North Sea Oil Fields (Taxable Capacity) (Hansard, 13 December 1982)

§ 4. Mr. Michael Morris
asked the Secretary of State for Energy when he last met representatives of the oil industry to discuss the taxable capacity of future North Sea oil fields.

§ The Minister of State, Department of Energy (Mr. Hamish Gray)
My right hon. Friend the Secretary of State and I last met representatives of the United Kingdom Offshore Operators Association on 2 December.

§ Mr. Morris
Is my right hon. Friend aware that it is now the unanimous view of the oil companies and those who comment on and are knowledgeable about on the oil scene that the time has come for a change in the taxation of marginal fields especially, otherwise their development will be restricted? If there are to be changes, is it not appropriate that they should last at least five years, so that there can be planned development of those important assets?

§ Mr. Gray
I recognise that many future fields are likely to be smaller and may be more marginal than earlier fields. I am anxious to reach a better understanding with the industry on assessment of the taxable capacity of these fields. For that reason, consultations have been taking place with the oil industry. My right hon. and learned Friend the Chancellor of the Exchequer will have to make his own assessment on these matters, of course, but my hon. Friend may be assured that the position is being looked at constantly by the Government.

§ Dr. J. Dickson Mabon
In the assessment of these matters, is it the Government's intention that net self-sufficiency in oil will be continued into the 1990s? Does that not mean that about 30 marginal fields will be required to be considered under very special taxation arrangements if they are to be brought into production?

§ Mr. Gray
Given the right hon. Gentleman's experience of Department of Energy matters, he will appreciate that it is not only taxation that influences decisions by the companies to proceed. I am happy to tell the House that today plans have been approved by Britoil for the Clyde field, which can now go ahead. This is a £1 billion project. The right hon. Gentleman will also be aware that the Government have pursued a vigorous policy of licensing to create maximum exploration so that discoveries may be made and the position that he desires may be achieved.

§ Mr. Douglas
Does the right hon. Gentleman accept that while taxation remission for the marginal fields is interesting, there is another way to go? It is to keep down production costs, especially of the facilities which are put over the fields. What assistance is the Department giving to British enterprises to ensure that when and if new production techniques are evolved Britain is in the forefront?

§ Mr. Gray
My Department is doing all that it can through the Offshore Supplies Office to give maximum encouragement to British companies in their efforts to obtain orders from the United Kingdom continental shelf. However, it would be a mistake for British industries to think that all their orders can be supplied from the continental shelf. With that in mind, we are doing all that we can to encourage our companies to bid for overseas work, especially on the Norwegian continental shelf.

§ Mr. John Smith
Is the Minister aware that the frequent changes in taxation policy since the present Government came to office have made the taxation of oil companies scarcely intelligible and very capricious in its effect? Will the right hon. Gentleman undertake to simplify the structure and see whether he cannot create an incentive for further exploration, which, after all, is what we want to achieve in the North Sea?

§ Mr. Gray
I do not think that the right hon. Gentleman and I differ about our ultimate objectives for encouraging investment in the North Sea. My right hon. and learned Friend the Chancellor of the Exchequer will be considering carefully the best taxation policy to follow. However, I should remind the right hon. Gentleman that, until the end of November this year, no fewer than 102 exploration and appraisal wells had been drilled. This is second only to the record year of 1975, when 116 were drilled.

§ Mr. John Smith
Under a Labour Government.

§ Mr. Gray
Yes. That was when the right hon. Gentleman was Minister of State. But I hope very much that, weather permitting, we shall be able to beat that record this year.