ROYALTY EXEMPTION FOR PETROLEUM FROM CERTAIN SOUTHERN BASIN AND LANDWARD AREAS (Hansard, 15 December 1988)

§ Mr. Frank Doran (Aberdeen, South)
We had a fairly lengthy debate on Second Reading on the general aspects of North sea oil and gas recovery, but one or two specific points remain open for question.
First, will the Minister give us some idea of what possibilities he sees for the extension of the philosophy behind the Bill? We have seen the removal of the royalty payments in the northern sector of the North Sea in 1983 and now we see them being removed from the southern basin. But some fields are coming to the end of their useful life and there will be a growing number of such fields in the next few years. What proposals do the Government have for those older fields? We hope that his proposals will lead to improved investment in technology which would encourage an increase in the recovery rate from those fields.
My next point was raised on Second Reading and it concerns the British Gas monopoly. Ministers referred us to the proposal within the report of the Monopolies and Mergers Commission that 10 per cent. of the recovered gas should be sold to parties other than British Gas. However, we did not get a statement about the Government's position. Opposition Members are concerned that British Gas controls the rate of development because it is the monopoly purchaser. What proposals does the Minister have to open up the sale of gas and to encourage the development of the marginal fields that we discussed on Second Reading?
Will the Minister comment on the impact of the electricity privatisation?

§ The Chairman of Ways and Means (Mr. Harold Walker)
Order. I do not see how that can possibly arise under clause 1.

§ Mr. Doran
I am talking about the monopoly purchasing power of British Gas. It is a matter for debate under the clause. I was about to ask the Minister whether he thinks that the privatisation of electricity and the opening up of what the Government claim to be new electricity suppliers will bring about any improvement. On Second Reading the Minister gave the example of the purchase by the North of Scotland Hydro-Electric Board of gas from the Miller field for burning in the Peterhead power station.

§ The Chairman
Order. Perhaps I am not following the clause. It is about royalty exemption for petroleum from certain southern basin and landward areas. It has nothing to do with electricity generation and gas supplies.

§ Mr. Doran
I thought that I had made it clear that I was talking about the sale of gas. I was asking the Minister whether he thinks that there will be any improvement after privatisation and whether there will be encouragement for exploration in the southern basin.
In Britain, gas and oil are publicly owned. The establishment and payment of royalties was an expression of that public ownership. Opposition Members regret the fact that the Government have taken what appears to be a blunderbuss approach and simply removed the royalties completely rather than taking a field-by-field approach. They have breached the principle of public ownership which royalties represent.

§ The Minister of State, Department of Energy (Mr. Peter Morrison)
I can assure the hon. Member for Aberdeen, South (Mr. Doran) that the mineral rights remain vested in the Crown, and that will remain the case. The philosophy about the longevity of the fields is not quite within the confines of clause 1. However, the hon. Gentleman will be aware that I have placed much emphasis on further research and development. Only yesterday in Edinburgh I launched a new institute which will have, among other things, to consider that aspect.
I would expect the privatisation of electricity to help the southern basin in terms of further gas exploration and discoveries. As the hon. Gentleman will appreciate, and as we discussed on Second Reading, the point of the Bill is to encourage further exploration and development. I am sure that he and his right hon. and hon. Friends think that that is the right way to proceed.