PARTICIPATION AGREEMENTS BILL (Hansard, 19 January 1978)

§ The Under-Secretary of State for Energy (Dr. John Cunningham)
I beg to move, That the Bill be now read the Third time.
The House will be aware that the purpose of the Bill is to remove doubt over the status of participation agreements under our restrictive trade practices legislation. Although short and essentially technical in its purpose, the Bill underwent through discussion in Committee, where the hon. Member for Ross and Cromarty (Mr. Gray), speaking for the Opposition, expressed their general understanding of and support for the Bill, for which I thank them. I am particularly pleased to see the hon. Gentleman on the Opposition Front Bench tonight, because he has a full understanding of the nature of the Bill.
We all agreed that uncertainty is bad for the industry and ought to be resolved. Not only the Government but the Opposition showed concern over this matter, and the Opposition additionally showed concern about some issues in the Government's participation policy. To meet some of those concerns, in Committee the Government put forward amendments to the Bill which were accepted. I shall come to some of those later.
It is important for the United Kingdom not only that the Government successfully implement the policies which they put forward, and which they have been put into office to pursue, but that the House and the people directly affected by our policies have a proper understanding of what those policies are. I welcome the wide range of discussion which we had not only on Second Reading but in Committee.
We established the British National Oil Corporation to represent directly the interests of the nation in the oil industry and especially in the vital work of exploration and development of Britain's offshore oil reserves. We also wanted 808 expert advice to get the best for the nation out of those resources. The Corporation is charged with the responsibility of giving us that advice. Teams from the Department of Energy and BNOC have been negotiating to get BNOC into the action, through participation agreements where the Corporation was not already fully involved.
The House has been kept informed about participation agreements as they have been concluded, and since the Bill was introduced the number of such agreements has grown significantly. We now have participation agreements with 42 oil companies. The agreements with 27 of those companies are in the final form, though some are still subject to technical clearances. Those that have already entered into force include leading holders of North Sea reserves and the leading marketers in the United Kingdom—that is, British Petroleum, Shell and Esso. Negotiations continue with a further 16 companies which have not yet reached agreement in either outline or final form.
We therefore have full or outline agreements with about three-quarters of the companies with an interest in commercial or prospectively commercial fields on the British Continental Shelf. This, perhaps above all else, clearly demonstrates the spirit of co-operation shown by the oil companies generally. Indeed, it demonstrates their wisdom and good sense.
It is, in general, unusual for a sovereign Government to negotiate with commercial companies, but I want to emphasise—the debate gives me an opportunity to do so—that our patience in this matter has limits. There are a few companies which have not yet realised that what is sensible for them to do, as well as in the best interests of the Government, is to get this matter resolved as quickly as possible and to reach final agreement with the Government as quickly as possible.
To those companies I would say that in the early hours of this morning I returned from a visit to the United States of America, where I had the opportunity to talk at some length with a significant number of the major multinational oil corporations. There is a 809 general understanding there of our policies and of the Government's willingness to negotiate. There is also an acceptance of the fact that the companies are getting a fair deal in dealing with the British Government. There is no longer any excuse for oil companies to delay in this matter, and I say that equally to companies which are British based as to those from abroad. It is now time for them to make up their minds to resolve the outstanding problems in such negotiations.
These agreements have not been designed as a back-door route to cheap oil for BNOC or as a means of competing from a privileged position with others who are active in the oil industry. They have been the route by which we have sought to secure a place for the United Kingdom in the development of vital resources, through the direct involvement of the nation's own oil company, with the interests of the nation at heart, and it should not come as a surprise to anyone, given what we believe to be in the best interests of the United Kingdom, and given the position in gas, electricity and coal, that we should want to establish a similar position with respect to our oil and gas interests.
During the Committee stage we agreed to make it clear that the agreements to be exempted are only in the petroleum area. For this purpose, we agreed to the addition of the provision at the end of Clause 1 (3) (c) restricting certifiable agreements to those relating to petroleum and petroleum products, and I believe that this has been helpful.
The other amendment relates to keeping Parliament informed of the use of the certification procedure. The Secretary of State has to be able to exercise discretion in certifying agreements as participation agreements because of the widely differing form of such agreements, which, as the House will know, can be and are tailored to suit the circumstances of each field and to suit the individual requirements, so far as that is possible, of particular oil companies. But, of course, it is right that Parliament should be informed of the use of powers given by it. Accordingly, we have put Clause 1(5) into the Bill to ensure that Parliament is kept informed.
810 As was explained at length in Committee, we could not agree to full publication of agreements because of the need to protect the commercial position of both the BNOC and the oil companies involved in the participation agreements. A summary will, however, be made available to the House when each agreement enters into force.
Hon. Members will also be aware of the undertaking that the Secretary of State will consult the Department of Prices and Consumer Protection before issuing a certificate. The Bill removes a doubt about the status of agreements which the Government, the BNOC and the rest of the industry have arrived at after long negotiation. The House accepts that the persistence of this doubt would be most undesirable and unsettling.
I commend the Bill to the House for Third Reading.

§ Mr. Hamish Gray (Ross and Cromarty)
The Bill that is before the House for Third Reading has been adequately dealt with during its Committee stage. We should be quick to acknowledge that the Government have responded to the representations which were made to them and have amended the Bill in a number of ways, for which we are grateful. The Government believe that this is to the advantage both of the participation agreements which the Government have not yet concluded and of any future agreements which they may seek to arrange with companies.
The Bill, as we pointed out on Second Reading, puts very great power into the hands of the Secretary of State, not only over licensees but over the industry as a whole, and over the consumer too. The safeguards of the Restrictive Trade Practices Act have to some extent been undermined. By the amendments which we tabled in Committee, it was our intention to try to improve the Bill as far as that was concerned.
I was a little distressed to hear the Under-Secretary of State, when talking about the participation agreements, recall that approximately three-quarters of the companies involved have agreed but that some have still not done so. I think he said that there was now no excuse for 811 companies to delay in agreeing to negotiations. It is entirely up to the Government to use their powers of persuasion to get those companies to agree. All of us in the House would be a little alarmed if there was any suggestion by the Minister of arm-twisting or compulsion about forcing the views of the Government in order to gain their own way.
Governments, by tradition, always purport to represent the national interest. One would not suggest that the present Government are doing anything other than trying to represent the national interest. Whether they in fact achieve that aim by the policies which they follow is a matter of conjecture and a matter for debate in the House.
We accept that the Government are, by their lights, certainly trying to represent the national interest, but they should not in any way use the big stick or try any arm-twisting methods. Therefore, I take issue with the suggestion of the Minister that there is now no excuse for companies to hold out. After all, these companies are business men and it is up to them to obtain the best terms they can, just as it is up to the BNOC to try to achieve the best terms, as seen in its lights, in the national interest.
The Minister also referred to coal, electricity and gas. I must point out, however, that the oil industry is very different, because it is the only industry which operates wholly under private enterprise. That is probably the secret of its success. The fact that the BNOC has now ventured into competition in this part of the private sector is something that we shall follow very closely indeed. If the BNOC can achieve at the end of a few years the success that the individual oil companies have achieved, it will indeed have proved itself. But that is something for which the Opposition will wait and will watch with great interest.
There were three very important improvements in the Bill that were achieved as a result of representations made by the Opposition. There were also a number of ministerial assurances which are equally important and are firmly on the record. The first important improvement was that we confirmed in Committee that the Bill does not include agreements in any substance other than petroleum and petroleum products. That is a very impor- 812 tant factor for the confidence of the industry.
Secondly, where the Secretary of State certifies an agreement, he shall lay before Parliament a statement giving three vitally important details—the date of the certificate, the date of the agreement and the parties to the agreement.
Reading that casually, it may not seem a matter of very great importance. However, the Minister will recall that in Committee we were very anxious that this should be done by order, although, for reasons that the Minister explained, we reluctantly accepted that this was not possible. But the laying of the statement before Parliament is of great importance, because it has the advantage that it draws the attention of Members of Parliament on each occasion to what has happened. That is what we felt was important, as opposed merely to placing in the Library of the House a statement of something that has already been concluded. We feel that this is a step towards open government. We welcome it.
The third important change which was achieved by pursuit on the part of the Opposition was the confirmation of the definition of "petroleum products", because that was not in the original Bill and we wished to have it confirmed. It has since been done, and we see that it is the same as in Section 21 of the Energy Act 1976, which was debated in considerable detail at the time. Among the assurances which have been written into the record and which we consider of very great importance also was the assurance given by the Minister of State on 29th November, when, referring to the consultation concerning the Restrictive Trade Practices Act, he said: I am willing to give an undertaking about consulting the Department of Prices and Consumer Protection to ensure that it will be part of the Government's procedure that the Secretary of State for Energy, before issuing such a certificate, will go to that Department and take advice. I do not want to use the word 'vestigal', because it is more substantial than that, but I give that undertaking."—[Official Report, Standing Committee A, 29th November 1977; c. 28.] This is important. I think that it will be considered outside the House to be of considerable importance. It restores the confidence that the Bill initially removed.
As I said on Second Reading—I would not expect right hon. and hon. 813 Members on the Government Benches to agree with me—the whole necessity for the Bill arose because of the incompetence of the Government in not including in the Petroleum and Submarine Pipe-lines Bill what the Bill now before us contains. Therefore, to some extent we are helping the Government. As an Opposition, we are always anxious to be responsible and to give help where help is needed. When the Government come to us and virtually admit that they made an error of judgment and a mistake, obviously we are anxious to accommodate them. That is the principal reason why we have given a reasonably fair wind to the Bill.
I do not wish to detain the House, because the Bill was adequately dealt with in Committee. The Minister has been generous in acknowledging the part that we played in helping the Government with the legislation, and we wish it well as it goes on its way.

§ Mr. Gordon Wilson (Dundee, East)
I wish to support the Third Reading and to congratulate the Under-Secretary on his valiant performance in explaining the Bill when he was unable to serve on the Committee. I understand that he has just returned from the United States as the Minister of State has left for Venezuela; Department of Energy Ministers are well travelled. He made a good job of explaining what the Bill is about and that the Government are at last beginning to lose patience over participation agreements.
I cannot see why 25 per cent. of the companies have failed to enter into agreements, since they do not mean very much. They were based on a "no gain, no loss" criterion which was forced on the Government during the earlier legislation, and I have not been able to see much need for them in that form. I should be pleased if they were stronger.
This is a technical Bill to enable the Government to get over a hazard that they did not anticipate when the Petroleum and Submarine Pipe-lines Bill went through, and it is right that it should be passed.
Compliments are due to the Government for accepting amendments in the name of the hon. Member for Ross and 814 Cromarty (Mr. Gray) and his colleagues. It is good to see a Government being prepared to accept so many amendments on such a small Bill. I am sorry that the Minister of State, Privy Council Office, is not here, because if he adopted the same principle on the Scotland Bill it would be very much improved.
The next piece of major legislation involving participation will be the Scottish Oil Participation Bill when the Scottish Government get involved in oil and participate in it.