§ 4.4 p.m.
§ THE CHANCELLOR OF THE DUCHY OF LANCASTER (THE EARL OF SELKIRK)
My Lords, my right honourable friend the Chancellor of the Exchequer has just made in the other place a statement on the Trinidad Oil Company, and I am repeating it now as he made it:
"As the House is aware, the Texas Oil Company has offered to buy the entire issued ordinary stock of the Trinidad Oil Company. The assent of the Government is required for this transaction and we have now had an opportunity to consider the many and complicated issues involved.
"The Trinidad Oil Company Limited has interests in a number of undertakings, of which the most important are the following. First, in Trinidad itself it has oil leases from which it produces just over a million tons of oil a year and a refinery which processes nearly four million tons of crude oil a year including some on behalf of the Texas Company. The products are distributed mainly in the Caribbean area and this country. The company has marketing subsidiaries in the Caribbean, in Jamaica, in Puerto Rico and the Dominican Republic. Elsewhere in the Caribbean the company markets on a 50:50 basis with Shell. It also holds one-third of the shares in Trinidad Northern Areas Limited. This company engages in oil exploration including marine drilling. The other shares are held equally by Shell and British Petroleum interests. In addition, the Trinidad Oil Company has a 50 per cent. share in the Regent Oil Company Limited, which at present distributes about 6 per cent. of all petroleum products used in the United Kingdom. The other half is owned by Caltex (U.K.) Limited, a wholly-owned subsidiary of the California-Texas Corporation, which in turn is owned as to 50 per cent. by the Texas Company and as to 50 per cent. by the Standard Oil Company of California. Finally, the Trinidad Oil Company owns 89 per cent, of the shares in the Regent Refining (Canada) Company, which is concerned in refining and marketing petroleum products in Canada. This company's present production of crude 996 oil from its concessions in Alberta is negligible.
"As the House will see, the crude oil production of the Trinidad Oil Company is very small—about one-sixth of l per cent. of free world oil production. But it represents about one-third of the crude oil production of Trinidad and, with the refinery, constitutes a considerable part of the oil industry there. The company have stated publicly that they have not the financial resources to maintain their position in an expanding oil world.
"In considering this matter, Her Majesty's Government are concerned with the interests both of Trinidad and the United Kingdom. As I informed the House on June 7, we have been in close touch with the Government of Trinidad on the effect of the proposal on the interests of the island. Prosperity in Trinidad is closely bound up with the oil industry. The Government of Trinidad have made it known that what they want to see is exploration intensified, existing oil resources exploited at the maximum economic rate, and the refinery operated at full economic capacity and if possible expanded. At the same time they are concerned that the existing established practice in respect of industrial relations should be maintained, that existing personnel should be treated fairly and that as many local men as possible should be trained for high positions. In view of the multi-racial character of the community, they are also concerned that there should be no racial discrimination in any of the company's plants or camps and that the rights of local persons should be respected.
"Subject to safeguards on these matters, I am informed that general opinion in Trinidad is in favour of this transaction. In consequence, Her Majesty's Government are under an obligation not to let this deal go forward without ensuring that the conditions made by the Government of Trinidad are met. On the other hand, we must bear in mind that if we use our powers to prevent the transaction we run the risk of denying great material benefits to the island.
"I now come to the interests of the United Kingdom. First I deal with 997 the need to ensure our oil supplies and to safeguard our balance of payments position. From what I have said about the production of the Trinidad Oil Company, it will be seen that the supplies which come to us from this source are very small indeed in relation to our total needs. Moreover, in time of war or national emergency, the Governor of Trinidad has power under the mining leases, to pre-empt all oil works and products thereof, and if necessary to take entire charge of the works.
"As regards the balance of payments, we should, if we permitted this transaction to take place, make it a condition that the marketing operations should be carried on under arrangements comparable with those which we already have with other American oil companies. In this way any oil which comes to the sterling area would continue to be paid for in sterling; at the same time dollars would have to be found for profits remitted to the parent company in the United States, while we should not receive any profits earned and remitted by the Canadian undertaking. For many years to come, however, all this would be more than counterbalanced by the continued investment which the parent company would have to make both in the United Kingdom and in Trinidad, while at the same time, of course, we should benefit from the dollars received in the purchase price. We should, of course, lose some tax revenue, but this can hardly he a determining factor.
"If, on the other band, we were to refuse permission for this transaction, we should, as I have said, be under a moral obligation to see that the necessary capital was forthcoming to expand the undertaking. The provision of this capital from private sources, even if it could be obtained, would represent a considerable burden on the resources of the United Kingdom, and since much of the expenditure would be overseas, an additional strain on the balance of payments. The same would apply if the capital came from public funds, and I do not think that this could be justified in the present circumstances. It has been suggested by some that Shell or British Petroleum might be interested in making an alternative offer. As I have explained, the 998 Trinidad Oil Company Limited has a variety of interests including producing, refining and marketing. Inasmuch as many of these duplicate undertakings owned by Shell and British Petroleum, it is obvious that the purchase of the Trinidad Oil Company's undertaking as a whole would have no attraction for them.
"Thus, if this transaction is considered by itself, the arguments are clearly in favour of our giving permission for it to go through, provided, of course, that the very important conditions mentioned, both those concerning Trinidad and those concerning the United Kingdom, are met. There are, however, wider considerations. This country is dependent for almost all its raw materials, including oil, on overseas sources. It is also—the two things go hand-inhand—a major overseas investor. By our investment abroad we have secured for ourselves access to many of the supplies on which our livelihood depends. This process brings great benefit both to ourselves and to the peoples of the countries where the resources lie waiting to be developed. It does, however, require the willing co-operation of those peoples and it must be a two-way business. British enterprise has built up and is continuing to build up valuable assets overseas, not only in the sterling Commonwealth, but also in North America. We have also benefited not only in the United Kingdom, but in many parts of the Commonwealth from United States enterprise and capital. If we approach this deal from too narrow a point of view, we not only take upon ourselves the burdens which have been mentioned, but also expose ourselves to the risk of discrimination against us in other countries.
"For these reasons Her Majesty's Government have decided that they are in principle willing to give permission for this transaction to go through, subject of course to the ordinary law, both here and in Trinidad, being complied with, but more particularly subject to the following conditions and undertakings:—
"First, that the following specific conditions are complied with in any 999 rearrangement of the present company structure:—
"Second that Her Majesty's Government and the Government of Trinidad receive satisfactory undertakings on the following matters:—
- (a) the marketing operations are carried on under arrangements satisfactory to Her Majesty's Government, on a basis comparable with those already existing with other American oil companies;
- (b) the production and refining operations in Trinidad are carried on by a company registered in Trinidad.
"In view of the complicated nature of the interests involved, which cannot be given in detail in a short statement, Her Majesty's Government will lay a White Paper setting out the factual basis on which their decision has been reached."
- (a) the Trinidad refinery is operated at full economic capacity and if possible expanded;
- (b) exploration in Trinidad is intensified;
- (c) existing oil resources in Trinidad are exploited on the basis of sound operating practice at the maximum economic rate;
- (d) industrial relations are maintained on the basis of existing and established practice;
- (e) there is fair treatment of existing personnel and training of as many local men as possible to take high positions in the company;
- (f) there is no racial discrimination in any of the company's plant or camps and the rights of local persons are respected.
§ 4.15 p.m.
§ LORD SILKIN
My Lords, we are very grateful for the long, careful and comprehensive statement which the noble Earl has just made. Obviously, it is of such a character that it would be very difficult for most of us to appreciate it on a first reading; we should need some time in which to study and digest it. Whether at the end of that period we should want a discussion upon it in this House or not I am unable to say at this moment. But our consideration will be 1000 assisted by the White Paper, and I should be grateful if the noble Earl could tell us when this White Paper will be available.
§ THE EARL OF SELKIRK
My Lords, I say it with reservations, but I believe that the White Paper will be available in a matter of a day or two—possibly even to-morrow.