HC Deb 11 February 1987 vol 110 cc399-407
Mr. Hardy

I beg to move amendment No. 22, in page 19, line 22, at end insert— '(1B) The Minister may not give a direction under Clause 1A—

  1. (a) when to do so would impose an unreasonable economic burden on a proposed programme of development in respect of any part of the licensed area;
  2. (b) in respect of any part of an oil field (whether or not it is such for the purposes of the Oil Taxation Act 1975) for which a programme of development had been served on the licensee or approved or consented to by the Minister under Clause (15) before …………date……… 1987,
  3. (c) in respect of any offshore installation on which the proposed separate measuring or weighing appliances are to be installed, at a date later than that on which the installation was first approved or consented to by the Minister under Clause (15) or in respect of which a programme of development was served on the licensee under that clause.'.

Mr. Deputy Speaker

With this it will be convenient to discuss the following amendments: No. 23, in page 23, line 3, at end insert— '(1B) The Minister may not give a direction under Clause 1A—

  1. (a) when to do so would impose an unreasonable economic burden on a proposed programme of development in respect of any part of the licensed area;
  2. (b) in respect of any part of an oil field (whether or not it is such for the purposes of the Oil Taxation Act 1975) for which a programme of development had been served on the licensee or approved or consented to by the Minister under Clause (15) before …………date……… 1987,
  3. (c) in respect of any offshore installation on which the proposed separate measuring or weighing appliances are to be installed, at a date later than that on which the installation was first approved or consented to by the Minister under Clause (15) or in respect of which a programme of development was served on the licensee under that clause.'.

No. 24, in schedule 2, page 32, line 25, at end insert— '(1B) The Minister may not give a direction under Clause 1A—

  1. (a) when to do so would impose an unreasonable economic burden on a proposed programme of development in respect of any part of the licensed area;
  2. (b) in respect of any part of an oil field (whether or not it is such for the purposes of the Oil Taxation Act 1975) for which a programme of development had been served on the licensee or approved or consented to by the Minister under Clause (15) before …………date……… 1987,
  3. (c) in respect of any offshore installation on which the proposed separate measuring or weighing appliances are to be installed, at a date later than that on which the installation was first approved or consented to by the Minister under Clause (15) or in respect of which a programme of development was served on the licensee under that clause.'.

No. 25, in page 28, line 14, at end insert— '(1B) The Minister may not give a direction under Clause 1A—

  1. (a) When to do so would impose an unreasonable economic burden on a proposed programme of development in respect of any part of the licensed area;
  2. (b) in respect of any part of an oil field (whether or not it is such for the purposes of the Oil Taxation Act 1975) for which a programme of development had been served on the licensee or approved or consented to by the Minister under Clause (15) before …………date……… 1987,
  3. (c) in respect of any offshore installation on which the proposed separate measuring or weighing appliances are to be installed, at a date later than that on which the installation was first approved or consented to by the Minister under Clause (15) or in respect of which a programme of development was served on the licensee under that clause.'.

No. 26, in page 29, line 39, at end insert— '(1B) The Minister may not give a direction under Clause 1A—

  1. (a) When to do so would impose an unreasonable economic burden on a proposed programme of development in respect of any part of the licensed area;
  2. (b) in respect of any part of an oil field (whether or not it is such for the purposes of the Oil Taxation Act 1975) for which a programme of development had been served on the licensee or approved or consented to by the Minister under Clause (15) before …………date……… 1987,
  3. (c) in respect of any offshore installation on which the proposed separate measuring or weighing appliances are to be installed, at a date later than 401 that on which the installation was first approved or consented to by the Minister under Clause (15) or in respect of which a programme of development was served on the licensee under that clause.'.

No. 27, in page 30, line 12, at end insert— (1B) The Minister may not give a direction under Clause 1A—

  1. (a) When to do so would impose an unreasonable economic burden on a proposed programme of development in respect of any part of the licensed area;
  2. (b) in respect of any part of an oil field (whether or not it is such for the purposes of the Oil Taxation Act 1975) for which a programme of development had been served on the licensee or approved or consented to by the Minister under Clause (15) before …………date……… 1987,
  3. (c) in respect of any offshore installation on which the proposed separate measuring or weighing appliances are to be installed, at a date later than that on which the installation was first approved or consented to by the Minister under Clause (15) or in respect of which a programme of development was served on the licensee under that clause.'.

No. 28, in page 26, line 26, at end insert— '(1B) The Minister may not give a direction under Clause 1A—

  1. (a) When to do so would impose an unreasonable economic burden on a proposed programme of development in respect of any part of the licensed area;
  2. (b) in respect of any part of an oil field (whether or not it is such for the purposes of the Oil Taxation Act 1975) for which a programme of development had been served on the licensee or approved or consented to by the Minister under Clause (15) before …………date……… 1987,
  3. (c) in respect of any offshore installation on which the proposed separate measuring or weighing appliances are to be installed, at a date later than that on which the installation was first approved or consented to by the Minister under Clause (15) or in respect of which a programme of development was served on the licensee under that clause.'.

No. 29, in schedule 2, page 31, line 48, at end insert— '(1B) The Minister may not give a direction under Clause 1A—

  1. (a) When to do so would impose an unreasonable economic burden on a proposed programme of development in respect of any part of the licensed area;
  2. (b) in respect of any part of an oil field (whether or not it is such for the purposes of the Oil Taxation Act 1975) for which a programme of development had been served on the licensee or approved or consented to by the Minister under Clause (15) before …………date……… 1987;
  3. (c) in respect of any offshore installation on which the proposed separate measuring or weighing appliances are to he installed, at a date later than that on which the installation was first approved or consented to by the Minister under Clause (15) or in respect of which a programme of development was served on the licensee under that clause.'.

No. 30, in page 34, line 14, at end insert— '(1B) The Minister may not give a direction under Clause 1A—

  1. (a) When to do so would impose an unreasonable economic burden on a proposed programme of development in respect of any part of the licensed area;
  2. (b) in respect of any part of an oil field (whether or not it is such for the purposes of the Oil Taxation Act 1975) for which a programme of development had been served on the licensee or approved or consented to by the Minister under Clause (15) before …………date……… 1987;
  3. (c) in respect of any offshore installation on which the proposed separate measuring or weighing 402 appliances are to be installed, at a date later than that on which the installation was first approved or consented to by the Minister under Clause (15) or in respect of which a programme of development was served on the licensee under that clause.'.

Mr. Hardy

I hope that the Minister does not think that I am ignoring the pretty full response that he offered at our last sitting in Committee, when he responded to a series of amendments which I had tabled to deal with the question of measurement. His response then was extremely interesting. However, I think that the Minister will understand that he is dealing with a complex and important matter and that he may welcome the brief opportunity to reassure the industry a little more fully and perhaps in a little more detail as to the effect which the provisions of schedules 1 and 2 would have in relation to measurement, especially on the question of the development of satellite platforms, which are essentially unmanned and which therefore cannot have separation and measurement equipment upon them. That was the basis of my concern in Committee.

The Minister will understand that if we are to seek the 625 trillion cu ft that was identified as an alternative to the purchase of the Norwegian Sleipner gas, satellite platform development may be essential. Therefore, it is right that we have tabled amendments to deal with this subject. The Minister knows that we shall not press them to a Division. However, I hope that he will accept that the amendments have been tabled so that a proper assurance can be given and so that the oil and gas industries will know that they have the backing of hon. Members on both sides of the House for a proper policy of adequate extraction of our offshore reserves. It would be frightful if reserves were riot properly exploited but were left sterile, never to be tapped, because of the short-sighted fiscal arrangements.

The industry should be assured that the arrangements will not be short-sighted and that proper management of our offshore reserves will be maintained. We have tabled the amendments to give the Minister a chance to offer the industry reassurance because the hesitation which may have been involved in the Bill initially could well have aroused anxiety which should not be fostered. The Minister might like to take this opportunity to relieve and remove those anxieties.

Mr. Buchanan-Smith

I am glad to respond to the hon. Member for Wentworth (Mr. Hardy) in the spirit in which he moved the amendment. I recognise, as I did in Committee, that there is anxiety about this, in particular about the effect that the provisions in the Bill as drafted may have on satellite developments which in the years ahead could prove, and indeed are already proving, a useful source of development in the North sea, and about ensuring that we exploit our resources to the full. I consulted the industry and had discussions with individual Members on this, as my officials have. I believe that we have met their anxieties, but it may be helpful quickly to go over some of those points tonight.

First, I should make an important preliminary point which must not be overlooked. Although these provisions apply to existing licences, they are not automatic requirements. They apply only if a direction is given by the Secretary of State, and it is important to remember that. Perhaps we did not dwell sufficiently on that point in Committee.

The amendment highlights particular points of concern, and perhaps by taking the amendment I can give the assurances that he seeks. Paragraph (a) in each of the amendments seeks to prevent the Secretary of State from giving a direction when to do so would impose an "unreasonable economic burden". I said in Committee, and I repeat tonight, that these provisions will be applied with full regard to economic considerations. It is self-evident that it would not be in the interests of the Department to discourage development; instead, we must seek to encourage it, as we have always done.

Paragraph (b) seeks to prevent the new arrangements applying in respect of part of an oilfield. In certain circumstances that may be necessary, but broadly the intention is to continue to accept unitisation agreements where a field straddling two or more licensed areas is worked and developed as a unit, and the licensees' shares of petroleum won and saved are determined by application of agreed unitisation factors to the quantity measured for the field as a whole.

Paragraph (c) seeks to ensure that the new arrangements may not be applied in respect of existing installations. As I have said, there is no intention to alter the method agreed for an existing field, except where it is proposed to make use of an existing field's facilities in measuring petroleum won and saved from another field.

As I have made clear to the industry, and endeavour to make clear to the House again tonight, we are not seeking to apply some elaborate gold-plated standards of measurement for the sake of it. The provisions will be applied consistently with our general philosophy of ensuring that worthwhile developments can go ahead while revenues are protected. My Department's gas and oil measurement branch works closely and regularly on a practical level, not only with UKOOA, which has raised some of these anxieties, but with the Institute of Petroleum and individual oil companies on developments in good oilfield practice in these times of rapidly changing technology. I assure the House that we shall certainly always have regard both to good oilfield practice and to economic considerations.

I hope that with this opportunity to repeat those assurances, perhaps even more specifically than I have done previously, the hon. Gentleman will withdraw his amendment. I thank him for the opportunity to repeat them again.

Mr. Hardy

The Minister will recognise that I am grateful for those assurances which will be looked at closely by the industry. I certainly accept his point about unitisation and he was right to make it as clearly and specifically as he did. We are completely reassured about the arrangements for two separate fields. However, I have a remaining anxiety. I shall not press the Minister to respond to it this evening, but I hope that he will attend carefully to it. My anxiety may not be justified. I do not claim to be a professional geologist and I have no claims to whatever other professional qualifications proliferate for offshore discovery, development and technology.

The remaining anxiety related to the possible position of one field. One field may consist of many reservoirs. Given the small fields, particularly the small gas fields that must be developed without crossing the interests of one field or another, the development of satellite platforms may require a more positive system of approval than so far is envisaged. I am glad to note from the Minister's comments that it seems to be clear that the Department of Energy does not intend to adopt such a system of measurement requirement or fiscal regulation as would prevent use of satellite platforms.

9.45 pm

Given that remaining anxiety, which may be worth another examination by the Department between now and the time that the Bill reaches the other place, it would be churlish of me not to thank the Minister for the detailed response that he offered in Committee and for his further response— which I am sure he will agree was better made this evening— to relieve the remaining anxieties within the industry, which faces considerable problems in regard to abandonment programmes.

It was rather sad that an important piece of legislation concerned with abandonment should also have had schedules cluttered up with almost incomprehensible terminology about taxation and measurement. It may have been better to introduce a small Bill on a rather more leisurely basis in regard to this draconian measure. I quote the word "draconian" from the speech of my hon. Friend the Member for Dundee. West (Mr. Ross). It was used frequently in Committee and on Second Reading. I am glad that the Government will not be quite so draconian about measurement.

I am obliged to the Minister for the explanation and assurance that he offered to the House, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Order for Third Reading read.— [Queen's consent, on behalf of the Crown, signified.]

9.48 pm
Mr. Buchanan-Smith

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

We have reached the final stage of the Bill in the House of Commons, subject to anything that may happen in another place. In some ways it has been a strange Bill with which to work. We are dealing not with a future hypothetical situation but with one that will arise and about which many understandable uncertainties have been expressed. Ours will be one of the first major offshore areas in which abandonment of installations is likely to arise. To that extent we are treading new ground and preparing a new road. The Bill has meant that we have had wide debates. It has allowed many diverse considerations to be involved. None the less, I express my thanks to all those who participated in the debates. We have accepted not only the challenge of preparing for the 1990s, but the difficulties in which we labour. We have also sought to provide a structure for abandonment when, in many ways, if we had had the necessary knowledge and experience, it would have been more satisfying to be able also to legislate for the details of abandonment. None the less, we were right to proceed with the Bill in this way.

We are dealing with a large and important sector of the British economy. It is important that the industry knows in what conditions and framework it must work. The Bill also underlines the opportunity taken to update legislation. As the hon. Member for Wentworth (Mr. Hardy) mentioned, the Bill has given us an opportunity to deal with matters such as measurement.

The Bill highlights and demonstrates the continuing need for co-operation between the Government and industry. This Bill simply provides a framework. I hope that the co-operation that there has been over its drafting and during its parliamentary stages, including the constructive changes that have been introduced with the approval of both sides of the House, will continue when the important regulations and international standards have to be drawn up before we tackle the first abandonment. The international background will be of particular importance.

I hope that research and development will continue on a satisfactory basis. We do not yet know enough about how some of the abandonment procedures will be carried out, or about their effect on the environment. This programme has therefore been embarked upon and I hope that details will emerge from it as to how to frame the regulations.

We are referring to a national resource that lies under the sea. The sea is used by many other people for thoroughly legitimate and long-standing purposes, such as navigation and fishing. A great deal of consultation went into the preparation of the Bill. I urge all those who are involved— the oil industry, shipping and navigational interests and the fishing industry— to continue to co-operate so that conflict can be avoided and to ensure that we make the best possible use of these resources for the nation as a whole.

9.52 pm
Mr. Rowlands

I echo and second many of the Minister's sentiments. It was the ancient scholar Livy who observed that laws are as mortal as man. For the last five or six years the Minister and I have debated many measures. In most cases, the lines have been drawn and the trenches have been dug. Eventually we have been guillotined and the Government have had their Bills. I hope that some of those Acts will not be immortal. However, there was genuine co-operation over this Bill. We are trying to anticipate a problem that will arise in the next decade or so. Some of us may still he Members of Parliament when the first abandonment takes place, and we have begun a legislative process to prepare for that day. The good boy scouts' principle lies behind the Bill: to be prepared in good time for the day when we have to tackle the enormous problems surrounding the abandonment of these North sea installations.

When we began consideration of this Bill, we faced the nightmarish concept of leaving behind in the deepest North sea large physical structures, sawn off below the waterline, that could cause considerable concern to fishermen, mariners and navigational interests. We have been debating how to provide an international framework of standards as well as a national set of regulations to deal with the abandonment of important installations.

I do not want to be too philosophical, but man is transient. So, too, are Governments. Sometimes we abuse the environment and our resources. We must ensure that having enjoyed the fruits of the North sea, in terms of the minerals that have been won and the oil and gas that have been delivered, we leave the North sea in the best possible condition and ensure that it is compatible with environmental standards of the highest quality. That has been behind much of our argument. It has been a pleasure to serve on this Bill because we have had a genuinely consultative process and the Bill has changed a lot as a result. We give the Bill our full support.

9.54 pm
Mr. Proctor

I congratulate the Government on introducing what has readily been regarded as a timely measure. By addressing the future now, they have cleared away a great deal of uncertainty among the industry and other interested parties.

This is an important Bill. We are concerned with expenditure of between £5 billion and £6 billion and the abandonment of 160 installations and associated pipeline activities. The Bill is important because of our international obligations in this respect. It is important to ensure that the burden does not fall on taxpayers. The Bill is important for fishing and navigational interests and for the oil industry. I am glad that my right hon. Friend stressed the continuing importance of the oil industry to prosperity and growth in the economy.

As the hon. Member for Merthyr Tydfil and Rhyrmney (Mr. Rowlands) said, this was a truly consultative and co-operative effort. The Bill is now much better than when we discussed it on Second Reading. Much of the reason for that is my right hon. Friend, and our thanks go to him for piloting it through so well.

9.56 pm
Mr. Bruce

I welcome the tone and content of the Minister's speech. It is important that people realise that the Bill puts down markers for the future. It would be wrong to assume that Parliament has taken a clear view on the best way Toward, as we do not have the information to do that.

We have set the framework within which to approach problems. It is important to give the Bill a Third Reading in that spirit. There are problems which must be dealt with and we need a framework for that. As the Minister said, we must increase research and development and consider the possible impact of abandonment before we can make a decision.

I still believe that less than total removal would be a concession. As the hon. Member for Wentworth (Mr. Hardy) paraphrased me by saying, that might turn out to be a realistic concession because all interested parties believe that it is sensible. As long as people understand that we have established a framework and nobody assumes that their solution has been endorsed and act on that basis, we will have started down the right road.

It is important that people who are concerned with how we remove installations do not believe that Parliament has given them any exemptions from dealing with the matter comprehensively. The Minister knows that all interested parties will examine the regulations closely. It is essential that everybody is consulted and carried before any regulations are imposed.

With those qualifications in mind, I am happy to endorse the Bill and look forward with interest to see how this major issue develops.

9.58 pm
Mr. Ernie Ross

The Minister will not be surprised to hear that I want to push him even at this late stage to gather research and development findings which emerge during the next few years. We are at the very forefront of this new technology and if British industry and technology are to advance there must be some determination to gather such experience.

It is clear that, unless we are outbid by the Japanese or a large American multinational, we may have to co-operate with our European partners to get contracts. It is certainly true that British business men will have to co-operate. We are talking about large sums of money and the removal, or partial removal, of these structures. Companies will be concerned, because it is new technology, and they will wish to ensure that company confidentiality is maintained. The Minister should establish a central gathering area.

It being Ten o'clock, the motion for Third Reading stood adjourned.