donald	Grant, John (Islington C)	Maclennan, Robert

McMillan, Tom (Glasgow C)	Roberts Albert (Normanton)	Thomas, Ron (Bristol NW)
Madden, Max	Robertson, George (Hamilton)	Thorne, Stan (Preston South)
Marks, Kenneth	Rodgers, George (Chorley)	Tilley, John
Marshall, Jim (Leicester S)	Rodgers, Rt Hon William (Stockton)	Tinn, James
Maynard, Miss Joan	Rooker, J. W.	Tomlinson, John
Meacner, Michael	Roper, John	Torney, Tom
Mellish, Rt. Hon Robert	Rowlands, Ted	Urwin, T. W.
Mtkardo, Ian	Ryman, John	Varley, Rt Hon Eric G.
Milian, Rt Hon Robert	Sandelson, Neville	Wainwright, Edwin (Dearne V)
Mitchell, Austin (Grimsby)	Sedgemore, Brian	Walker, Harold (Doncaster)
Morris, Rt Hon Charles R	Selby, Harry	Walker, Terry (Kingswood)
Morton, George	Shaw, Arnold (Ilford South)	Ward, Michael
Mulley, Rt Hon Frederick	Sheldon, Rt Hon Robert	Watkins, David
Murray, Rt Hon Ronald King	Shore, Rt Hon Peter	Watkinson, John
Noble, Mike	Short, Mrs Renee (Wolv NE)	Weetch, Ken
Oakes, Gordon	Silkin, Rt Hon John (Deptford)	Wellbeloved, James
Ogden, Eric	Silkin, Rt Hon S. C. (Dulwich)	White, James (Pollok)
O'Halloran, Michael	Silverman, Julius	Whitehead, Philip
Orbach, Maurice	Skinner, Dennis	Whitlock, William
Orme, Rt Hon Stanley	Smith, Rt Hon John (N Lanarkshire)	Williams, Rt Hon Allan (Swansea W)
Owen, Rt Hon Dr David	Snape, Peter	Williams, Alan Lee (Hornch'ch)
Palmer, Arthur	Spearing, Nigel	Williams, Rt Hon Shirley (Hertford)
Park, George	Spriggs, Leslie	Williams, Sir Thomas (Warrington)
Parker, John	Stallard, A. W.	Wilson, William (Coventry SE)
Parry, Robert	Stewart, Rt Hon M. (Fulham)	Wise, Mrs Audrey
Pavitt, Laurie	Stoddart, David	Woodall, Alec
Pendry, Tom	Stott, Roger	Wrigglesworth, Ian
Price, C. (Lewisham W)	Strang, Gavin	Young, David (Bolton E)
Price, Willam (Rugby)	Summerskill, Hon Dr Shirley
Radice, Giles	Taylor, Mrs Ann (Bollon W)	TELLERS FOR THE NOES:
Rees, Rt Hon Merlyn (Leeds S)	Thomas, Jeffrey (Abertillery)	Mr. Robert Hughes and
Richardson, Miss Jo	Thomas, Mike (Newcastle E)	Mr. Ernest G. Perry.

Question accordingly negatived.