HC Deb 20 April 1989 vol 151 cc459-63 3.30 pm
Mr. Frank Doran (Aberdeen, South)

(by private notice): To ask the Secretary of State for Energy if he will make a statement on the explosion on the Cormorant Alpha platform, the consequent reduction in Britain's oil production and the implications for the price of petrol.

The Secretary of State for Energy (Mr. Cecil Parkinson)

Cormorant Alpha is both a production platform and the gathering platform for the nine fields in the Brent system, from which the oil is exported to Sullom Voe.

On 18 April, when fitting an emergency shut-down valve on the platform, in accordance with the recommendations of the interim report on the Piper Alpha incident, a gas leak occurred. Shell notified the Department and evacuated non-essential personnel from the platform in accordance with emergency procedures. The leak was repaired but an explosion occurred at 1820 hours. There was no fire or loss of life or injury. The Brent system was shut down as a result of this incident. My inspectors and officials from Shell are now on the platform assessing the damage. Until they have completed this assessment, we cannot estimate how long the system will be shut down.

As a result of this explosion, the loss of production is some 400,000 barrels per day. This amounts to 17 per cent, of United Kingdom daily production.

Petrol prices depend primarily upon crude oil prices and other factors in the world market. Obviously the crucial factor is the total free world oil supply, which runs at approximately 50 million barrels a day. Even though Brent is a crude oil commanding a small premium, production from the Brent field is therefore less than 1 per cent, of world production, and it is impossible to calculate the effect of any temporary shortfall from this field on petrol prices.

Safety is and will remain the first consideration. I can assure the House that every precaution is being taken to ensure that the installation is safe and that my safety directorate will not agree to production start-up until it is satisfied that all safety measures have been taken.

Mr. Doran

I thank the Secretary of State for his answer. The Opposition welcome the fact that the evacuation of the platform was, apparently, efficient and that there was no loss of life or injury.

Will the Secretary of State publish his report on the investigation that is being carried out into the causes of the explosion so that the lessons that are to be learnt can be learnt? There is obviously a great deal of speculation as to why there was an explosion three hours after the gas leak was noticed at about 3 pm. It is important that we discover the causes.

The Secretary of State will be aware that there have been a string of disasters and accidents in the North sea in the past year, many of which have resulted in substantial losses of production. There have been the Brent Alpha explosion and the Piper Alpha disaster, with tragic loss of life; the Fulmar Auk and Clyde fields were closed at Christmas; the Brent Delta was closed in the new year; the Dunlin platform was closed in February; and now the Cormorant South platform and the Brent system have been closed. I am advised that nearly 40 per cent. of the total oil production in the North sea has been lost as a result of these accumulated breakdowns and shutdowns in production.

Does the Secretary of State recognise that the loss of 40 per cent. of oil production is the direct consequence of the cuts in maintenance and safety applied by the oil industry after the fall in oil prices in 1986, and an inadequate inspection of safety by his Department? Is he prepared to allow this state of affairs to continue? Has he considered the cost to the country of those failures in the North sea oil industry? On my estimate, the result of the loss of 40 per cent, of the United Kingdom's oil production will be to add £300 million to £350 million to our monthly balance of trade deficit. That is a huge figure by any standard.

Is the right hon. Gentleman aware of the considerable fears of the consumer who has experienced steep rises in petrol prices since the beginning of the year? Since January, the price of petrol at the pump has risen by 24p a gallon. That is a massive increase in anyone's terms and there are genuine fears that there will be further increases as a result of the latest loss of production.

Will the Secretary of State accept that, as a result of the huge loss of production in the North sea, there is no justification for further increases in petrol prices? Does he recognise that the loss of production and consequent increase in oil price is caused by inadequate safety procedures or negligence on the part of the oil industry, and that the industry should bear the cost as part of its normal commercial risk? The cost should not be borne by the already hard-pressed consumer. We know that, if the temporary increases in prices resulting from this shutdown are used by the oil industry to increase petrol and other prices, it is very unlikely to reduce prices when oil prices stabilise. Will he use his good offices with the oil industry to protect the consumer against unnecessary price increases?

Mr. Parkinson

On the first question, we shall make sure that any lessons to be learned from the incident are widely disseminated throughout the industry as quickly as possible, but I cannot give the hon. Gentleman an undertaking to publish the report. As he knows, such reports can be used as the basis of prosecution if that is necessary. I cannot prejudge that, and I am not suggesting that there will be prosecutions, but that is a reason why we do not publish. But we shall publish any lessons and make sure that the information is disseminated as quickly as possible.

May I put the hon. Gentleman right, marginally, on the figure that he quoted? We have lost a great deal of production, but it is not 40 per cent. We calculate that it is about 31 per cent.

There is no evidence whatsoever to support the hon. Gentleman's smear on the industry in saying that the accident was a result of cuts in maintenance and safety. I further repudiate the idea that the rigs are not being properly inspected. The rig involved, and all the others, have been inspected, some within the past few months.

The hon. Gentleman grossly exaggerates the effect on the balance of payments. Our best estimate—it is not possible to give a particularly accurate estimate as we do not know how long the platform will be out, but assuming four to six weeks-the effect on the current account could be up £800 million this year.

As the hon. Gentleman knows, price increases are being investigated by the Monopolies and Mergers Commission, which will look at the recent price increases as it looked at the increases earlier this month. Prices have moved broadly in line with the increase in world oil prices in the past few months. World oil prices have risen by about 70 per cent, during that time, and prices have moved in roughly the same direction. I am not prejudging that, as it is a matter for the MMC which is investigating the matter, as the hon. Gentleman knows.

Mr. Bill Walker (Tayside, North)

Does not my right hon. Friend agree that it would be impossible to eliminate risk completely in an area like the North sea where oil is being extracted? The important thing is to learn the lessons and to implement the measures that result from the inquiries. That the Government have pledged to do. Those of us who are interested in the North sea are appreciative of that. Will my right hon. Friend take note of the comment of the hon. Member for Aberdeen, South (Mr. Doran) about concern in the Highland area of Scotland, where it seems that the £2 per gallon price for petrol will happen tomorrow? That is causing great concern. The oil companies claim that problems in the North sea lie behind some of the price increases.

Mr. Parkinson

I agree entirely with my hon. Friend that it is not possible to eliminate all risk from operations in the North sea, any more than it is possible to eliminate them from the coal industry or any other energy industry. That is no excuse for not making every effort to ensure that a dangerous job is carried out safely. As I said in answer to the hon. Member for Aberdeen, South (Mr. Doran), petrol prices have moved broadly in line with the increases in crude oil prices. There are other pressures on the market. There is an especially large increase in demand from the United States, which is putting further pressure on gasoline prices. I am sure that petrol companies will hear what my hon. Friend has said and will recognise that price increases are extremely unpopular.

Mr. David Steel (Tweeddale, Ettrick and Lauderdale)

Can the Secretary of State say anything more about the disruptive effect of the explosion on work at the Sullom Voe terminal in the constituency of my hon. Friend the Member for Orkney and Shetland (Mr. Wallace)? On petrol prices, the Secretary of State will remember that it is only a few weeks since the Chancellor, at the Dispatch Box, told us that he would not increase excise duties because of the effect on inflation. Since then, the price of petrol has gone up by about 8p a gallon. When do the Government expect to get the report of the Monopolies and Mergers Commission? Will the Secretary of State, together with the Chancellor, seek to intervene to make sure that the price of petrol does not go through the £2 barrier?

Mr. Parkinson

As to Sullom Voe, the loss of production represents a flow of oil that will not get there and will not be processed. We hope that the loss will be temporary and that production will be back on stream as soon as possible. A period of a few weeks has been mentioned. There can be no certainty about that until the full scale of the damage has been investigated. My officials spoke to the inspector on the platform less than an hour ago. It does not appear that there is any structural damage, but it is too soon to give a full assessment of the damage and therefore to be able to assess when it will be back on stream. Obviously everybody, subject to the demands of safety, will do everything possible to get it back on stream quickly.

The MMC will report when it has finished its work. I cannot put a date on it. The commission recognises, as do the oil companies, that there is great public interest in the matter, and it will make every effort to report as soon as possible.

Mr. Tim Smith (Beaconsfield)

Does my right hon. Friend agree that, since the Budget, the oil companies have given every impression of operating a cartel on retail prices? If it is true, as my right hon. Friend says, that retail prices are following the price of crude oil, and if, as a result of the incident in the North sea and the consequent increase in the price of Brent crude to $20, there is another increase in the retail price, will he try to ensure that, when the price comes down, as it surely will, there is a corresponding fall in the retail price of petrol?

Mr. Parkinson

The MMC is investigating precisely the cartel whose existence my hon. Friend alleges and the oil companies deny. I do not think that I can anticipate the report.

Mr. Greville Janner (Leicester, West)

Recognising the series of grave and potentially dangerous incidents on North sea oil platforms and rigs, with the Piper Alpha disaster leading to vast loss of life, is it not time that the Department of Energy handed over responsibility for safety to the Health and Safety Commission? Is the Minister aware that nearly all the serious tragedies that have occurred recently—in the North sea, at Zeebrugge and at King's Cross—have been in areas where the Health and Safety Commission has been barred from looking into safety until there has been an accident? It has only been brought in afterwards.

Mr. Parkinson

Surprisingly and unusually, the hon. and learned Gentleman has misled the House about the legal position. The Health and Safety Commission has a responsibility for safety and delegates it by agreement and under contract to my inspectorate. Moreover, there is no evidence that separating the inspectorate from my Dapartment would change matters. Although the Opposition consistently say that the same Department should not be in charge of both production and safety, they then draw our attention to the Norwegian arrangements, which are precisely the same: the Norwegian operator is responsible for both production and safety. We do not accept that there is any substance to the hon. and learned Gentleman's allegations. This matter is being considered by Lord Cullen and I have committed the Government to accepting his recommendations. I suggest that the hon. and learned Gentleman awaits that report.

Mr. Speaker

Mrs. Ewing.

Mr. Janner

On a point of order, Mr. Speaker.

Mr. Speaker

Not now.

Mrs. Margaret Ewing (Moray)

Although the Secretary of State has referred to the safety checks that are conducted on the platforms and the rigs, how extensive are those safety checks, how long does each one last and what is the expenditure on them? As we are now in the third decade of production in the North sea and the age factor must be taken into account, is any emphasis given to the age of platforms? Will the Secretary of State accept that we all welcome the fact that the safety directorate will not open production until it is satisfied that the standard of safety is appropriate, because production and profit pale into insignificance when placed against potential loss of life?

Mr. Parkinson

I entirely agree with the hon. Lady's last point about safety. Indeed, I stressed in my statement that safety is absolutely pre-eminent and no risks will be taken. No permission to operate the platform will be given unless my inspectorate is satisfied.

On the hon. Lady's first point about safety checks, the duty to operate a platform safely 24 hours a day is a duty that Parliament has placed on the operator. My inspectorate is not responsible for safety; the operator is. My inspectorate makes regular visits to ensure that the operator is carrying out that duty. Therefore, it is not fair to put all the responsibility on an official who visits occasionally when it is the operator's duty to ensure that safety is the prime consideration.

So far as the age of platforms is concerned, quite separately from the regular inspections, the certifying authority, which is an independent body, has to give a regular certificate that the platform is safe. The certifying authority supervises the design and construction and subsequently, at regular intervals, has to renew the certificate. That examination is quite independent of my Department. As the Department of Transport is responsible for the movement of people to and from the platforms, the evacuation equipment is inspected by that Department independently. A series of checks and balances is therefore built into the system.