§ 4.0 p.m.
§ LORD STONHAMMy Lords, I hope that it will be for the convenience of your Lordship if I now repeat a Statement on the Continental Shelf Licensing which has just been made in another place by my right honourable friend the Minister of Power. I will use his own words: "As the House knows, great success has been achieved in the first stages of exploration and development of the United Kingdom Continental Shelf. In less than five years since the first batch of licences was issued, five major commercial discoveries have been made; 1007 natural gas is being used in quantity by the gas industry; and large supplies have been contracted for by the petrochemical industry. Already we can be confident of 4, 000 million cubic feet per day in the mid-'70s. This fine achievement will be of great value to the economy.
"Over the past year I have been considering the next stages in the exploration and development of the United Kingdom Continental Shelf. My objective has been to realise the maximum benefit to the economy in the exploitation of these national resources.
"The two most important considerations are to maintain a continuing and vigorous effort on the United Kingdom Continental Shelf and to do this in a way which secures the maximum advantage for the economy in terms of the balance of payments and of low energy costs.
"The first objective can only be achieved by continuing to take advantage of the immense experience and resources of the oil industry. To achieve the second it is my intention that the nationalised industries and British companies should play a larger part in future.
"Large tracts of the North Sea and almost all the Irish Sea are still unexplored, and I have decided that the time has now come to invite applications for a limited number of blocks in both areas.
"In the North Sea the bulk of the territory to be offered will be in the North, since most of the blocks in the South were licensed in 1964 and 1965 and will not come up for reallocation before the end of 1970. The criteria by which I shall judge applications will be similar to those used in 1965, though with some added preference for groups involving the Gas Council and the National Coal Board and other British interests.
"Further North, between the West Coast of Scotland and the Outer Hebrides, I shall shortly be granting the Gas Council and British Petroleum a licence in the North Minch, for which they have jointly applied. This, being technically a landward area, comes under different arrangements from the North Sea and Irish Sea.
1008 "Finally, in order to clarify the present position of the Gas Council and to make sure that it is in a position to exploit to best advantage any oil it may find, I intend to seek powers by legislation for the Gas Council to search for, refine and market oil. Appropriate provisions will be included in the Bill on the re-organisation of the gas industry which I shall be presenting in the next session.
"To sum up: I shall be increasing the public stake in the continuing exploration of the Continental Shelf. In the Irish Sea, in particular, I envisage the Gas Council and N.C.B. being extensively involved, with the Gas Council, through its 'British Hydrocarbons' company, playing not only a larger but a more active role than hitherto. At the same time, I shall be offering private industry renewed opportunity to contribute to our national objective of rapid exploration of the resources of the Continental Shelf.
"Invitations to apply for licences will be published in the next two or three months.
"In the Irish Sea, I intend to make two changes. First, it will be a stringent criterion that applications for licences should provide for participation by the Gas Council or the National Coal Board, through direct partnership or options or other acceptable arrangements which the parties may agree between them. Secondly, I have informed the Gas Council that an application by them to act as operator in a limited area in the Irish Sea would be welcome to the Government so that the gas industry can gain the practical experience necessary to equip them to play an even more active role in the further development of the United Kingdom Continental Shelf. For this purpose it is the Council's intention to operate through a wholly-owned 'British Hydrocarbons' company."
THE EARL OF BESSBOROUGHMy Lords, I am most grateful to the noble Lord for making this very important Statement. Personally, I welcome the fact that the Government are now making an effort to secure maximum advantage from the United Kingdom Continental 1009 Shelf for the economy in terms, as the noble Lord said, of the balance of payments and low energy costs. However, I should like to ask him one or two questions.
First, can the noble Lord give the Government's reasons why they are giving this added preference to groups involving the Gas Council and the National Coal Board? Can he say why the Government think that in the Irish Sea the Gas Council will be the best body to act as operator? Can he also tell us something of the proposed British Hydrocarbon company? Will this be another nationalised monopoly? Is this not going to be another case of using public capital in a high-risk area in which the international oil companies have much more experience? In regard to the West Coast of Scotland, can the noble Lord say whether the Gas Council or British Petroleum will be the dominant partner? Finally, I should like to ask the noble Lord whether he thinks it right that the Gas Council should market oil, as opposed to gas. Surely they have never done this before. Is this not also much more a job for the oil companies?
§ LORD BYERSMy Lords, I welcome this Statement, and I should perhaps declare an interest, because I am a director of a company which is participating in the North Sea exploration. I should like to ask the Government whether they feel that they are in their proposals really giving preference. "Preference" seems an odd word to use: our experience is that this sort of exploration costs a great deal of money, running into millions of pounds. This plan, therefore, should be looked at, first of all, as a commitment on the part of the Gas Council and the National Coal Board to spend a great deal of money, if they are going to do the job properly, with no guarantee that they will find gas or oil at the end of it. If they do, of course, it will be of benefit to the taxpayer and the country; but if they do not, it is a very big burden indeed.
§ LORD STONHAMMy Lords, I am grateful to the noble Earl, Lord Bessborough, for the general welcome he has given to this Statement, and for the fact that this welcome was echoed by the noble Lord, Lord Byers. Exploration and development of this kind, as the 1010 noble Lord, Lord Byers, has said, is very expensive; and in fact some £200 million has been spent so far. So far as the publicly-owned bodies are concerned, they have already spent a considerable sum, and they are not without experience in these matters. So far they have spent £18 million—£7 million for exploration and £11 million for development—and with no further discoveries, combined expenditure under current licences will amount in the next eight to ten years to between £80 million and £95 million.. The cost of the additional exploration arising from action under the Statement that I have just made will, we envisage, be about £10 million spread over the next six years. But I think that the results so far achieved, some 4, 000 million cubic feet per day in the midseventies—
§ LORD BYERSMy Lords, that is by private enterprise firms.
§ LORD STONHAMMy Lords, I do not think the noble Lord need be sensitive about this. The Statement does not in any way belittle the achievements of private enterprise firms; in fact it endorses them as one limb which is indispensable, with their immense expertise and drive.
I was trying to deal with the point raised by the noble Earl, Lord Bess-borough, who asked first of all why the Government are giving added preferences to publicly owned bodies. It is because, while we want to use private expertise to the max mum benefit of the economy, we also feel that, with an increasing share given to publicly owned bodies, as their knowledge increases, the economy as a whole and the individual citizen as a whole:, will benefit more. This tendency is already increasing in this particular industry. For example, the nationalised industries' stake is now 11 per cent. The estimated share of the five commercial fields is that the nationalised industries will have 15 per cent., and the total British share will be 38 per cent. So it is already increasing.
The noble Earl, Lord Bessborough, asked why we think that it is in the Irish Sea that the Gas Council are best fitted to take a preponderance in the matter. I would ask him to look again a: the Statement I made which does not envisage, as it were, a major dictating role for the Gas Council. The National Coal Board and private enterprise bodies will 1011 be under arrangements which are reasonable and acceptable to the Minister of Power. With regard to the British Hydrocarbon Company, I cannot at present add anything to what I have said. With reference to the use of public capital in a high-risk area, while we all know that only one well in ten produces any oil gas, and that only one well in 30 produces gas in commercial quantities, we are also aware that, with the knowledge and expertise which we have, and which is increasing, what we are doing now is extremely likely to produce satisfactory dividends for the country as a whole. So the use of public capital in this area is justified. The noble Earl, Lord Bessborough, also asked me whether the Gas Council or British Petroleum would be dominant in the North Minch area. This is a question that I cannot answer at this stage. My own understanding is that it will be a partnership between them, working together, with no suggestion of one dominating the other.
§ 4.13 p.m.
§ LORD BLYTONMy Lords, I should like to congratulate my noble friend on his Statement. This Statement is contrary to what the noble Lord, Lord Erroll of Hale (as he now is), did in 1964 when he was Minister of Fuel and Power. He hastily gave all the preferences in the North Sea to private enterprise. I am pleased that the nationalised industries are now being considered, and I believe that the Government are entirely right in this issue.
§ LORD STONHAMMy Lords, I am most grateful to my noble friend for his approval in this matter. I hope he will accept from me that while the Government think it right for an increasing share of future development to accrue to publicly owned undertakings, we nevertheless acknowledge the immense achievements of private industry, and their great knowledge, in this field. So in many ways we are at least without peer as a country, and I hope we can regard this great national success as something in which we can all share and take pride.
THE EARL OF BESSBOROUGHMy Lords, if the noble Lord and the House will forgive me for speaking again may I say that although he gave me a very clear answer to my other questions there 1012 was one question which he did not answer. That was with regard to the Gas Council marketing oil, something which I think they have never done before. What is the position in regard to that? Is this the right solution?
§ LORD STONHAMMy Lords, I do not know whether the noble Earl has appreciated that this is a reference to oil found by the Gas Council in the North Sea or the Irish Sea, and we are talking about refining and marketing that. In the view of the Government this is an activity in which it would be proper and helpful for the Gas Council to participate.
§ LORD BYERSMy Lords, on that point, am I right in understanding that the noble Lord is not in fact saying that the Gas Council will necessarily retail oil; that this is marketing in its widest sense of selling?
§ LORD STONHAMYes, my Lords.
§ LORD WAKEFIELD OF KENDALMy Lords, could the noble Lord say whether any arrangements are being made with the Irish Republic for developments in the Irish Sea? Also, could he give any indication as to whether, in the explorations that are taking place in these new areas, there is any likelihood of anything other than oil and gas being found which might be of commercial advantage to the United Kingdom?
§ LORD STONHAMMy Lords, one certainly cannot discount that last possibility. When you start digging you do not know what you are going to find. I have no precise knowledge on that point. With regard to the question about the Irish Republic, they will have rights in this matter, and these will be matters for negotiation between the two Governments. I cannot say anything about the precise details of such negotiations. As the noble Lord will appreciate, this is not a new matter, because we already have arrangements, for example, with the Isle of Man and the Northern Ireland Government. No doubt similar arrangements will be negotiated with the Government of the Republic of Ireland.
§ THE EARL OF SWINTONMy Lords, may I ask the Minister whether it is not a fact that Her Majesty's Government are predominant shareholders in the British Petroleum Company, who have the most 1013 colossal knowledge of this development, as well as vast capital with which to undertake work on it? Would it not be much more in the national interest to entrust this extremely risky enterprise to the British Petroleum Company, rather than to bring in people who have no experience at all in this kind of risk venture?
§ LORD STONHAMMy Lords, I do not know whether the noble Earl quite appreciated that I said that the British Petroleum Company and the Gas Council will be jointly participating in the development of the North Minch area, which is a landward area. I fully accept everything the noble Earl said about the knowledge, expertise and power of B.P. That apart, in so far as the exploration of the Continental Shelf is concerned, the Government treat and regard B.P. as they do any other company, and it would not be thought right to give B.P. a special advantage in that regard as compared with another company. In two or three months' time the areas or plots to be available will be advertised and it will be open to B.P., or any other company, to put in their schemes to the Minister, who will then be able to decide according to the criteria which were used in 1964 and 1965 to which companies or consortia the plots or areas should be allotted.