§ LORD TANLAW rose to call attention to the urgent need for a National Energy Plan in relation to Britain's entry into the European Economic Community and the increasing inadequacy of world energy supplies; and to move for Papers. The noble Lord said: My Lords, I rise to move the Motion standing in my name on the Order Paper. If ever I reached the Halls of Fame, I think it would be for one reason only: I shall have been the only speaker in your Lordships' House who managed to clear the House before uttering a single word. I am grateful for the 10 minutes' adjournment and particularly pleased to see the speakers who are to take part later in the debate.
I shall need help in introducing a wider Motion than I originally thought, so I intend to start by calling on St. Matthew, Chapter XXV, verse 8, which some noble Lords may find appropriate:
And the foolish (virgins) said unto the wise, give us of your oil, for our lamps have gone out.
My Lords, experts and amateurs alike have throughout history underestimated future demand for fuel ever since those foolish innocents failed to fill their lamps with oil. Noble Lords will recall the advice given to them at the time, which was, "to go and buy from them that sell". This is precisely the position the industrial nations are in to-day. They have gobbled up their indigenous energy reserves without thought for the morrow, and in the mistaken belief that they were virtually unlimited. Let us look at the position in more detail. I shall try to keep spoken statistics to a minimum as they can be misleading in a debate of this kind. I shall, however, mention my sources wherever possible. First, Britain. The White Paper of 1967 was a genuine attempt at a fuel policy but unfortunately,
through no fault of its authors, its extrapolations became quickly outdated by the new oil discoveries off the Scottish coast, I shall not refer to it again, but it is the last official word from the Government on energy; since then there has been a deafening silence.
§ This may be explained partly by complacency, in the mistaken belief that the newly-found oil and gas discoveries will take care of all Britain's future energy requirements. Alternatively, perhaps, the civil servants cannot bear the thought of their extrapolations going wrong again. But an energy policy is not about extrapolations, or resources at the bottom of the sea; it is about guaranteed supplies. The Suez crisis and the miners' strike made this point all too clearly. I do not subscribe to the view of an impending raw-energy famine, and am therefore directing this debate towards supplies and not resources.
§ If we look at Table 3 of the Report by the British Coal Industry entitled Coal and Energy Policy in Europe, it clearly shows that Britain's dependence on imported energy supplies has risen from 25 per cent. in 1960 to 45 per cent. in 1970. The E.E.C.'s dependence on imported energy rose to 63 per cent. in 1970—it more than doubled within the same period. The object of quoting from this table is to try to temper the Government's apparent euphoria by emphasising that Britain has not yet landed one barrel of crude oil from its own oilfields, and will be dependent upon importing heavy crude at a competitive price from the OPEC countries for at least another ten years before it can reach theoretical self-sufficiency. Shell estimate that by 1985 Western Europe's consumption of oil will be running at 25 million barrels a day, and if by then North Sea production achieves 2 million to 3 million barrels a day, it will account for only 10 per cent. of the total demand.
§ When the barrels start to roll out from the North Sea fields, the quality of oil will be high and with a low sulphur content. These oils are most suited for breaking down into expensive petroleum products and justify their expensive extraction costs. If maximum fiscal benefits are to be gained, North Sea oil and gas should not be used to fire power stations or for bulk industrial purposes, but reserved for premium use. The surpluses 630 should then be sold on the international markets. But sole dependence on the OPEC countries for domestic supply of bulk generating and industrial energy requirements is dangerous. It is dangerous for two reasons: first, because supply could be interrupted through the political instability of the area—and last week's events do not augur well for the future—and, secondly, because of the strong bargaining position of the OPEC countries over the price per barrel. This could rise rapidly because of a switch from a buyers' situation to a straight sellers' market. Earnings could even rise to an incredible thousand billion dollars a year by 1985. It is naïve to imagine that these large surpluses will not be spent on the most sophisticated weapons money can buy.
§ If the enlarged Community and, more particularly, the U.S.A. and Japan are to maintain any kind of economic autonomy in the next decade, much more efficient use muse be made of indigenous sources for generation energy. Tables clearly illustrating these points are shown in the B.P. Statistical Review, the Coal Board document to which I have referred, the Shell Briefing Service and the pamphlet, Energy and Europe produced by the European Commission. Britain's first contribution would be to lay down a national energy policy of its own. No country in the world has so far produced one, because the urgency of the situation has not been recognised by Western Governments, who seem mainly obsessed with short-term political considerations and nothing else. Britain is particularly well placed to give a lead at this time. The experience gained in all sections of the energy market, from production to exploration and exploitation, will be especially valuable. However, the Government's response so far has been discouraging.
The Minister of State for Trade and Industry had only this to say on December 11, 1972:
There is real uncertainty about future prices of fuels and an increasing awareness throughout the world of the danger of a shortage of energy. We in the United Kingdom must ensure that our national energy assets are wisely used.
This is a well-intentioned statement; but it says remarkably little about an energy policy. Perhaps the Minister was
referring to coal. If so, let us take the Coal Industry Bill, which comes before noble Lords on March 6. It is all very well for this Bill to sort out the Coal Board's huge losses and wage increases brought about by the miners' strike in 1972, but it looks to me like a sop, and cannot be taken for anything else without a statement of intent on the size of the industry as a whole. No mention is made of this in the Bill, because there is no national energy policy in which the coal industry can be given its rightful place. I believe the Government have a duty to the mining community to declare their intentions. If they negate this duty, then they belittle the intelligence, the courage and the integrity of brave men who are naturally worried about their future.
§ The effects of the last industrial action taken by the miners in 1972 were far-reaching. The Central Electricity Generating Board altered their reliance on coal to oil and natural gas, which in turn accelerated the rundown of the British coal industry at just the wrong time. An excellent article in the National Westminster Bank Review of May, 1972, by Richard Bailey, warns of the serious consequences of this switch in policy by the C.E.G.B. I would only add that if the Government had had an energy policy at the time, those short-term considerations would have been overridden. The C.E.G.B. would also not have been allowed to use natural gas, a premium fuel, for generating purposes.
§ I am sure other noble Lords will have more to say about the coal industry, including the question of coal imports, so I shall turn now to other indigenous sources of energy supply. Before doing so I would remind the House that in spite of these sources, the future price of electricity must depend primarily upon the oil companies obtaining favourable terms from the OPEC countries, as well as a continuous source of supply; that is, until there is a breakthrough in nuclear power plant design and operation. My noble friend Lord Avebury will, I hope, give us the up-to-date position and prospects for this source of energy.
§ There is also natural gas, which I mentioned earlier is a premium fuel. It should not be dissipated in firing power stations or for bulk industrial use. Its 632 proper role in a national energy policy should be reserved for the valuable premium markets. Supplies of cheap natural gas from the North Sea may be limited and therefore cease to be cheap. This was intimated by the noble Earl, Lord Gowrie, in the road traffic debate on June 14.
§ All that I have said so far adds up to one inescapable fact—the days of cheap energy are over; the laws of supply and demand have seen to that. In future, I hope, all tables showing the cost of living index will have beside them a relative scale showing base energy costs. Again, this cannot be done without a national energy policy. Why have we not got one? I think the noble Lord, Lord Robens, who is unable to be here this afternoon, put his finger on the main reason, in his powerful Potterton Lecture entitled "Towards An Energy Policy For Britain", I hope, incidentally, the noble Lord will see that his lecture goes into print, as it is a major contribution in laying down a national energy policy for this country. The noble Lord pinpointed a serious weakness in the present system of managing our energy needs, which is the constant change-about of Ministers and top civil servants in this field. This undermines the requirement of consistency in any energy policy, because of the time spans involved. The noble Lord recommended as a solution an Energy Commission, which would be a continuing authority, staffed by experts in fuel economics and the specialist technologies. The Commission would advise the Government and undertake comprehensive studies. Such a plan would be welcomed most warmly from these Benches and would receive our active support. I trust the noble Lord the Minister will have something to say about this suggestion when he makes his intervention later on in this debate.
I turn now to the enlarged E.E.C. where the problems I have outlined so far are intrinsically the same. A European energy policy is under intense discussion at the moment, and the principles behind it are laid out in the Commission pamphlet. I believe they are worth repeating—
Cheapness of supplies to the Community, though the fundamental consideration here must be the lowest long-term cost to the Community rather than the lowest market price at a given time;
Security and continuity of supplies as regards both price and quantity;
Free choice of energy sources for the consumer;
Fair competition between the various sources of energy;
Avoidance of disruptions of social and regional structures due to the substitution of one energy source or another for reasons of economic necessity.
These principles point the way to our own national energy policy which must not only have the same objectives as that of an enlarged E.E.C. policy, but must be part of it. For instance, I understand the Chairman of the Coal Board was in Europe last week to try to establish new markets for his industry. I feel his position could have been greatly weakened by not having behind him a firm commitment from the Government, on a British energy policy, in which coal was shown to have a definite role as supplier to the generating industry.
§ My second point with regard to Europe is in the form of a question to the noble Lord the Minister. It is simply this: How can Britain play its part in the formation of an energy policy for the enlarged E.E.C., when it is quite clear that the Government have not yet developed a policy of their own? Thirdly, there is a pressing need for the enlarged E.E.C. to speak with one voice when it comes to negotiate imported crude oil prices from the Middle East. The United States and Japan will be round the table as competitors; and it goes without saying that it will be in their interests, as it will be for the OPEC countries, to negotiate with a disunited Europe on this vital issue. This must not be allowed to happen.
§ The Community has rightly based its energy thinking so far on a trade and supply policy. This is especially noticeable in the coal sector, where much has been done in granting assistance to an ailing industry. The well-known Decision No. 3/65 of the High Authority to the E.C.S.C. on Subsidies, was replaced in January, 1971, by Decision 3/71, which is operative until December 31, 1975. Although this gives encouragement to the industry, the policy is based primarily on mitigating social difficulties in the regions, and does not as yet give coal a long-term future. The Community is not as advanced in the oil and natural gas sectors, but the concept is nevertheless still based on a 634 trade and supply policy. Member States are now obliged to supply the Commission with data every six months of all oil and natural gas imports. The Community also recognises that in the nuclear energy sector it will be reliant on the United States for its single source of supply of enriched uranium until the 1980s, when its own plant comes on stream.
§ So far, my Lords, the various energy sources of the Community continue to be governed by separate legal provisions—coal by the E.S.C. Treaty, oil and natural gas by the E.E.C. Treaty and nuclear energy by the Euratom Treaty. Until all three European Treaties are merged into one E.E.C. Energy Treaty, it will be impossible to create a Community energy policy. The concept of the Energy Commission mentioned earlier as a starting point for a British energy policy, might also find an application in Europe, where the problems with the administration and diversification of fuel responsibilities have many similarities.
§ My last point on Europe will, I hope, prove to be unnecessary. I made reference earlier to the theoretical possibility of Britain becoming self-sufficient in energy supplies through its own resources by 1985. This could, I submit, only happen for reasons of national security. In case it is suggested from some part of the Chamber that this should be one of the objectives of a national energy policy, let me repeat a point I made earlier. Unless Britain plays its part in supplying petroleum products and, I hope, coal, to the Community, the economic foundation of our relationship with the enlarged Community will fall apart. Energy supplies must be seen as an international issue, not a national one. An energy policy is as important as the international monetary policy, and is in many ways closely linked to it. The current weakness of the dollar and the energy crisis in the U.S.A. is hardly a coincidence.
§ I wish now to make a general point on energy conversion, which has direct links with an environmental policy. Noble Lords are no doubt aware that inefficient conversion of energy creates both waste heat and pollution. The latest Liberal pamphlet Strategy 2000 makes the point that half the total world energy consumed is wasted, mainly through power generation by poor conversion of primary fuels 635 into electricity, and through transportation. One possible remedy mentioned in Strategy 2000 worth pursuing with more research is to raise the efficiency of a modern power station from 40 per cent. to 70 per cent. through more use of gas turbines. There are other ways, too, such as heat storage in base salts at the site of generation, the use of geothermal and tidal energy, and magnetohydrodynamics—to name but a few. Unfortunately, there is still a long way to go before any of these promising methods can be made practical to bridge the energy gap between now and 1985.
§ However, there are at least two areas where the Government can take direct action now, by implementing a policy of energy conservation without reducing the quality of life. Britain is wasting fuel to the tune of £6 million a year, rising to £14 million by 1979, at 1969 fuel prices, by having the lowest thermal insulation standards in Western Europe, thanks to the abysmal standards laid down in the British Building Regulations 1965, Part F. It is not surprising to learn, therefore, that Britain's domestic heating bill is double that of Germany, which has a colder winter. Figures from the insulation industry show there is a 20 per cent. heat loss through the roof, and 30 per cent. through the walls of British housing. The Regulations require only 1 inch of insulation, but a minimum requirement of 2 to 3 inches is the economic minimum for Europe. The Government have turned a deaf ear to all representations from the industry, who have asked for a revision of this outdated provision. In human terms this waste is criminally irresponsible. Organisations such as Task Force and Shelter have pinpointed the high cost of keeping pensioners warm in winter. I suspect that 99 per cent. of the recorded cases of death through hypothermia have been caused through inadequate insulation. The non-recurring extra capital cost per house to provide adequate insulation need only be in the region of £35. I am sure the Minister will agree that this is a smaller price to pay than doubling the pensioners' inadequate heating allowance of 75p per week. It is also more efficient. A proper energy conservation policy would not only make a material contribution to keeping energy prices 636 steady but relieve hardship in large sections of the British community.
§ To continue this theme, the development of fuel cells, the Stirling engine, and other systems of electro-chemical storage and propulsion, should all be part of an efficient energy conservation policy. The increase in research grants for these new sources could be met perhaps out of tax penalties for using the motor car in city centres, where its efficiency drops below 10 per cent. and its pollution is at its maximum. There are so many other ideas and new methods to discuss, but time is against me. It is tantalising only to mention the promising developments in recycling of waste and district heating as other methods of energy conservation. I commend the article in New Scientist by Soviet academician, Igor Petryanov-Sokolov to those noble Lords who are interested and who may take up this line later in the debate: it is a brilliant article.
§ My Lords, I cannot leave my introduction to this Motion without taking a peep into the future. I have concentrated on the critical period between now and 1985, when nuclear reactors will start to make a significant contribution to world energy supplies. We should then see a gradual shift away from an oil-based economy. But to what? To what end will nuclear technology be directed? Again, the response from the Government is discouraging in the apparent low priority given to this section of the energy industry. On August 8 last year the Minister of State outlined in another place the Government's intention to set up a Nuclear Power Board. Five months later I made inquiries as to progress from Lord Limerick's Office. The answer was that preliminary discussions were still taking place, and no date could be given for the setting up of this Board. Perhaps this delay is due to disillusionment. The early hopes that nuclear generation held all the answers to future energy supplies have been dashed. Research slowed down with the advent of North Sea oil and gas and the figures also showed nuclear reactors were not as efficient as first thought. There were also potential dangers of excess pollution and serious accidents. So Britain's lead in this field passed to the United States when the Government switched their attention to the North Sea developments. Attention is now returning, albeit late in the day, back to 637 nuclear reactors. I have already given reasons for this. The question for the future I pose now is: To what end will nuclear reactors be directed by the year 2000? Towards an all-electric economy? Or to a hydrogen-based economy?
§ I have already focused on the inefficiency of heat loss in electric power generation. Add to this transmission losses and the shocking waste of an all-electric household, and the result is a very poor system of energy conversion. Surely we cannot accept electricity as the sole basis of our economy for the future. Personally I am most attracted instead to the theory of using nuclear power for the electrolysis of hydrogen. Arguments for this have been put forward by Francis Bacon, inventor of the Bacon fuel cell, in New Scientist of August 10 last year. Derek Gregory, Director at the Institute of Gas Technology in Chicago, also made a strong case for hydrogen economy in the January issue of The Scientific American. The basis of this theory is simple. Hydrogen is a most efficient clean gas; it can be transmitted through existing gas lines, and the generation process is reversible. The waste element is water, which is the raw material from which the process begins. Of course, there are problems. Problems of storage, transportation, and of acceptance of this form of energy. Much research has yet to be done on finding suitable electrolysers. Euratom are working now on the problems of thermal electrolysis of hydrogen as a more economical alternative. What is Britain doing? Can the noble Lord say whether or not funds have been allocated to this promising line of research? Also, can he say whether the manufacture of hydrogen as an energy source is part of the nuclear reactor programme? The answers to these questions are needed now, because they must form the long-term objectives of a national energy policy.
§ In conclusion, my Lords, I am deeply conscious of my amateur status in this subject and the number of omissions and over-simplifications that I have made in moving this Motion. However, in spite of its complexity, I believe it possible for any Government to formulate an energy policy, if they care to choose their priorities, make the necessary decisions and then stick to them. By forming a permanent Energy Commission comprised of Ministers of the day, civil 638 servants and energy experts from the public and private sectors, a start will have been made towards this goal. No country, as I said earlier, is better placed than Britain to show a lead by forming such a Commission, and, what is more, to make it work. Noble Lords are aware of many new ideas and policies that originate from the Liberal Benches in both Houses. They are also aware of the long digestive process that takes place before they are absorbed into their own Party Manifestos. My Lords, there is no longer time for these tactics. The Government must declare their intention to formulate an energy plan for Britain now. If they do not act our lamps will go out and we shall be left waiting in the dark outside the bridegroom's door. I beg to move for Papers.
§ 3.30 p.m.
§ LORD KENNET
My Lords, I feel sure that the whole House will agree in being grateful to the noble Lord, Lord Tanlaw, for opening the debate with such a wide and highly informed tour d'horizon and we on these Benches endorse the choice of the Liberal Party in putting forward energy policy for one of their days. When we say "energy" we are all aware that we need it to get around, we need it to warm ourselves, we need it to make everything that we need to use. But we do not realise that we eat it. We eat it in the form of refrigeration. The entire food supply in this country is directly dependent on energy in the form of electricity. During the dreadful coal strike of 1972 the last reserves of energy went on avoiding starvation of the people by avoiding the wholesale breakdown of the refrigeration industry. It is starvation which faces us in the short run if there is a real energy catastrophe.
This winter, and indeed, for all I know, at this very moment, aeroplanes taking off from New York to fly across the United States to San Francisco and Los Angeles can no longer get there in one hop; they have to land in the Middle West to refuel because the oil crisis in the United States is such that that economy has not been able to arrange to have enough fuel available at all times at the New York airports. I have not seen this fact in the British Press, but if we, as we should, always watch the United States first to see where economic 639 trends are going to hit us, this is the striking example of how far things have gone there already: that that country already cannot organise a trans-continental flight without refuelling because of this crisis.
It is true to say that in the short run the American energy crisis is partly due to the environment crisis. The environmentalists in the United States have over the last two or three years been allowed virtually to stop investment in the energy industries. This is a failure of the American political mechanism which we profoundly hope we shall avoid in this country, but the environmental lobby there is one which has its own reasons, and its existence is justified. There is a world situation of very great gravity which has made it not only likely but necessary that there should be such a lobby, and that it should have its effect.
If I start with oil it is because it is uppermost in all our minds. By 1980, projecting the trends, the United States will have to import half its oil. It was self-sufficient traditionally until only a few years ago. By 1980, in only 7 years, American oil imports will equal in total volume all the oil imports of Western Europe to-day. A dramatic message from President Nixon is expected at any moment about this. The gravity of the situation in American eyes can be judged by the fact that Dr. Kissinger has been asked to take a hand in formulating new policy. One can see why the Middle East must be at the centre of all our thoughts.
The fact about oil is the same as we have known for many years. Proved reserves go up, consumption goes up, but the curve that concerns us—that is, the ratio between reserves and consumption —goes remorselessly down. There were 80 years' reserves in 1950; now there are only 30 years' proved reserves. That is a steady decline. Each year the ratio has gone down and down. Moreover, the cost of the oil goes up and up, and here we have to think about something that is called the "host government take per barrel"—the amount of money the Government of the country where the oil is gets for it, wrapping everything together. That was constant from 1955 to 1970, constant in real prices, and the 640 improving technology brought the real price of oil down during that 15-year period. In 1970 to 1971 that "host government take" increased by 46 per cent., in one year. It is still increasing. Those of your Lordships who are in touch with the oil industry will know this. The increases are not publicised. I do not know what the present figure is, but it is certainly way above 46 per cent. over what it was in 1970. It will go further; in time we shall be forced, if we still use oil, to get it from low grade shales and sands where the capital expense is absolutely colossal so much so as to bring out the running price a great deal higher than for the oil which comes naturally from a well. If we do not reach our own balance on oil consumption, nature will reach it for us, and we may not like it.
In the meantime, what do we do? We build larger and larger tankers; of course, the larger the tanker the fewer, and therefore the less the risk of collision; but with each collision there is, the more catastrophic the damage. The United States Navy has asked for more money for destroyers to protect these great floppy bladders of oil as they chunter round the oceans of the world in a sea where a mixture of backward-looking nationalism and a vague pointless commerce-orientated internationalism succeeds in getting us the worst of all worlds, where anyone is free to lay a pipeline in any direction —there is no law about it—outside territorial waters, where nobody knows what territorial waters are and where the Government apparently have no idea how to allot mineral rights under the ocean floor.
There is at the moment a perfectly serious proposal to build a tank in the sea seven miles from Harwich which would handle 200 million tons of oil a year; accommodate 10,000 persons on top; with a golf course as well, and would be able to harbour 1-million-ton tankers. The half-million-ton tanker is here already, and there is no technical difficulty about building a 1-million-ton tanker. Meanwhile, oil pollution of our coasts continues to get worse. This is what the returns show, but public protest diminishes, because we have got used to it. That, I think, is a sad and startling fact.
What is the future of the energy scene in this country? Electricity is one-third 641 of all our energy and looks like being a half by the end of the century. The Atomic Energy Authority estimates that nuclear power stations will be providing 90 per cent. of that electricity by the end of the century. The scene is affected by North Sea oil and gas. I will not say much about that because my noble friend Lord Balogh will do so later, I believe. I should only like to say how striking I think this operation in this House has been where he has succeeded, by dint of relentless and rational questioning, in bringing out the total confusion in which the Government were found to be about the question of North Sea oil licences. That has been brought out, and a sorry picture it makes. I do not know what more bombshells he has in store for the Government this afternoon.
Meanwhile, given we have this increase of North Sea oil, which will still be only one-seventh of Europe's oil demand by the end of this decade, 1980, what do we do? We seem to try to sell it as fast and as cheap as we can, and to keep on running down the coal industry. So far as the North Sea gas is concerned, I do not know how widely understood it is, but that appears to be tax free—not one penny paid to the British Exchequer by any operator taking the gas. Cannot the Government tell us whether the oil exploiters are going to operate tax free? One would not have expected them to pay tax yet; they have not begun. Will they contribute to the national Exchequer or will they too get away scot free?
Is it the right way round to run down the oil we have, in view of the catastrophic shortage which is coming, and to let the coal industry continue to run down? In the past few years depreciation and the sale of assets in the coal industry have exceeded investment, and that is a picture of an industry which is absolutely running down. Some 400,000 miners have been made redundant. It was a matter of pride to the Coal Board for some time that this had been done without a single official strike. My goodness! that record has been broken with a vengeance last year. It is true enough to say, "Exploit the oil now, the coal will still be there". But will the miners? It is easy to think that if we put off the exploitation of oil by raising the price a little we shall be able to get and train oil workers easily enough later on, when it is a better time 642 to do it. But if there are no miners left, can we imagine re-training a generation of people who have no experience, no background, in mining to agree to go underground again? I doubt this. I believe that the coal industry, and deep mining, must be kept, because we are going to need it.
The nuclear industry will take up what it will; I do not know what that will be. The horizon here is full of hope. We have been told that the fast breeder reactors will use uranium 40 times more efficiently than do the Magnox reactors. It has also been estimated that uranium can be obtained from sea water at a cost only 10 times what it costs to get it out of mines. If these facts are true, we see—and one can do the sum for oneself—that fast breeder reactors are going to be extremely advantageous so far as fuel is concerned.
Beyond that lies fusion, limitless fuel resources, no pollution problem, but a high capital cost to be sure. It is difficult to know what is right to do by way of investment in research and development in this field because in their field, as in others, all the forecasts have so far been wrong, including the White Paper produced by the Labour Government in 1967. I was glad to hear the noble Lord, Lord Tanlaw, say that it was no fault of the officials or Ministers of the day.
I agree with the noble Lord that we must reduce the waste of energy. This could be done with double-glazing, the proper insulation of houses. This would save four to five per cent. of all the energy consumed in this country. Some 87 per cent. of energy goes out of the exhaust pipes of motor cars. The Americans are talking about banning half-empty flights. I do not know whether we should do that; it would be a pretty heroic measure. We should certainly try to put a stop to the development of that ridiculous phenomenon, air conditioning. Air conditioning is ridiculous in a British climate, you only need it for about three days of the year.
To come to the main point, what about the conservation of oil resources? Why do we not consider that? Already Iraq, Kuwait and Canada have limited the output of oil. The Canadians have simply been refusing to sell more than a certain amount to the Americans, because they 643 know they are going to need it later. Can we really afford not to consider that with our own oil fields in the North Sea?
In this terribly confused field I am going to have recourse to a traditional solution, and I am going to suggest two new bodies, one Governmental and one non-Governmental. The Governmental body is the National Energy Commission around which I hope much of our debate this afternoon will centre. The noble Lord, Lord Tanlaw, called for it. A version of it was proposed by the Labour Party—as opposed to the Labour Government—in 1967. A version of it has been proposed by the National Union of Mineworkers quite recently, and another version has been proposed over a period of years now by the noble Lord, Lord Robens. I will not define it; but what it ought to do is relate all branches of the energy producing and energy converting industry in this country. It should be responsible to Parliament through a Minister, and it should be set up now, even while oil and so on are still being privately exploited. When a future Labour Government nationalises oil and all mineral rights that will only thicken up the texture of the Commission and make its job easier to carry out.
The National Energy Commission must introduce some order into the self-serving optimism which pervades the forecasts of each separate sector of our energy industry at the moment; it must give an independent opinion, a check, on the figures produced. For instance, we all know that the limiting factor on uranium reactors, of whatever sort, is going to be the storage of the hideous, poisonous wastes. British Nuclear Fuels Limited have extrapolated to say that they are only going to need between 5.6 and 7.5 hectares of land to store the highy active wastes in the year 2,000. The price of that is going to be only £2 million or £3 million a year, which is peanuts given the whole generating budget. This is only an example; I do not say they are wrong, but there is no independent authoritative check on that forecast.
I should like the Commission to look into the so-called merit order of the power stations. Nuclear generation looks very cheap at the moment. Is this not because it always takes up the base load, that is to say, it is always operating? If one 644 were arbitrarily to swap the positions of nuclear and coal on the load duration curve, how would costs look then? The House will know that some power stations have to work all day and others only get switched on when everybody turns on the electric kettle during the commercial T.V. breaks. I quote an example given by Mr. Michael Posner in a recent book: somewhere in darkest Yorkshire there is an antediluvian generating set cared for by three devoted caretakers who run to answer the call of duty for four or five-minute periods each year. Naturally it is coal-fired, and that gives a very high cost for coal generation.
I should like to have an independent body which is combing through this so-called merit order to see that "merit" is rightly defined, and going through the arbitrary swaps on the load distribution curve which might produce rather different results, and lead to a more economic policy. Who can we ask about this at the moment? Not the Coal Board, not the Atomic Energy Authority. The Energy Commission could also forward joint uses of energy: district heating from power stations, the combustion of town waste, desalination of sea water for water supplies. I should like to tell the House an experience of my own on this matter. I thought it would be a good idea if we could imagine a nuclear generating station which would also produce fresh water from the sea. I fell down completely, as a Minister, in the attempt to get it put into effect because it is a statutory duty of the C.E.G.B. to produce electricity as cheaply as it can. If anybody wanted the bath water after it had been finished with—tepid, very low grade heat—they could have it at a high price.
But the thought of producing both electricity and fresh water at the optimum price, at the best intersecting point on the price curve for both, was absolute anathema. I could have been talking Chinese in asking for it. There was a statutory difficulty there; the Statutes should be overhauled. They are not going to be overhauled by the C.E.G.B. Ministers are busy; therefore let us have an independent National Energy Commission under Ministerial control to do it.
The second body there is need for, the non-Governmental body, would be something broader than that, something one 645 might call a British Environment Institute. I include in the word "environment" mineral resources and the rate of exploitation of all resources. In the energy field there will be problems also left over which will not be for a National Energy Commission. The Royal Commission on Environmental Pollution will not do, it is limited to pollution. If we could have this non-Governmental overall institute which could look at resources in a wider context, and look especially at the side effects on which those concerned with industrial promotion so often find it hard to focus in their minds, especially the atmospheric and climatic effects of hydrocarbon combustion, it would be a safer world when we begin to get reports from that institute.
A few months ago, Mr. Peter Walker (then Secretary of State for the Environment), after some well-publicised interviews with the conservation lobby, referred the Club of Rome document The Limits of Growth to a study group inside the Government. Ministers and officials have been most helpful to me in my attempt to obtain news of that study. But I cannot honestly say that I find any evidence of a level of activity much above hibernation. Is any report to be published? Is any report even to be made to Mr. Rippon, as the new Secretary of State? I am sure the House would like to know. The months go by and, as so often seems to be the case, nothing happens.
We have in the Motion the idea of relating all this to the E.E.C. It is rather hard to find out what the European Commission's energy policy is. In fact—let us make no bones about it—if we have not got one in this country (and I am sure that Lord Tanlaw agrees with me that we have not) then the E.E.C. have a minus quantity of one. They have a rule which was made by the Council in 1968 which says that all member States must stockpile 65 days' supply of oil. I do not know whether that rule is kept or whether we ourselves keep it; perhaps the Government could tell us. That is about all there is in the way of rules. It is really very primitive. We know that the Commission is worried about the fact that the whole of the original Community is bound to get its enriched uranium for many years yet from a single source—that is, from the United States. What do 646 we in Britain think about this? I ask this question in all ignorance. Would the Government give us their opinion on this —do they think it is O.K. or is it thought that we should try to change it now that we are a member of the Community?
The noble Lord, Lord Tanlaw, has already quoted from an undated document on the energy policy issued by the Commission. I should now like to quote from the same document:Trade and supply policy is the be-all and end-all of any energy policy.My Lords, I think not. I believe conservation policy is another leg of the tripod which is just as necessary as the other two. I do not know whether you can include the concept of conservation of resources under the word "supply". It seems to me stretching it a bit. The point I am making is that they are very backward—they have been trying and it is not their fault, but the Governments have not allowed them to get ahead in getting a Community energy policy. In this country we produce half Europe's coal; we have just found a colossal new oil and gas field of our very own and we are way ahead on nuclear generation. Perhaps we can help them to get a meaningful policy for the Nine as a whole. I would hope that our own National Energy Commission, if the Government are wise enough to set it up, would be the finch-pin of the policy. I hope that both it and the British Environment Institute—that is the non-Governmental one I have proposed—will be able by a process of lateral osmosis to create round them Community institutions of a parallel nature.
I want to end by touching very briefly upon an economic and financial point, which seems to me one of extreme danger. If there is one factor overhanging this whole field it is that we are going to continue to squander, or at least to use, oil for the next thirty years. The price will continue to rise and the amount of money to be transferred from the developed world to the OPEC countries is going to become perfectly astronomical. The noble Lord, Lord Tanlaw, has mentioned this. This is something in which I have lived since early childhood, as a matter of fact, because my father was chairman of the Kuwait Investment Board. It seems to me that the Kuwait Investment Board will turn out to have 647 been the forerunner of something that gets bigger, bigger and bigger. The OPEC countries are not going to be able to use that money in the quantities in which it comes to them. They are going to buy up the West; they are going to buy into industry and financial institutions of the United States, Western Europe and Japan. Maybe there is a kind of poetic justice in that. We seize from them the oil we do not really need and we shower on them the money they cannot really use. This I think should be looked at within the rich industrial world: it is a job for the O.E.C.D. and the European Economic Community. If, as is so often the case, these international bodies are too late and too vague, we may find that the poetic justice will come to pass, and that we shall all belong to the Arab world, as surely as a hundred years ago the Arab world belonged to us.
§ 3.55 p.m.
My Lords, the House will be very grateful to the noble Lord, Lord Tanlaw, for putting down this Motion and for giving your Lordships the opportunity of debating this very important and quite fundamental subject. The Government are grateful for the opportunity of hearing your Lordships' views, and I can assure the House that these will be studied. Indeed, the two noble Lords who have spoken already have produced a whole range of extraordinarily interesting points, some of overall interest and some dealing with technical detail. But, like so many things which are basic human requirements, energy is so vital and so universal, so relatively freely available and in so many different forms, that it tends to be taken for granted. The noble Lord's Motion gives us the opportunity of moving a few heavy and well-encrusted stones to look and see what the bugs are like underneath.
I thought that it might be useful, before discussing the concept of an energy plan, if I were first to describe to your Lordships, albeit in a necessarily cursory fashion, how the Government see the nature of the subject with which we are dealing. This should help to elucidate what kind of "planning", if any, would be most appropriate. United Kingdom consumption of energy has risen steadily over the last two decades. This is, for the sake of simplicity, often shown in 648 million tons of coal equivalent. In 1950 the total consumed was 226 million tons of coal equivalent. By 1960 this had risen to 265 million tons, and by 1971 to 323 million. Within these totals, coal itself sank from 201 million tons to 139, whilst oil rose from 22 to 147. Two completely new energy sources also appeared—natural gas and nuclear energy. In 1971 gas represented nearly 26 million tons of coal equivalent and nuclear energy nearly 10 million.
These are rather hard, cold statistics, but within them are concealed vast industries, each with its own distinctive traditions and its own specialised technology. If we look at coal first, as the noble Lord, Lord Kennet, said, this has been reduced in size, but it is still—and let us not forget it—a vital component in the overall picture. It is a labour-intensive industry and it is crucially dependent on productivity; and since the strike last year I am glad to say that productivity has picked up well. If this is maintained, and with the assistance which is envisaged in the Coal Bill which comes before your Lordships next week for Second Reading, there is no reason why the industry should not once more achieve commercial viability.
Oil is an industry for which the 1970s are likely to prove very different from the 1960s. Although the demand for oil will almost certainly continue to grow, the conditions under which the companies will be able to obtain their product are changing. Of course, in the Middle East the reserves are very large and physically easily accessible, but the Governments of the countries in which this oil is being found and exploited are anxious to increase their own participation in the companies' activities and their share of the profits. In other parts of the world, though, the industry is developing oil fields under very different conditions and in circumstances which are adverse both physically and climatically—such as in the North Sea, Northern Alaska and so on. This entails the development of entirely new equipment and new skills and the industry's investment requirements rise accordingly. In the longer term, oil may need to be recovered from even more unconventional sources, such as oil shales, tar sands, coal or even the deep sea. Although these sources may not have been shown so far to be 649 economic, the growing world demand for oil may make them so in the medium or long term. The overall picture with regard to oil, therefore, is of an industry which is dominated by large multinational companies with immense reserves of experience and skill, but which faces a rapidly-changing physical, financial and political background.
Gas is an industry which has also recently experienced a change in circumstances nearly as comprehensive as that which is currently being experienced by the oil companies. The discovery of natural gas in the North Sea in 1965 completely revolutionised prospects overnight. Any plan which might have been written before that date would have been an uncharacteristic example of unique prophecy, had it been forecast that the British Gas Corporation would now be well on the way to converting more than 13 million consumers to natural gas. Your Lordships will know that this programme has had, not unnaturally, its own local difficulties, but the task has, on the whole, been accomplished with a standard of efficiency which I suggest has been the envy of many other countries. If one looks to the future, there are good prospects for further gas finds, some of which may well be in association with oil rather than in the "pure" gas fields which were found in the 1960s.
Turning to nuclear energy, I should like to draw your Lordships' attention to what my right honourable friend the Secretary of State for Trade and Industry said in another place on August 8 of last year. He said:The Government are resolved to build upon the major achievements of the Atomic Energy Authority in the past and to ensure the development of a powerful capability for the future …He went on to explain that:We have decided, therefore, to intensify the installation of nuclear plants as far as technological progress, environmental constraints, industrial capability and generating plant requirements permit."—[OFFICIAL REPORT, Commons; 8/8/72; col. 1491.]
§ LORD TANLAW
My Lords, I am sorry to interrupt the noble Earl, but as I understand it he has not yet got as far as forming a board. I cannot see how he can do all this without having first formed a board.
My Lords, I was going on to say that in order to achieve this, two major streams of action were set in hand. The first was to establish a stronger design and construction capacity in the industry, and the second was to set in motion various studies so as to enable an order for nuclear plant to be placed within the next eighteen months. Work on both these fronts is proceeding rapidly.
With regard to electricity, each year the electricity industry makes a forecast of the likely demand which can be expected six winters ahead. This forms the basis for its power-station ordering programme and it is subject to Ministerial approval for the capital investment involved. Ministerial approval is also required on the siting of individual stations, but it is the Boards' clear responsibility to make the initial proposals. Your Lordships might be interested to know the breakdown of current generating capacity, which is roughly as follows: coal accounts for about 63 per cent.; oil for 24 per cent.; nuclear energy for 10 per cent.; hydroelectricity for 2 per cent. and gas for 1 per cent.
Having very briefly sketched some aspects of the industries concerned, I should now like to point to some general characteristics of the energy sector which I think are especially relevant to the idea of a national plan. The first of these, although it is obvious, is often forgotten. It is the way in which energy costs, as the noble Lord, Lord Kennet, reminded us, seep through the entire economy and affect literally everything. The amount of controlled energy, for instance, which is embodied in many of the most familiar products is considerable, and yet seldom considered. The motor car, quite apart from consuming petrol, represents the application, through machine tools, presses and sprays, of a very substantial quantity of power. So also does the saucepan, the television set and almost every other type of everyday article of which one can think. To us, therefore, as a nation which depends upon trade, it is vital that we should not let our energy costs get substantially out of line with those of other countries with whom we have to compete in international markets. Of course, the impact of those costs is uneven—if one takes an average, direct fuel costs represent only about 3½ per 651 cent. of the gross value of industrial output—but it is significant that some of the industries that consume the most energy per unit of output are in fact those which occupy key sections of the economy. For instance, in the iron and steel industry the corresponding percentage figure is not 3½ but 15, and in the cement industry it is 25.
The second point, which is different but nevertheless related, is that, taken together, the energy industries are large enough to constitute a recognisable element in the overall management of the economy. They contribute about £1,000 million per year to domestic fixed capital expenditure in this country. As a nation, we spend rather more than £100 per person each year on purchasing different types of energy. These are large sums, and these two statistics alone go far to explain the legitimate public and Government interest in the sector.
The third characteristic which I should like to draw to your Lordships' attention is the international nature of many energy problems. This has immediate consequences for planners and for policy makers. It means—and to be realistic we must recognize this—that at least some of the factors which affect the United Kingdom energy prospects are beyond the direct control of the Government. They may be affected by our influence as a major trading nation, or we may attempt to make them the subject of international law, or treaties, or contracts or other forms of agreement. But we cannot order these factors according to our own wishes, nor are we able to predict their precise behaviour with any degree of certainty.
I should like to look for a moment at some of the key features of the world energy scene and the effect which these have upon the United Kingdom. The first is clearly the continuing growth of world demand. In 1951 consumption stood at roughly 2,700 million metric tons of coal equivalent. By 1961 this had risen from 2,700 to 4,200 and by 1970 it had risen again to 6,700. So in 19 years world consumption has risen no less than 2½ times, and this represents a growth rate of about 5 per cent. per annum. Of course, within this total, the consumption of each fuel has grown 652 at a different rate. When one sees growth of this nature in a prime commodity such as energy (if, indeed, one can call energy a prime commodity) one is bound to ask the question, "If this continues shall we run out of energy?". I do not believe that I should be a competent person, still less a sensible one, if I were to try to answer that question—and I doubt if there is anyone who can. This has not, however, inhibited, nor should it inhibit, many detailed investigations of the problems involved from being undertaken; nor has it prevented, nor should it prevent, extensive and continuing public debate on the subject. It is right that this should be so, for the problem is clearly one of such fundamental importance that any understanding of its nature, however limited that may be, is to be welcomed.
In this world context I think it is well to bear in mind some important factors. First, the total world reserves of fuels are still massive. It is easy to be misled here, since many published estimates have their origins in the assessments which are made by oil companies of known sources which are suitable for early exploitation. Some of these tend to understate the overall long-term position. One also needs to take into account what one might describe as the "unconventional" sources of oil and gas which I referred to earlier, such as deep water off-shore fields, oil shales, tar sands and coal. But of course these unconventional reserves will be expensive to exploit; new technologies may be required, the environment will need proper protection and the whole process will take many years.
§ LORD KENNET
My Lords, I wonder whether I might ask the noble Earl whether he is aware that as regards deep water technology Shell is already winning oil at a depth of 4,000 feet in one place, which is about 800 fathoms?
§ THE EARL OF LAUDERDALE
My Lords, is the noble Lord not somewhat 653 mistaken? They are winning oil at a depth of 400 or 500 feet at this moment. They are seeking to develop techniques for the sea bed at 2,000 feet. They are not yet winning oil at anything like the depth which the noble Lord opposite is suggesting.
My Lords, if the noble Lord is very likely wrong I should be grateful if he would not interrupt me and so confuse my own level of thought on what I previously thought was right. The point about this, as the noble Lord, Lord Kennet, knows, is that drilling in the North Sea is a relatively new undertaking and the possibilities for drilling further and deeper are there but, like the North Sea drilling, they require a new and different technology. But, my Lords, we as a civilised nation are remarkably flexible in our processes both in our requirements and in our ability to meet change, and indeed to create it. We merely have to look back over the last forty years to see ample evidence of that. I would only say that if pressure on the more conventional sources becomes too great, we may expect to see the energy industries turn towards these other, as yet untapped sources.
Nor, should we forget the new types of energy which have recently become available or which are in prospect. The most promising of these is probably nuclear power. Ten per cent. of the United Kingdom's electricity is already generated by nuclear fission. Here is a virtually unlimited source of energy, especially if, in the very long term, nuclear fusion becomes practicable. Of course there are problems with nuclear power, but I should like to stress that the basic technology is now widely and firmly established. In addition to nuclear power there are a number of other possibilities, including solar energy, tidal and wave power and fuel cells. My Lords, I am bound to say here that when I have been in the West Country, I have listened to the constant and continuing roar of the sea, and thought back to one's elementary physics lessons at school when one was told that any noise or explosion involved the burning up of energy. I could not help but reflect that this noise, which has gone on since time 654 immemorial, constantly and continuously, represents a huge expenditure of natural energy. If this energy can be harnessed in some way, it could well add to the supply of our energy requirements. And there are signs that this can be done. But I do not see ally of these new sources being of major importance in the United Kingdom during the immediately foreseeable future, but they serve to remind us that science and technology do not stand still, and views of the future which do not recognise this are incomplete.
I should like to stress that our awareness of the possibilities does not in any way induce—nor I hope reflect—an aura of complacency. Considerable difficulties could lie ahead. World figures may conceal local and vital problems. Delays in research or inadequate planning could produce temporary imbalance between supply and demand for particular countries or regions. The real price of energy may rise. The problem of the world population explosion could make a mockery of any reasonable forecasts of demand. At the other end of the scale, the widespread use of birth control could put substantial limitations on any anticipated requirements. The Government are, therefore, studying carefully long-term world trends and ways of predicting them. We are doing that both internally and through international organisations and contacts.
My Lords, I do not think there is any reason to believe that the future—even the near future—will be free of the surprises and the disappointments, the new departures and the constant anxieties which have characterised the recent past. This must surely encourage one to treat visions of the future, which are based mainly on projections of existing trends, with extreme caution. Of course, such projections are undoubtedly useful and important—and indeed necessary—but we should not believe that even the best of them are so wholly reliable as to serve as the basis for really detailed plans running many years ahead. Yet it is equally true that the long periods of time which are inevitable between the expenditure of capital and the supply of commercial, usable energy make it imperative to take some view of the future.
That brings me squarely back to the question of a national energy plan which the noble Lord, Lord Tanlaw, raised in 655 his original Motion. I suggest that the conclusion which might be drawn from the facts which I have ventured to put before your Lordships so far is that, while to plan is of extreme importance, the policies which are subsequently adopted must incorporate considerable flexibility. A rigid plan which is tied to detailed forecasts of prices and output is almost certainly doomed to failure. It is the Government's responsibility to make the best assessment of future circumstances which they can and then to discuss this with the industries concerned in the light of national objectives as well as of their own commercial priorities. This discussion is not carried on in any dictatorial spirit, but more in an attempt to identify broad strategic options and to ensure that there are no gross inconsistencies in the way in which the principal firms and public corporations are moving forwards. It is—and must necessarily be—a process of continuous review and reassessment.
What is it that the Government want and where do their responsibilities lie? First, we require energy supplies which are adequate for the foreseen needs of the economy, and which are secure and at the lowest attainable cost over a period. In this connection it is imperative that we should make the best use of our indigenous resources, which are, fortunately, extensive. Secondly, we wish to ensure that, once obtained, energy supplies are used economically. This means, as the noble Lord, Lord Tanlaw, rightly raised, concern for minimizing energy losses in distribution and use, and it includes also questions of thermal insulation and the efficiency of industrial and domestic appliances. Thirdly, we need to make sure that, in getting and using energy, we do not make unreasonable demands on our natural environment. Fourthly, we must guard against developing a pattern of energy supply which places an insupportable burden on the balance of payments. And in this connection, fifthly, we must see that, in the pursuit of these other objectives, we do not overlook the impact which they may make on the community whether from a social or an employment point of view.
The Motion of the noble Lord, Lord Tanlaw, refers to the need for a national 656 energy plan in relation to our joining the European Economic Community. Our joining the Community and its consequent enlargement, has given a whole new dimension to United Kingdom policy formulation in the field of energy. I should not wish, and I do not believe your Lordships would wish me, to go into the many detailed energy issues which are currently under discussion within the Community institutions. But there is a growing awareness that energy problems often need to be examined on a world scale and that accentuates the importance of the European Community co-ordinating its policies in this area. The Government were fully behind the reference to energy in the Summit Communiqué last October and are actively participating in the work which has been set in hand since. Anyone who is familiar (and even most of those who are not) with the vastness of this subject would hardly expect common policies to spring into being overnight, but we hope for solid progress in this direction and we shall certainly keep Parliament fully informed as matters develop.
My Lords, I have tried to touch on most of the principal points of current interest in the energy field and relate them to the concept of a national plan. I hope that I have shown that much depends on what one considers "planning" should mean. If it means detailed output targets which are backed up by Government inducements or controls, then I suggest that this would not work in practice. If, however, it means that policies should be based on an up-to-date co-ordinated view of prospects, and that individual decisions should be taken in relation to this broad view rather than on a narrow consideration of local factors, then I am wholly in favour of this approach, and indeed it is the one which the Government are attempting to pursue.
§ 4.20 p.m.
§ LORD AVEBURY
My Lords, the noble Earl, Lord Ferrers, in a masterly review of Government policy lasting some 30 minutes, has managed to review all the factors which should determine a national energy policy without at any point specifying what such a policy ought to contain. He began with some historical allusions, after having posed the question as to how the Government see the nature of the subject, purely in terms of the 657 change in the fuel mix which has occurred since the year 1950. I must emphasise at the outset that there is a big difference, as indeed my noble friend Lord Tanlaw said in introducing the Motion, between a fuel policy and an energy policy. What we have always had in this country in the past, and what I think the Americans and other nations who have considered this subject have also had, is a policy for determining what is the relative mix of the various fuels which make up the energy policy, rather than considering how one should view the total consumption of energy resources. That is what is lacking here.
That is why my noble friend said that no country has had an energy policy; and we are in a position to be in the vanguard of the movement towards one if we start off by asking ourselves the question, which the noble Earl did not pose: what should be the level of energy consumption in this country at any point in the future? The noble Earl did not answer that question; he simply assumed all the way through his remarks that this was the given position and it was simply a matter for the Government, having been told how much energy the domestic and industrial and commercial consumers were likely to want, say, in 1985, to ensure, as he put it at the end of his remarks, that there would be security of supplies, economic use of the energy that was necessary, safeguarding of the environment, regard to balance-of-payments considerations, to the social impact on the community—which mainly affects the contribution of coal and is therefore a matter of fuel policy rather than energy policy—and then, finally, in a masterly generalisation, he said that our entry into the E.E.C. brought a new dimension to the problem without saying what that dimension was.
Of course, there is an element of uncertainty in any projection we may make. As the noble Earl quite rightly said, when we look towards the future we do not know whether measures affecting population growth in this country or in other highly industrialised countries are going to be effective, and if so whether a given rate of energy consumption per capita or a decline in population would alter the projections which have been made, particularly by the oil companies which have looked furthest into the future.
658 I think we have to start with what Herman Kahn would call surprise-free projection into the future, which means that the rate of growth of energy consumption will be much the same as it has been in the past per capita, and that the rate of growth of population will be the same, so that we can extrapolate from the figures the noble Earl has quoted of the consumption in this country, or indeed in the world, from 1950 onwards and can see what the position would look like in 1980 or 1985 and beyond; although I must say that I think my noble friend Lord Tanlaw in his remarks limited his time horizon to 1985. It is probably sensible for us to do that in this debate, because, as the noble Earl has said, beyond that period there are so many uncertainties.
To what extent can we expect fusion power to make a contribution in the latter years of this century? I do not think anyone, even the scientists in your Lordships' House, would be prepared to lay down a time scale for this development, or even say whether it is practicable within this century. But if we limit our time horizon to 1985, we are able to formulate some kind of picture which is going to be meaningful if we are to have an energy policy, as my noble friend says, because within this period of 13 years we are, I must emphasise, primarily dependent on fossil fuels. The development of nuclear technologies in particular, which have been referred to by my noble friend and the noble Lord, Lord Kennet, and the noble Earl, are not really going to have much impact—let us be quite plain about that—within that time horizon.
We talk glibly about the benefits that the fast reactor is going to bring to this country and to Europe. But we have not even got a prototype fast reactor in operation yet. We are talking about ordering the first commercial fast reactor in about the year 1976, and perhaps one per annum after that. If the C.E.G.B.'s present delay between the placing of orders and the commissioning of a station continues, as it is most likely to do in the case of a brand new technology such as fast reactors, we might possibly have a one thousand megawatt fast reactor in operation in 1983 and another one in 1984; so one is talking about 2,000 megawatts of fast reactors in commission by 659 the year 1985 out of an installed capacity by then of 100,000 or 120,000 megawatts. So this is an insignificant contribution towards meeting the energy needs of Great Britain within the time horizon we are talking about.
We must, therefore, consider most carefully what are the implications of some of the constraints which my noble friend mentioned, so far as hydrocarbon fuels are concerned, in meeting the energy requirements of Great Britain. I think that he was quite right to start off his speech by a reference to the foolish virgins in St. Matthew. We are glibly assuming that we can go on using up fossil fuels at the rate we have done in the past and can get away with it; that that is going to have no serious adverse effect on our economy; that it will simply be a matter of some minor difficulties in our negotiations with the OPEC countries; that whatever may be our difficulties in that respect we shall make up for them by this wonderful bonanza in the North Sea about which the Government have given us an account in the recent Report to Parliament issued by the Department of Trade and Industry in January 1973.
I must criticise that Report, and I must do so in the same terms as I have done the noble Earl's speech. This is primarily an historical account of what has happened so far: the 1965 legislation; the development of techniques for exploring on the Continental Shelf; a very small amount on the benefits to the United Kingdom economy—nothing specific at all; and very little about the present controversy concerning the degree of benefits to United Kingdom industry, the engineering industry in particular, where there are such enormous differences between us and the Norwegians. I am sure the noble Lord, Lord Balogh, will have more to say about that in a moment. I should have wanted to explore the subject myself if the IMEG Report which has been issued by the Department of Trade and Industry had been available to your Lordships' House. I went into the Printed Paper Office for a copy of the Report. I mentioned to the private office of the Secretary of State for Trade and Industry that it was not available. I raised this matter last week at Question Time, and I am sorry to say that, in spite of the fact that this important 660 debate was pending and everyone knew about it well in advance, the D.T.I. were not able to make available copies of this essential Report so that we could discuss the effects of North Sea oil exploration on our United Kingdom engineering industry.
§ THE MINISTER WITHOUT PORTFOLIO (LORD DRUMALBYN)
My Lords, I took steps to see that a hundred copies of the Report were made available two days after the noble Lord had raised this matter in the House.
§ LORD AVEBURY
My Lords, I am sorry to say that prior to raising this matter in the House I had asked in the Secretary of State's office whether I could be sent a copy, because there were not any in the Printed Paper Office, and they assured me that that would be done. It did not arrive, and as I was not able to come into the Printed Paper Office on the day after my Question I am afraid I have not been able to study this matter. It is quite unreasonable to expect people to look at a report a couple of days before an important debate like this, and to take advice on it from those who are in a position to say what the effect has been on their own industries. In future, perhaps the noble Lord will make sure that important reports of this kind are available well in advance, and not just a couple of days before the debate takes place. I know that the noble Lord, Lord Balogh, will have much to say on this subject, and I will not pursue it further.
I want to come back to some points made by the noble Lord, Lord Kennet, at the beginning of his speech. He said —and I quite agree with him—that if one wants to know what is going to happen in this country in a few years' time one can do worse than look at the situation in the United States to-day. The situation regarding oil supplies there has become quite critical. This is not because they are going to run out. The noble Earl, Lord Ferrers, said that nobody was in a position to make predictions on this —and of course they are not, except in a purely arithmetical sense. Exponential increases in the consumption of any goods or services are a physical impossibility—but what tends to happen if one takes the consumption of energy, aluminium, or of any other natural resource, is that as one approaches a smaller and smaller ratio 661 of reserves to annual consumption the price begins to rise and the effect of the market forces is to reduce consumption. I do not take the Madoxian view which the noble Earl, Lord Ferrers, expressed, that in the end technology will solve everything; that some new development, which we cannot forsee at the moment, will enable us to overcome these shortages and to substitute some alternative technology to the one we are using now. It is all very well to talk about solar energy, tidal energy, the use of fuel cells and such-like, but none of those things in the end will be able to safeguard us from the effects of energy shortages at the prices that we are paying at the moment if we continue to depend on exponential increases of the kind that have been experienced since the 1950s according to the figures that the noble Earl quoted.
The noble Lord, Lord Kennet, referred to the shortage of aviation fuel in the United States as one particular instance of the crisis which has hit them over there. I want to ask some fundamental questions which I think we should be posing to ourselves as we look at the developments over that side of the Atlantic, and which have particular relevance to this country and to Europe in general. We have been discussing the development of the third London airport. If it is going to become more expensive to fly, as the Americans may discover as aviation fuel increases in cost—and I understand that it has increased in cost at a faster rate than crude oil or other oil products in general—then perhaps all the extrapolations of the growth of air traffic have been wrong. We do not need a third London airport at all, and we must re-examine the estimates on which it has been justified in the past.
What estimates have we made of the rate of growth of motor traffic and of freight traffic on our roads if motor fuels are going to become more expensive? Let us assume that motor fuels increase at a rate of 30 per cent. every decade in real terms. Is this going to make a tremendous difference to the relative shares of road and rail? Should we not now be thinking how we can shift freight traffic on to the railways and away from the roads in anticipation of a trend of increasing fuel costs, which in any case are going to cause this effect, but after we have made an enormous investment 662 in motor vehicles which would then no longer be required? Should we take steps now to restrict direct electric space heating? I agree that this would be an extremely interventionist step for any Tory Government to take.
§ LORD BALOGH
My Lords, does the noble Lord realise that in the fuel cost raw material is a small fraction, so that all these very interesting considerations that he is putting forward to us are really quite beside the point?
§ LORD AVEBURY
My Lords, I am not sure that the noble Lord is correct. If we are going to build more power stations to produce the direct electric space heating I was talking about, then one of the materials that goes into the power stations is cement, and, as I think either the noble Lord, Lord Kennet, or the noble Earl, Lord Ferrers, told us, something like 25 per cent. of the cost of the manufacture of cement is accounted for by energy. Therefore, it is not the direct consumption of fuel in the power stations that is the only component.
§ LORD BALOGH
My Lords, I was referring especially to motor traffic, which takes, after all, half the consumption of hydrocarbons.
§ LORD AVEBURY
My Lords, I think that we could pursue that point at another stage; perhaps in a transport debate. What one would need to look at is the input/output tables which tell us how much of the output of the motor car industry is accounted for by an input of energy. It is not merely the fuel which is consumed in the vehicles they produce, but the cost of the energy which goes into their manufacture that we must consider in determining what are the relative volumes of road and rail traffic appropriate for this country.
May I put one final question on these examples (and they are only intended to be examples), which might be considered by some kind of national energy commission such as my noble friend has suggested. We have heard that one of the difficulties of the electricity supply industry is that at the end of a popular television programme when the commercials begin, a vast number of people leave their television sets and turn on electric appliances—particularly kettles to make tea during the commercial break—and 663 this causes an enormous surge in the demand for electricity at that instance which the C.E.G.B. assume they have to meet. Are we going to say that because the independent television companies happen to choose a particular instance to finish Their programmes, and as this happens at the same time all over the country, that we are going to invest hundreds of millions of pounds in electricity supply facilities to meet that particular demand which has occurred because of commercial decisions?
My noble friend—and this is my final point—referred to the question of E.E.C. policy. He was talking about the components cheapness of supply, security and continuity, free choice, fair competition, and avoidance of regional difficulties. These were much the same as the criteria which were laid down by the noble Earl, Lord Ferrers. However, there was not one word in that list of components of an energy policy, as they call it, which talked about conserving energy. As my noble friend pointed out, there was not one word about the importance of insulation; not a single word about the possibility of higher taxes on energy consumption in order to discourage use; not a single word about the importance of district heating as a method of reducing the cost to the householder in total of the energy that he consumes to keep himself warm. These are the components of an energy policy, and if we do not start now and have some kind of national body in order to reconcile the competing interests of our fuel industries, instead of merely having a Government which, every 10 years, produces a White Paper holding the ring between them, then I am afraid that we are storing up very serious trouble for ourselves in the future. We are simply misleading ourselves if we think that the discovery of natural gas and oil in the North Sea is going to make very much difference.
I will put this in perspective—and these are the last figures I will give. By 1985 the total amount of oil that we shall be producing from the North Sea will amount to 250 million tons per annum—and that means the Norwegian, the Dutch, and the German sectors as well as our own. By that time, according to the forecast of the Shell Oil Company, Western Europe, the enlarged Community, 664 will be importing no less than 900 million tons of oil. So that whatever happens, however marvellous these discoveries may be and however successful the oil companies are in their development of these natural resources, we shall still in Western Europe be needing to import 65 per cent. of our oil requirements from politically sensitive areas, such as the North African littoral, the Middle East and Nigeria. I feel that this is a situation which we ought to take account of now, before it is too late. We should attempt by Government policy, through a national energy commission, to reduce our energy consumption and so make certain that our descendants have the energy which we enjoy to-day.
§ 4.41 p.m.
THE EARL OF BESSBOROUGH
My Lords, we must all be most grateful to the noble Lord, Lord Tanlaw, for having raised this great question of the world's energy needs and its vast ramifications before your Lordships this afternoon. I have recently been giving some attention to these problems as a member of the European Parliament's Energy Committee, and I must admit that it is with some trepidation that I venture into this field after having attended only two meetings of that Committee and taking part in odd exchanges in the full Parliament in Strasbourg and Luxembourg. Perhaps I should say at the outset that this is the first occasion on which I have had an opportunity of exercising what is described as the "dual mandate" and addressing your Lordships as a Member not only of this House but also of another place across the Channel. In that sense I feel that, in a way, I am making a kind of second maiden speech, and in view of that, and also because of the great complexity of this subject, I should perhaps crave your Lordships' indulgence in the time-honoured way.
I agree with the noble Lord, Lord Tanlaw, that the White Paper of 1967 is out-of-date owing to the new Scottish oil discoveries, and I also agree with him on the necessity of devising a European energy policy to maintain price stability of all fuels and to maximise the use of indigenous resources. On the whole, my view—and it has some support in industry itself—is that the right approach is not to attempt to produce separate proposals 665 for a purely United Kingdom energy policy, since such a policy must at least harmonise with a larger E.E.C. policy. Here I think I differ a little from the noble Lords, Lord Tanlaw, Lord Kennet and indeed, Lord Avebury. I want to look at this problem on a European basis and not, in the first instance, purely as a national problem. Indeed, I think that any national policy should emerge after we have broadly agreed on an E.E.C. policy. It is essential—and this I should like to emphasise—that the United Kingdom should now make its voice really heard on energy policy matters.
It seems to me that there are two distinct lines along which a Community policy could develop. The first line might be termed negative integration. This would consist of what we all want—the removal of barriers to trade, the harmonisation of taxes and State aids, the control of abuse of monopoly power and, perhaps, the publication of rolling forecasts. The second line, which I might call positive integration, would involve the member States working within centrally determined guidelines, with the Commission eventually assuming some executive control. I should not at this stage, after only a preliminary examination of these problems, wish to favour one particular line against the other, although I note that some elements in industry favour the first—negative integration—with certain qualifications.
I regret in some ways that this debate is not taking place later this year, for, in answer to a question which I recently put to M. Simonet, who is the Commissioner responsible in Brussels, it appears that the E.E.C. Commission will be putting forward proposals covering this whole question to the Council of Ministers, probably in April. The European Parliament should therefore be holding a debate in depth on the subject, either in Luxembourg in the middle of April, or in Strasbourg in May. It seems likely that the Council will, as is usual, be referring the Commission's draft proposals both to the European Parliament and to national Parliaments at about the same time. I think that a debate at about that time would have been more appropriate in your Lordships' House, and, indeed, in both Houses at Westminster. However, the debate to-day may prove to be a useful 666 preliminary canter around this question, and perhaps the usual channels will he able to arrange for us to have another debate on the Commission's proposals when they are available. I do not know precisely when that will be, but I have given some indication of what the intentions of the Commission are. I do not doubt that it will take the Council and its working parties a good deal of time to make up their minds on a concerted and co-ordinated plan of action, and that the Parliaments should have a considerable time to review, consider and debate the proposals before final decisions are taken on an E.E.C. basis.
The Six made their first move towards a common energy policy, as your Lordships probably know, in April, 1964—that is, nearly nine years ago—and progress has not been exactly dramatic since then. Your Lordships will recall that the European Coal and Steel Community Treaty was signed in 1951—over 22 years ago. Then European coal was by far the main source of energy within the E.E.C., and the founders of the Treaty were concerned to ensure that there were fair shares for all. But, before long, imported crude oil began to change the situation with increasing speed, and with the change there disappeared this main object of the Treaty so far as coal was concerned. However, I have no doubt that the British coal industry now has a very important part to play in helping to meet Europe's energy needs, for, as we know, the United Kingdom's coal industry is almost as large as the combined coal industries of the Six put together.
In the Summit communiqué which was mentioned by the noble Earl, Lord Ferrers, the necessity was stressed of formulating as soon as possible an energy policy guaranteeing lasting supplies under satisfactory economic conditions. What has been holding up an overall Community policy? We must have the political will if it is to be achieved, but the fact is that at present there are major differences in national energy positions within the E.E.C. Italy, as your Lordships know, has no coal, and before the postwar discovery of gas in the Po Valley was in a very poor situation. Italy now has an active, nationally-owned, hydrocarbons company, E.N.I., which has, however, somewhat of a history of going its own way. Germany had a massive coal 667 industry after the war and seemed excellently placed. But coal has faded, and Germany, to its present regret, has never had any real stake in oil production overseas. Holland has Royal Dutch Shell and a large quantity of indigenous natural gas, much of which is exported to other E.E.C. countries. Yet Holland is beginning to be worried about its gas reserves, and has recently caused a considerable Community flutter by declining to allow a new source to be exported to Germany. France, of course, has traditionally operated its own tightly-knit energy policy, and seemed to be in an exemplary energy position until Algeria nationalised French oil production there. This, my Lords, is a sort of broad impressionist picture of Europe.
I may add that when Norway was still a candidate country, just before their referendum, M. Fernand Spaak, who is the Director General for energy policy, caused a commotion in Oslo when he said that it would be in the interests of the Community as a whole, and perhaps also consistent with the rules of the Common Market, that if pre-emption rights were to exist they should be in favour of the Community rather than in favour of any national State. Of course, the Norwegian Foreign Minister took this very badly indeed, and said that it was totally wrong to say that North Sea oil was a Community asset. The non-discriminatory right of establishment was valid all over. In the Ruhr coalmines, for instance, no one would deny that the coal resources belonged to West Germany. This same vein of thought, in the British context, ran through a recent article in the Daily Telegraph which stated thatwith the reserves of oil and natural gas in the North Sea, Britain"—not Europe, but Britain—was in a much better position to face a world energy crisis than any other country in Europe."I'm all right, Jack" may be a line which can be taken in Britain. Do we need a common energy policy? Yet in my view the need for common thought about energy would nowadays seem to be essential.
Even leaving aside mutual concern about the attitude of the Middle Eastern producing countries, one reads increasingly that the three main oil-consuming 668 areas in the free world—the United States, Japan and Europe—must either get together or they will find themselves competing for the same sources of Middle Eastern oil. The United States and Japan exist: Europe does not yet exist in this context—and it cannot exist, except as rival European nations, until it thinks on common lines. I personally should like to think that Europe would be able to get itself into a position to deal with these problems on a unified basis, like the United States and Japan are able to do. The United States, as I think has already been stated—it may not have been, but it is true—is no longer self-sufficient. The United States is already importing 12 per cent. of its consumer needs. During previous crises in the Middle East—indeed, right up to 1967—the United States had supplies to offer others, but, according to the estimates which I have now seen, by 1980 the United States will be importing at least one-third of its needs; and I think the noble Lord, Lord Avebury—I see him nodding—agrees with me that that is a very fair estimate. Japan, of course, now depends on imports for 90 per cent. of its requirements.
As far as Europe's energy consumption is concerned, it is thought that it is bound to continue to grow at the average rate which the noble Earl, Lord Ferrers, mentioned of, I think, something over 5 per cent. a year; and by 1980 Europe's dependence on imports could, as again the noble Lord, Lord Avebury, stated, be in the region of 65 per cent. I do not see, therefore, that we can fail to conclude that there is likely to be a world energy crisis; and it is clear, I think, from what M. Simonet, the Commissioner in Brussels, has said, that he, too, thinks the situation is serious. Having worked out a common E.E.C. policy, or at least some overall E.E.C. guidelines, these would then have to be discussed with the United States, and no doubt with President Nixon himself and Dr. Kissinger, as the noble Lord, Lord Kennet, said, within the next few months. M. Simonet said as much in answer to a supplementary question that I put to him in Luxembourg only a fortnight ago.
Apart from safeguarding the environment, which I am not going to go into but which is a major subject discussed in its committee in the European Parliament, 669 the main questions which seem to be concerning members revolve around the extent to which central Commission intervention will be necessary to achieve a common policy. How much dirigism (as they call it) will be necessary? In the event of war, it is accepted; but even if certain sections of the fuel and power industry in this country are run by State enterprises, this, in peace-time, is by no means accepted right across the energy board. Yet it seems to me that there must be some intervention if a coherent energy policy is to be worked out. Many of us on these Benches, my Lords, in both Houses of Parliament—and I mean both Houses of the British Parliament—may certainly say that a centrally controlled and centrally managed policy of a supranational kind would be undesirable, for we continue to accept that in certain sectors private enterprise should continue to operate.
Even, however, if we do not believe in a centrally controlled and centrally managed policy, there will in my view have to be some form of dirigism or acceptable co-ordination if we are to meet the situation. But, of course, it must not conflict with the E.E.C.'s own competition policy rules. On this question of administrative controls, there are of course fundamental differences of view, particularly between France and Germany. Some may say that the cost of achieving a European policy will be too great, and one of the criticisms of the many Papers which have emerged from the Commission to date—and I said this at the first Energy Committee meeting I attended in Brussels—is that the Commission has so far failed to indicate what internal European priorities should be, and what they are likely to cost. So far, for example, in their Paper COM. 72–1200, which contains 46 points, the overall coherence of what is proposed is not easily discernible. Indeed, one friend of mine described these famous 46 points as "forty-six bites of the cherry without getting at the stone".
Secondly, as I say, there has been little attempt to cost the proposals. This may not perhaps be so important in the case of those dealing with the collection of information, but some of the other proposals have important implications for public and private expenditure, and for prices. So far the Commission has 670 not brought out the basic problems with sufficient clarity, although the noble Lord, Lord Tanlaw, did his best to explain their attitude. One might ask the Commission how far the Community should be prepared to buy increased security of supply through higher prices. In the European Parliament's Committee, I have pressed the E.E.C. Commission for a further short Paper picking out the priority points, and I have also pressed that these should deal explicitly with the basic themes of security versus price. M. Simonet has promised to try to meet these points in the Paper which he is at present preparing for submission to the Council of Energy Ministers which he hopes will meet in May. As I say, I assume that these proposals will also be available at that time to the European and national Parliaments. As you see, my Lords—and here I agree with the noble Lord, Lord Kennet—not much progress has yet been made within the E.E.C., but I am sure that M. Simonet and the Commission agree that we must arrive at a concerted European policy despite all our differences, and I know that the Commission will be reading our Hansard today with consideration attention.
I have already mentioned the important contribution which British coal can make within the E.E.C. I put coal first and therefore I hope that when it comes to research and to expenditure on research we should put further effort into the problems of underground gasification, new methods of mining and coal conversion. Then I also think that we must not forget the new sources of energy mentioned by the noble Lord, Lord Tanlaw, and the noble Earl, Lord Ferrers. I will not repeat them but I hope personally that the high temperature gas reactor, the O.E.C.D. project, the "Dragon" at Winfrith, will continue to fill the gap in atomic needs between now and the exploitation of fast reactors, which is still very much in the future. We must think about research on the other new sources mentioned by other noble Lords: solar energy and the recycling of atomic waste. There is a new method of extraction of energy from very small pellets of fissile matter. I am not going into these matters this afternoon but I hope that there will be other opportunities of putting to your Lordships ideas or proposals which emerge from the E.E.C. or its different 671 bodies. Meanwhile, I should like again to thank the noble Lord, Lord Tanlaw, for giving me the opportunity of saying this much (or shall I say, this little) to your Lordships this afternoon.
§ 5.2 p.m.
§ LORD BALOGH
My Lords, I, too, am very grateful to the noble Lord, Lord Tanlaw, for bringing up this Motion in this House. It is very regrettable that the Public Accounts Committee report on fuel, on North Sea oil, is coming out tomorrow. It is embargoed in the Press now; but we have not been able to get copies, because to talk about this particular topic in a balanced and relevant way without that report is obviously quite impossible. It shows that one ought to have perhaps a commission, if one follows the noble Lord, Lord Tanlaw, to co-ordinate business between the two Houses—a commission independent of the Government but responsible to Parliament. That is perhaps nowadays the formula which gives a solution to problems which have not been solved or attempted to be solved.
This particular topic is one which is very awkward from many points of view. It gives rise to the "doom and gloom boys" who say, for instance, that France will have double the national income per head in 1985. I do not know how they get a projection of that kind, but, still, that is the sort of thing they say; and they had a certain reflection of their views in the speech of the noble Lord, Lord Kennet, who is not in his place at the moment. In his speech we had a whiff of the "gloom and doom". Then there is the science fiction aspect of it which we heard from the noble Lord, Lord Tanlaw—hydrogen heating and enormous investment in neighbourhood heating and so on. Well, I do not wish to go into that part of the subject. However, I could not disagree more violently than I do with the noble Earl, Lord Bessborough. In fact, I expected him to walk over to the Liberal Benches at any, moment during his speech. Then I reflected that perhaps he ought not really to join the Liberals in this House but the Liberals of the last century. I, too, was present when M. Spaak talked about European energy plans and I must say—it may be that I am frivolous and a cynical sort of person—that I did not get 672 the sort of impression that was gained by the noble Earl, Lord Bessborough. I had the impression that he wanted to get his hands into our pockets and be away with some of the gas which we have not yet given away to the Americans. Perhaps we could give it to the Europeans. Is that what the noble Earl, Lord Bcssborough, meant to imply? In that case, Heaven help us if the Americans and the Europeans combine in fleecing the British people of their natural resources, for then there is little that one can do to preserve the country and its balance of payments.
There is no such thing as a European fuel policy. We have heard that the French are in cahoots with the Iraqis in making our situation in the Iraq Petroleum Company very difficult. I have not heard yet that the E.N.I. has been, so to speak, very respectful of British interests in the Middle East and elsewhere. On the contrary, I thought that the E.N.I. were the first to breach the united front of the oil companies in Iran, for instance—with disastrous consequences to our balance of payments, consequences which have been estimated by the noble Lord, Lord Drumalbyn, who never exaggerates, at £200 million. So I must say that I am absolutely appalled. If you look at the fuel policy statements from the Government, and especially the 1967 policy, you must admit that fuel policy, like defence policy, is a very awkward thing for Ministers and ex-Ministers. When in Opposition they make exaggerated proposals about nationalisation or about free enterprise. We are absolutely bi-partisan in this and have only slight differences in emphasis. I speak strictly as a Cross-Bencher on this topic because I criticise my Party as much as I do the noble Lord's friends in the other place. Often they are plus royaliste que le Roi et plus catholique que le Pape, and equal their ministerial pronouncements in Opposition. The noble Lord, Lord Winter-bottom, was like that the other day when he forgot the correlation between unemployment and recruitment. Perhaps he will remember it tomorrow.
The economists and officials have succumbed to the song of the official advisers—they croak the same melody now in order to preserve their self-confidence, and I say "economists" very humbly in the full knowledge that I have often been 673 as foolish and as mistaken as the best of them. Fuel policy seems a cemetery for reputations. For instance, Austin Robinson, a very famous economist in Cambridge, not only mistook the whole fuel provision here, he also mistook it in India which was much more difficult and disagreeable. Obviously the Indians can afford mistakes of this type even less than we can—though I must say that we are nearing a stage where we cannot afford them either.
The 1967 White Paper—which was a sort of Labour White Paper—excelled itself. It had the following assumption. It assumed that oil prices would not go up, and that was very foolish. I hope that the noble Lord, Lord Drumalbyn, will not defend that White Paper. It is not his, though he defends almost anything with his usual amiability and that wit for which he is well renowned. The second thing which they did—and of course the noble Lords, Lord Avebury and Lord Tanlaw, and my noble friend Lord Kennet repeated this—was they assumed that one can extrapolate in the linear way or, even worse, in the parabolic way—one would almost say the paranoic way—and that is not true. If, for instance, there is a great shortage of oil, certain subtle changes take place in the economy. Though I am not a very liberal sort of economist at all, as the noble Baroness obviously will testify, nevertheless I think the price mechanism has certain advantages which one ought to take into account when one goes into these flights of mysterious extrapolation. My Lords, trees do not grow to heaven; they stop after a time. And one ought not to think that phenomena like fuel consumption is exempt from this natural law of modesty in nature.
The other thing they assumed—I do not know why—was that there will be a vigorous and furious further and lineally progressive substitution of oil for coal. That, of course, is absolutely wrong. Indeed, nowadays one can if one has these sort of Kahnian assumptions, which I have not got, forecast at what point oil will be more expensive than coal. Unlike we, who are gentlemen, the Arabs are not; and they are going to press us very hard. And inasmuch as the demand for oil is very inelastic—if I may use this horrid jargon—one can foresee that oil will go up in price. 674 Therefore the sort of tactic and strategy which has been outlined by the Petroleum Department of the "monster" Department, the D.T.I., is so wrong. Because they are wanting to burn up our oil as fast as possible. I am not saying that I want artificially to preserve it. I am not one of the à tout prix conservationists; I am moderate in every way. Nevertheless, my Lords, I do not think one wants to kill the North Sea oil reserves as quickly as possible. One wants to have the sort of balanced view of the situation which I fear that the officials in the Petroleum Division simply cannot allow themselves to have. I do not know why that is so, because privately they are good fathers and husbands. But, obviously, they ought not to be in the Department.
There is another thing which the Department did, and this is very interesting because it is really almost Freudian. They forgot about North Sea oil. There is not a single mention of North Sea oil in the 1967 White Paper. And after all, with Ekofisk already in and the Leman Bank almost producing one might have thought there would be an itsy-bitsy little sort of side remark about North Sea oil. But there was not and this is much the most interesting aspect of the affair. I think that we ought to free ourselves first from the ludicrous situation that if the Arabs raise their price, we pay the Americans more. That is really absurd. That situation has to be ended. Apart from that, it seems to me that we ought to protect coal much more, and more openly, than we have. Before we have made quite sure what our our situation is—and we shall not be able to do that for a little time yet—we ought to have any sort of conversation on European fuel policy. In this case we are the people who can give and they are the people who can receive and this is a very good point. There are many things in respect of which they can give and we ought to receive, such as regional policy. So, to give, so to speak, all we can give without receiving anything which they can give is one of those things which only the Department of Trade and Industries Petroleum Division has been able to achieve.
§ LORD ORR-EWING
My Lords, may I interrupt the noble Lord? Would he not agree that the Ministry of Defence, both 675 in the last Government and also in this Government, placed enormous orders for defence equipment overseas without any offset arrangement at all, which was another case of giving away a lot of money and not arranging any offset in recompense?
§ LORD BALOGH
My Lords, I would not disagree with the noble Lord at all. As I have said, I am speaking entirely as a Cross-Bencher. I feel very much that if we are to have an energy commission such as the noble Lord, Lord Tanlaw, wishes to have, we had better look out. Commissions are no better than the chaps in them, and I must tell your Lordships that if I thought that the sort of people who would be in that commission are those who are now in charge I think that we had better not have a commission.
§ 5.20 p.m.
§ VISCOUNT HANWORTH
My Lords, I think we are all agreed that there is a need to conserve energy resources. How urgent this may be is perhaps open to debate, but that we should conserve energy where we can is, I think, agreed by everyone. We should also reduce the amount of pollution in the environment which the generation of energy inevitably produces. There is one very easy way of doing this which has already been mentioned in this debate, but I would like to deal with it in rather more detail—that is, by increasing house insulation to an economic level. This measure is almost unique in that it has no disadvantages and virtually nobody has tried to produce a case against doing so. It is simply inertia, the dislike of change and the fact that the Government have hesitated to legislate under the Building Regulations which have to be justified on health grounds, which has prevented anything effective being done as yet. Let us look at some of the facts. Insulation can be stated in terms of what are known as "U" values; the smaller the figure, the better the insulation. A comparison between a widely used Continental standard—incidentally, this term was introduced by the National Building Agency—and our own Building Regulations is as follows: for the roof, "U" value, Continental, 0.1; United Kingdom, 0.25; external walls, Continental, 0.15; United Kingdom, 0.30. It will be appreciated that the Continental standard is at 676 least twice as good as our own and results in less than half of the heat losses, but even this Continental standard is in fact lower than the standards in practice in many European countries.
If we take a league table showing the standards of insulation in practice in Europe we find that the United Kingdom, with 1 inch insulation, is, with the exception of Spain, at the foot of the table. The Scandinavian countries head the league with insulation thickness, in practice, in excess of 4 inches. Now, at first sight it might be thought that Continental countries have a harder climate and that higher insulation could be justified on this account. However, if you make a comparison with the days in the year on which the average temperature falls below a level at which heating is necessary and multiply by the number of degrees below this level—in other words, degree days—you get the following table; Bergen (Norway) 4733, Edinburgh 4728, Sheffield 4083, New York 4027, London 3962, and Paris 3631. Thus we see that London and Birmingham are just as cold on the average as New York, and that Edinburgh is virtually as cold as Bergen in Norway.
Looking again at the energy situation, the domestic sector in Britain uses about one-third of the total energy requirement, the majority being for heating. It will readily be seen how, in a properly insulated house, it would be possible to reduce the heating requirements to a half. In fact our present domestic consumption is nearly half that of the original Six members of the E.E.C. whose population is three and a half times our own. Apart from energy conservation, higher values of insulation have enormous economic advantages, and I will deal with these in a minute. There is also the health aspect in reducing condensation risks by improving ventilation of rooms, which would reduce the likelihood of hypothermia, particularly with old people who cannot afford the ever-increasing cost of adequate heating. There is, of course, in general the added benefit of increased comfort.
If we take the existing standard of roof insulation and add only one inch of additional insulation the extra cost for a semi-detached house will be in the region of £5 and could give a saving in fuel bills of about £2.50 per year; 677 an amortisation period of only two years. Similarly, improved wall insulation of existing cavity walls would cost about £50 and be amortised by savings in fuel in four years. Looking at it another way round, it would represent an interest rate on capital of just over 25 per cent. A point that should not be overlooked is that even with the last example there ought to be a very worthwhile saving in rented accommodation when you offset the fuel savings against a slight increase in rent. Lower capacity central heating installations will also help to offset the capital cost in many cases.
Let us look for a moment at the history of this insulation question. In 1945 the Egerton Report recommended minimum "U" values for walls which were twice as good as those incorporated in the building regulations. The trend towards lower "U" values has been reflected by every report since this, including reports by the National Building Agency and the Economist Intelligence Unit and even in a Ministry of Public Building and Works advisory leaflet No. 34, published in 1968. The tendency to lower "U" values has become increasingly important with the spread of central heating and the requirements for higher room temperatures. At present the lowest minimum "U" values which should be accepted are: roof 0.08, walls 0.12, floors 0.17; that is, three times the Building Regulations requirements for roof, over double for walls, and about 30 per cent. for floors.
The Government are at last doing something about it. They are consulting with a view to bringing out an advisory instruction to local authorities, but they fight shy of amending the Building Regulations. How they were ever able to include insulation in these Regulations, when they now think that they cannot amend them to adequate levels, is to me rather strange. The proposal is, I understand, that the Government will sooner or later introduce a building Bill, but not before the next Session, and then, of course, only if they can find time to do it among other legislation. They propose then to legislate under that new Bill. My Lords, is that really good enough? If the Opposition will support a new standard now made under the Building Regulations what have the Government to fear?—and surely it is reasonable to think that these new standards are 678 required to a great extent on grounds of health.
§ 5.29 p.m.
§ LORD ORR-EWING
My Lords, I should like to start with congratulations, first to the noble Lord, Lord Tanlaw. I think the whole House enjoyed the very thorough speech and his thorough review of the sources of energy and the potential sources of energy. In the short period that I have been in your Lordships' House, two years, I know how much we appreciate a fellow Member when he has taken infinite pains, as has obviously been the case with Lord Tanlaw's introductory speech. I think it is unfortunate that the Public Accounts Committee will publish their report on North Sea oil tomorrow—24 hours after we are having this debate. My second congratulation, is to D.T.I., which on this occasion, has come in for some small, friendly, poisoned arrows from the noble Lord, Lord Balogh. Perhaps I can throw them a bouquet, because I think the Report to Parliament on North Sea oil and gas which they published in January, 1973, is an extremely well put together and a well presented summary of the position which we have reached over the last six years. I think they deserve warm congratulations.
I thoroughly agree with my colleague on the Cross-Benches, the noble Viscount, Lord Hanworth, about the need for revising our local building laws to bring them up to date. I know that we shall be sharing an inter-Parliamentary visit to Val d'Isere, not on an intellectual exercise, as fellow members of the Lords and Commons Ski Club. Whenever I go to Davos with the Lords and Commons Ski Club to compete against the Swiss Parliamentarians, I am always impressed with the great trouble that they take to have really good and effective insulation in their houses. Even in the most modest house they pay tremendous attention to this. It really is astonishing that fifty years after we have come away from the large supplies of cheap coal which were available in this country we still cling to these archaic laws about the manner in which we insulate our houses. I endorse everything that the noble Viscount said, and I hope that the Government will press forward with reforms in this area. It could make a big difference to the amount 679 of energy that we use in heating our 22 million homes.
I believe that the Government should have a broad strategic plan for energy. Whether the National Energy Commission, as advocated by the noble Lord, Lord Kennet, from the Opposition Front Bench, is the right solution, or whether this should be done within the Department, I am not sure. I tend to think that an external body is more open to pressure and influence than a Government Department, particularly a Government Department of such massive size, complexity and width of special interest as the D.T.I. The Department has more responsibilities than any other single Department at the present time. I tend to think that it may be a good idea to have a National Energy Commission.
But I reflect not so much on the 1967 Labour Energy Plan as the 1951 plan, which was put forward in my early days in the other place, when it was forecast that in 1971 (I think it was) the coal industry would supply 200 million tons each year. In fact, as we learned from the Front Bench to-day, the coal industry supplied 139 tons in 1971. It was then said that 100 million tons of coal equivalent would come from oil and we should not be able to get any more because there were no oil reserves in the world which would allow greater supplies. In fact, we are getting nearly 150 million tons, a 50 per cent. increase on that forecast. And, of course, there was not even the smallest asterisk in 1967 against the possibility of oil and gas from the North Sea—there was obviously no reference to it in 1951—that is supplying 26 million tons. I have a feeling that if Government Departments produce an energy plan and if the capital investment plans of the nationalised industries of electricity, gas and coal are drawn up in accordance with that plan, it becomes rather inflexible and does not readily adapt itself to changing circumstances. I urge that, if we are to have a broad energy plan, it should be up-dated at least once a year in accordance with the actual facts, and not put to bed while everybody sits back for five years and forgets that the variables in the particular equation have changed in the intervening years.
My Lords, I wish to concentrate on North Sea oil. I left a blank in my notes 680 here, because I felt certain that I should disagree with almost all that the noble Lord, Lord Balogh, was going to say. However, he was in such a convivial and friendly mood in the way that he fired friendly little arrows into the back of his Front Benchers that I have nothing to disagree with him about. In fact, I was glad in one way that the noble Lord was here, because in the opening Opposition speech we learnt that North Sea oil (all oil companies, the noble Lord, Lord Kennet, said) was, under Labour's policy, to be nationalised. I remember one of the many excellent letters that the noble Lord, Lord Balogh, wrote to The Times recently in which he said that he did not think nationalisation was the solution to the problems of North Sea oil. I am glad to see the noble Lord nod. So yet again there is a major difference, and I am glad that he was speaking officially from the Cross-Benches, although he was positioned on a Labour Bench at the time.
As I have said, I want to concentrate on the North Sea (we have had one other short debate on this subject, but much has happened in the meantime) because I feel that there are many noble Lords in this House, on all sides, who would like to see the United Kingdom have a larger stake in what is going on in the exploration for and development and eventually the production of North Sea oil. I would first say to the D.T.I. that it was all right to have one experimental auction for the sites—that may have set a standard for monetary values for those sites—but please do not have another auction. It will not be a Dutch auction, but a United States auction, and the American companies are so immensely rich that they will price our companies out of the market. So I do not think that another auction is the solution for looking after United Kingdom interests in this field. I would have discretionary awards of licences to United Kingdom companies. I would be brutal about that, and say that after these early phases, where so much development has gone to the United States of America, we now have to look after our own interests and make sure that we are producing both the calibre of people and the calibre of equipment to undertake this for ourselves.
I hope that once these licences are given the D.T.I. will monitor more closely 681 what is happening. I know of an instance where a company called Siebens Oil and Gas (U.K.), Ltd., did win a licence, and after a short while they "flogged" it for twenty times what they paid for it. That is not the intention of the D.T.I., I feel sure; therefore it is not just a question of the right method of allocating the licences but of monitoring thereafter. After all, if, through the Monopolies Commission, we can forbid the amalgamation of companies, I see no reason why we should not equally veto the sale of these licences outside our own interests, or at least limit external participation in that development.
My Lords, I tend to think that we ought not to encourage the Gas Corporation or the Coal Board to go on taking an interest in the development of North Sea oil and gas. Perhaps my noble friend when he comes to wind up can tell me whether it is true that the Gas Corporation are now applying in the next round of allocations for an exploratory acreage in the Norwegian sector. I feel that the Gas Corporation have enormous problems in this country, and I do not think they should be concerning themselves with ventures of that sort in overseas areas. The same applies to the Coal Board. They have tremendous problems. I welcome the plan (it is an ambitious plan which we have not yet debated) under which the Government are to put (was it not?) £1,200 million into our coal mines to modernise them and to close down the inefficient ones. That is an immense investment and a huge programme to organise and manage. I think the Coal Board would be better concerned looking after all the problems concerned with coal, and not concerning themselves with investment in a rival fuel. After all, is it right that the Coal Board should invest in oil, which would be a rival to their own production?
For other reasons, too, I do not think it is right that these nationalised industries should concern themselves in this way. First, it is a high risk sector, and I do not think it is right that they should go into a high risk sector. Secondly, private enterprise are willing and able to do it; therefore, why not let them? Thirdly, as I have said, these nationalised industries would be interesting themselves in a competitive field to their own production, and I do not think that is desirable. 682 Lastly, they are not making profits, so that if they were investing money they would be investing money which they have borrowed from the taxpayers, and that again I do not think is a good thing.
§ LORD BALOGH
My Lords, do I take it that the noble Lord does not want any sort of public participation, say in carried interest or something like that, or do I understand him to mean that he does not want the Coal Board and the Gas Council to participate? I would agree with that because I do not think they should be mixing it up. But surely some sort of public participation is necessary?
§ LORD ORR-EWING
My Lords, I should not object to a minor public participation, but I do not think it should come under their management and control. This is why I think it is undesirable, for the reasons I have given.
Many speakers in the last debate and again to-day have wondered how it is possible for us to get greater financial benefit for the United Kingdom out of the development in the North Sea, and after considering all the alternatives, I come down to feeling that a sliding scale licence fee on the lines of the Norwegian arrangement is probably the best. That has the desirable feature that for some small fields you take a small percentage, and if the field is really productive then you have a bigger percentage, and only when it gets into full and stable production do you levy a larger charge. That seems to me the way to do it. I do not think you can rely on taxes.
One noble Lord asked whether the overseas companies were paying taxes. All my information is that they are paying very little, if any, United Kingdom tax. They have the facility of any international company of so arranging their prices that they pay taxes where they are lowest. As every noble Lord knows, the United Kingdom is not a low-tax country; indeed it is a high-tax country and many of the international consortia have offices based in Switzerland. Therefore, I say you cannot rely on the syphoning-off of corporation tax or any other tax from these companies; you can only do it by licence and you will monitor oil output at the well head. This is an easy thing; it is routine. The through-put of the oil at the well head would need 683 to be measured in any case for various members of the consortium and for all sorts of data. That is being done, so you can measure accurately how much licence should be paid on how much oil.
§ LORD KENNET
My Lords, Mr. Boardman answered a Parliamentary Question only the other day to the effect that not one penny of tax had yet been paid for the gas exploitation in the North Sea.
§ LORD ORR-EWING
My Lords, I am most grateful to the noble Lord for endorsing my view. It was my impression that certainly no tax had been paid, and I go on—
§ THE EARL OF LAUDERDALE
My Lords, is it not the case none the less the licensees needed to pay licence fees for their licences? There has been a revenue to the Treasury on that account, but there cannot be any royalty until the oil is landed.
§ LORD ORR-EWING
My Lords, there is a small entry card in the form of a fee; that is true. But it was the licence point I was pressing. One is not likely to be able to change that because of the international tax laws and arrangements. I now turn to getting more United Kingdom personnel both on the exploratory rigs and on the production platforms. I believe it to be a fact that there are virtually no United Kingdom personnel now working on any rigs in the North Sea—there may perhaps be a few; the great majority are overseas personnel.
§ THE EARL OF LAUDERDALE
My Lords, I do not know how many rigs the noble Lord has visited, but I found that about one-third of the personnel, from drilling superintendents down to roughnecks and roustabouts, were in fact British.
§ LORD ORR-EWING
My Lords, I am delighted to hear that. The situation is less unfavourable than I had supposed, although I still feel we need to get more United Kingdom-trained personnel because that would lead to the buying of British valves, motors and British ancillary equipment. I am sure my noble friend would agree that the senior personnel 684 of the rigs are largely of American origin. They have been trained on the use of United States of America ancillary equipment and tend to take the instrument they have been trained on and know they can rely on. One reason why we are not getting orders for ancillary equipment is because we have not enough of the managerial staff, at any rate on the rigs, during construction.
May I be told whether the D.T.I. have persuaded some really high-grade experienced oil personnel with knowledge in this field to join them on say a dollar a year basis? I am sure they cannot come from within the Civil Service. I do not see why they should be permanent members of the Civil Service; but they could be bought for a special job on a short term basis and would have to be remunerated at the rate at which they are currently remunerated in the companies they are serving. It is no good setting up new departments or offices without people who are really experienced in this special field.
It is sad but the D.T.I. estimate in this Paper is that by next summer there will be 25 rigs operating in the North Sea, and not one will be U.K. built. A Norwegian group is just building its own rig to its own design with Norwegian managers and crew. I am told that the French have decided to rent that rig, and that they, too, are building their own rigs. Perhaps the D.T.I. could tell us why we have failed to grasp these jobs in this country. We have the same expertise in shipbuilding and heavy engineering as the Norwegians and the French. Why are they doing things we are not able to do?
I have one final plea. When the D.T.I. considers these matters, and considers which British companies shoud explore this oil, please let them not look entirely at the giant companies. It is my experience of many years in industry that the bigger the organisation the bigger the moment of inertia. Some small companies may move faster and more adroitly because they have not the world-wide interests of a company like B.P., who must be desperately concerned with whether their Alaska investment will go ahead; with the uncentainties in Nigeria where they have an immense investment, and other such world wide 685 problems. Some of the small companies may move more quickly and therefore benefit the national interest with the development of our own North Sea resources by some of our own personnel paying our own taxes and thereby benefiting our economy.
§ 5.47 p.m.
§ LORD HINTON OF BANKSIDE
My Lords, I should like to join with the other noble Lords who have thanked the noble Lord, Lord Tanlaw, for enabling us to debate this subject this afternoon, and also to congratulate him on the extremely well-balanced and thoughtful speech with which he introduced the debate. Both in the Motion and in his speech he hung his plea for an energy policy on two main arguments. The first was our entry into the enlarged European Community. The second was the increasing impending scarcity of energy supplies. I am not sure that I agree with him that his first peg is very strong. In spite of what the noble Earl, Lord Bessborough, has said, I think that the possibility of an effective form of European energy policy is perhaps a little remote. I know that under the Treaty of Rome member countries undertook to prepare a common energy plan. I know that there are already regulations concerning the movement of coking coal. I know that the matter is still under debate, but it seems to me that the problems of preparing an energy plan even on a national basis are so great that those of preparing an energy plan on a Community basis are bound to be so much greater that any plan which is in fact prepared will be so frail and so flexible that it may be possible to drive a coach and horses through it.
I think I am right in saying that all member countries of the Community have to import energy. I do not believe that in any case (there may be a minor exception to this) their indigenous energy sources are sufficient. I think that all member countries will use their indigenous energy supplies to the extent which is economic, and they will fight on their own for their own interests in buying the offshore supplies of energy and fuel that they require. I should be a little doubtful whether our entry into the European Common Market makes very much difference to the need for an energy plan, and I attach much more importance 686 to the second argument that the noble Lord, Lord Tanlaw, put forward. I find that much more compelling.
He and other noble Lords pointed out that there is a growing fear of energy shortages. There are a great many different forecasts to-day. Some are extremely pessimistic. Even though some of those forecasts may be too pessimistic, all wise and thinking men will agree that some of our most convenient fuels are going to be in short supply at an inconveniently early date. I do not believe that this means that there need be a global shortage of total energy because, in spite of the difficulties that are being experienced both in this country and overseas countries in relation to nuclear power, I believe that nuclear power can and will be developed so that it could supply the total energy demands of the world. But this leaves us with an extremely difficult problem of energy conversion. It is easy to say that you can use nuclear power, presumably via the generation of electricity, to evolve a hydrogen fuel economy, but the extent of the technical and technological changes that are involved in this are very great and frightening. Alternatively, you can say that you can use this same power synthesize methanol. The complexity of that change is very great. So I find the second reason which the noble Lord, Lord Tanlaw, gave much more compelling than the first one.
However, I would be prepared to dispense with both the noble Lord's reasons and say that it seems to me to be foolish to imagine that one can run a highly industrialised country like ours economically without having an energy plan. I am entirely in agreement with him that such an energy plan should be prepared; but, on the other hand, when I look back to the past and see the energy forecasts and the energy plans of earlier years, I become a little discouraged. The noble Lord, Lord Orr-Ewing, mentioned the 1950 plan. He pointed out that at that time we were counting on an output of 200 million tons of coal a year. The figure I had in mind was even higher—I thought it was 220 million tons. At that time we had the Ridley Committee which examined the problem in great detail and with great care. They came out with the answer that there was bound to be a fuel 687 shortage. The electricity boards were persuaded to convert a number of power stations to oil burning. They put this work in hand and negotiated long-term contracts with the oil companies. Before the work was half complete we had a surplus of coal in the country. The plans were put into reverse, half the stations were put back to coal burning and the contracts with the oil companies, with considerable difficulty and tolerance on the part of the companies, were revised.
In 1955 there was an O.E.E.C. Commission on Energy Supplies which drew up a forecast and a plan. That again proved to be misleading within the course of a year of two. The 1958 nuclear energy White Paper laid down an expanded nuclear programme which I am quite certain was damaging to the industry, and quite probably damaging to the country. Various noble Lords have mentioned the 1967 Paper on fuel. They pointed out that it is in error, and they have attributed this to the development of the North Sea gas and oilfields. But they will find if they examine the Paper that there are other reasons besides that rather unpredictable one for the errors which are at present to be found in that Paper.
I am only giving a few examples; I could certainly go on listing an equal number of energy forecasts and energy plans all of which have one common feature: every one of them within two or three years has proved to be useless. I do not think I would be unduly cynical if I said that we should have been better off without them. But we should not be discouraged by this; rather we should look back on those energy plans and ask ourselves why they have ultimately proved to be misleading. The answer is that in every case they were looked at as a close-ended job, a job for which a committee was appointed which produced an admirably well thought out report bound in neat Stationery Office covers. The report would be put on a shelf and pulled down from time to time for reference. Some two or three years later it would be found to be so inaccurate that it would never be used again, and a year after that another committee would be set up.
In a changing world this is no way to carry out forecasting. Forecasting must be a live, continuing activity. The forecasts 688 and plans must be constantly revised. I am quite sure that this is what the noble Lord, Lord Robens, had in mind when he suggested the Energy Commission, which has been mentioned by other noble Lords this afternon. In so far as that suggestion implies a continuous review of energy forecasts and energy plans, I am in agreement with it. But I tend to lean in the direction of the opinion which I believe the noble Lord, Lord Orr-Ewing, was expressing when he said that he doubted whether this was a problem which should be dealt with from outside the Government machine. I have experienced this problem at the grass roots level, and I have found that however much technology was involved in energy decisions, there was so much politics involved that it was a matter which could only be dealt with from within the Government machine.
§ LORD WYNNE-JONES
My Lords, may I ask the noble Lord this question? He has been referring to the difficulty—in fact he suggests the virtual impossibility—of making a plan because plans are always being changed, and they have always been changed in the past. Would he agree that the estimates of energy consumption have been roughly right, and that the real problem has been the distribution between the different fuels used and the different methods of generating the energy?
§ LORD HINTON OF BANKSIDE
My Lords, the noble Lord is quite right in saying that. The trend curve for total energy consumption in this country is still following roughly an exponential law, but the different types of fuel used within that total have departed widely from the exponential laws that they were following. It is to accommodate such changes that one needs an energy forecast and an energy policy.
As I was saying, I would personally feel, as the noble Lord, Lord Orr-Ewing, implied, that this matter should be dealt with from within the Government machine. To deal with it, the Government would almost certainly need to recruit outside experts; it may be that the responsible Minister might find it helpful to set up an Advisory Committee. But I believe that the responsibility should be a Ministerial one. Therefore, I should like to support the plea of the noble Lord, Lord 689 Tanlaw, for an energy plan, but I would say that if it is to be useful it must be a plan which is flexible, unbiased, constantly under revision and, above all, courageous—because in a realistic energy plan there must he some things which are unpopular with some people, and unless they are honestly stated the plan would be useless.
My Lords, this is what I intended to say when I came here this afternoon; but a number of noble Lords have gone further and have tried to outline—sometimes in a way which I, who have been concerned in the "nuts and bolts" of this industry, thought was a little imaginative—the form which an energy plan should take. I believe it would be going too far to attempt that this afternoon. I would hope that if the Government are able to accept the proposal of the noble Lord, Lord Tanlaw, and if we are able to set in hand a plan of this kind, a Green Paper might be produced for debate later. But since the details of the way in which an energy plan should be evolved have been mentioned, I should like to suggest that, whatever differences of opinion there may be about the different forms of energy which have to be integrated to meet our total energy demand, it is unquestionably true that, before the end of the century, nuclear power must supply a greater part of our energy. If this is true, it is necessary to have a healthy, successful nuclear industry in this country. I know the problem is inevitably a complex one, and that the Government have been considering it for a long time. I do not know, because I am completely uninformed, the difficulties they are experiencing, but I would suggest it is time a decision was made and something was said to the nuclear power industries. I feel that unless something is said quickly there will be only one thing the Government can say to them—and that will be "Good-bye"!
§ 6.5 p.m.
§ THE EARL OF LAUDERDALE
My Lords, I am sure that noble Lords in all quarters of the House will have appreciated, and listened with great attention, profit and benefit to the words of the noble Lord, Lord Hinton, who speaks with such great authority and, if I may say so with respect, with such helpful moderation on a matter so critical to all of us. Surely we would all agree that 690 we need a non-Party approach to something as urgent for civilisation as the nuclear bomb itself. May I, too, join with others in congratulating the noble Lord, Lord Tanlaw, not only on a well-informed introduction to this debate but also on a sophisticated approach. I found myself in agreement with almost everything he said, beginning of course with his Biblical allusion to the wise and foolish virgins. That set me thinking of images of voltages, gas pressures, pipe-lines and power lines, leading me irresistibly to Pope's lines on Dryden—Dryden taught to join the varying verse, the full resounding line, the long majestic march and energy divine.If energy is eternal delight, certainly an energy debate in this House is packed with the imprévu. Alas! the star performer after the noble Lord, Lord Tanlaw, was the noble Lord, Lord Balogh, who is not now in his place—and we had a new, angelic, almost urbane tranquility from one speaking as a non-Party Cross-Bencher, recognising that the price mechanism has advantages, declaring himself not to he a mere conservationist, hostile to the socialisation of oil resources, in contrast to his Front-Bench spokesman—to whom I am sure this came as a bombshell—and finally a balanced approach. None of my reserve points ready for answering him came into play; I was very happy to find that he, too—indeed that is the theme of this debate—and others are moving towards a bipartisan attitude.
If there has been a second slight imprévu contribution to this debate, it is the welcome impression we have had from my noble friend Lord Ferrers that an energy policy may indeed be on the way. My purpose now is to make a few positive points that may be of some help while it is still being gestated. We are talking of a major world resource, and the solution to the problem is as urgent for civilisation as the bomb itself. The geography of energy is ever changing, like the crust of the earth, and one thing which has emerged in recent months is that Britain is one of only four major industrial Powers (the others being Australia, Canada and the United States) which have a theoretical possibility of self-sufficiency in power.
Our energy policy, I suggest to your Lordships, must encompass four factors. 691 The first is that its operation must be a balancing operation in the light of many variables. There are the needs of the balance of payments and the external demand for sulphur-free oil—for example, there are pressures in New York to consume sulphur-free oil which could push up the North Sea price and therefore confront us with a choice between its use and its sale. American and Japanese competition could also so raise the OPEC price as both to stimulate extraction of synthetic oil from shale and coal, and maximise the merit of coal use for firing conventional power stations, to say nothing of its use for developing the generation of power, oil, gas and petro-chemicals on the new COALPEX concept. Then of course it could stimulate the fluidisation of coal for peak power generation in highly flexible because relatively small units—even down to 100 megawatts.
A further balancing element is the danger of an absolute natural gas deficit in Western Europe by 1985, which can well be deduced from the figures put out in a recent study by the Common Market Commission, S.E.C.(72)3182 Final, called—if my French pronunciation will be tolerated for a moment—"Previsions et Orientations a moyen terme pour le Secteur du Gaz".Embodied in that thick document there is plenty of evidence to forecast an absolute gas shortage in 15 years, and that opinion is shared by experts in the industry here.
A second key factor, once we have said that our problem is one of balancing, is an absolute, categorical imperative requirement for a bipartisan approach, not only about oil but about gas and coal and nuclear power. A third equally critical component was, I am glad to say, endorsed by my noble friend Lord Ferrers when he spoke of the need for the cheapest possible energy as against our industrial competitors. Having only last year reversed the policy of the Corn Laws Repeal for a cheap food economy by our entry to the Common Market with its economy of high food costs, we must counterbalance this by a policy of low energy costs. Fourthly, and this is where I part company with my noble friend Lord Bessborough—there is the strong, compelling need for Britain to confirm beyond the slightest peradventure or possibility 692 of question, whether from the E.E.C. Commission or from Germany or from France, our full, total and absolute sovereignty over the United Kingdom Continental Shelf as agreed in the Continental Shelf Convention to which four E.E.C. countries freely consented in the full knowledge at the time (that is in 1964) that we were still aiming at membership of the Community.
THE EARL or BESSBOROUGH
My Lords, if I may interrupt my noble friend for a moment, I did not say that we should relinquish our sovereignty over these resources. What I was advocating was a co-ordinated plan or some guidelines which would be proposed by the Commission for submission to the Council of Ministers. I am not for one moment proposing that the Community should take over these resources. It is true that M. Fernand Spaak, the Director General, perhaps hinted for a moment at its being a Community resource, but this has not been accepted.
§ LORD SHEPHERD
My Lords, if the noble Earl is going to continue, could he point his remarks in this direction, because we did not have the benefit of them?
§ THE EARL OF LAUDERDALE
My Lords, I am much obliged to my noble friend and much comforted that in his exercise of the dual mandate and in his maiden speech in that capacity he has been able to clear up what to my listening ears, at any rate, was an ambiguity, and I am much comforted to find that we are on the same side about that.
These four broad principles lead to four distinct implications: first, that the cheapest energy must always be energy put to the best, and not the most extravagant, use. One thinks, for example, of the gas firing of the West Thurrock and Hams Hall power stations, and although that is but one per cent. of the power generation of the whole country, according to the figures given by the noble Earl, Lord Ferrers, this afternoon, one wonders whether the proportion of 28 per cent. of power generation which comes from oil is in fact the ideal balance, and whether 63 per cent., which is the balance he gave as coming from coal, is in fact as high as is to our national advantage. At any rate the cheapest energy is the energy put to the best, and the least extravagant, use, and subsidies may well 693 be needed to accomplish this. One certainly cannot develop fluidised coal burning; one certainly cannot develop the COALPEX concept of power and petrochemical operations, unless the best-prospect collieries (and the mining communities belonging to them) are kept going. Here I thought the point made by the noble Lord, Lord Kennet, was sound and timely. Any decision to maintain and to use coal to a certain level, say between 130 and 150 tons per annum, must mean some higher use of coal in power generation and surely this may well require an element of subsidy which has, of course, been an accepted principle of Common Market thinking for some years.
Then a third point is the essential requirement of Government help for research and development in regard to all four fuels. This point scarcely needs labouring. The fourth point is that price stability is needed for the best balance between alternative uses, and if that principle is accepted it could call in question the wisdom of heavy Development Area incentives for capital intensive investment such as oil refineries. I say "could" because there is an argument current which deserves to be examined as to whether the Italian experience has not shown that over-stimulation of capital investment in oil refineries can distort the market, encourage dumping, and create price uncertainties, leading overall to sub-economic use of oil as a source.
Finally, the licence policies with regard to offshore oil must in turn balance a range of considerations. First, maximum exploration cannot be secured without maximum return to the risk takers, and you cannot just encourage exploration, as some would like, and at the same time discourage exploitation. The second consideration is that what is sauce for the goose is not necessarily sauce for the gander: licence terms for one area may need to be totally different by way of incentive, or even disincentive, from those of another area according to the difficulties of the area concerned. To propose, suggest or even imagine a gas price from the Leman field as being a suitable gas price from the Frigg field when the one is obtained at a depth of 120 feet of water and the other at a depth of more than 300 feet is sheer madness.
Then with regard to the needs of a bipartisan policy, there are two demands 694 that need to be met and need not, I hope, be brushed aside on this side of the House as being mere political clamour from the other. There is the demand for maximum public sector participation in oil exploitation with minimum risk to taxpayers. I agree with my noble friend Lord Orr-Ewing (who was kind enough to tell me just now that he had to go to another engagement) that this requirement might well be met by a modest application of the carried interest principle. It is not something that the oil companies will welcome but I believe it is something that they would accept if they felt, and could feel certain, that this would be a serious, lasting element in a policy that would survive changes of Government.
On the same bipartisan theme, there is also the political cry that foreign oil companies should not be allowed to come in and export their profits across the exchanges. To that difficulty, surely, there might be an answer in the introduction of depletion allowances, somewhat on the American model, which would encourage the retention of profits in Britain. If that were to be considered, it might be linked perhaps with a proviso that the enjoyment of such allowances should be subject to reinstatement either in exploration or in research. Because the next frontier is not the Continental Shelf the next frontier is the Continental Slope and in fact the deep sea, with water depths not of 300 or 500 feet but of more than 2,000.
There has been general support this afternoon for the call made by the noble Lord, Lord Robens, for an independent Energy Commission to balance the pressures and to obtain the best result for the country. I too support that proposal in general terms, and I couple it, as did my noble friend Lord Orr-Ewing, with a plea for something like an annual or bi-annual energy balance review such as I myself urged in this House almost a year ago in the debate on the collieries. Such an energy commission might very well base its balancing calculations on working the sort of sophisticated mathematical energy models that Professor Deam, seconded by B.P., and his team are currently contriving at Queen Mary's College, London University. But the case of the noble Lord, Lord Robens, is surely most vividly endorsed by the 695 situation which now follows the IMEG Report. For several of that Report's recommendations are, so far as we have been able to find out up to date, still only "under study". The term "under study" will be familiar to your Lordships as Whitehall jargon for a situation where Departments are squabbling, and for such a situation even to be possible six months after an urgent Report was compiled—and that Report was compiled in August—can mean only one thing: it can mean only (and I hope I am wrong) that the Ministry of Fuel and Power in the Department of Trade and Industry is simply unsuited by its structure to mastering so complex and politically explosive a subject.
What are these recommendations that are under study? There was the suggestion that there should be finance for research and development; there was the suggestion that there should be special credit terms to help British contractors in the oil business; there was the suggestion that there should be special insurance terms for the same purpose; there was the suggestion that the State should lease heavy capital equipment to contractors; there was the suggestion that the State should obtain and own and train people on a jack-up rig so that we could bring into the industry people qualified to work in it (when I say that the State should do these things, I mean that the State should encourage them to be done by the universities or some other suitable vehicle). Finally, the recommendation was made that there should be a study of a much expanded oil and gas-processing industry in Scotland. If that recommendation has not been supported by two subsequent developments, I cannot think what will! But since that was written, the Piper field has been discovered by Occidental a hundred miles off Wick leading to the very reasonable possibility that oil may well be piped ashore to the far North-East of Scotland with the possibility of refining there and petro-chemical development, particularly since there is the Frigg gas still available and no landing point has yet been determined for it.
Secondly, there is the quite remarkable proposal which was made to me in reply to the Scottish oil debate in December. It was made to me by letter from my noble friend Lord Polwarth. He wrote 696 that it would be for the Hydro Board in the Highlands to determine whether there was any need for gas supplies in the North of Scotland and, if so, to approach the Gas Corporation which could then do the necessary costings to see whether it was worth while trying to lure the Frigg gas to the nearest landfall. If that does not build up the case for something far more effective, coherent and realistic than the present operations of the D.T.I., I do not know what does!
We then come to the context of the E.E.C. itself. Of course, Professor Haverkamp's famous 46 points are, most of them, as innocent as the Tables on Mount Sinai but there are at least six critical questions which now lie on the table and have yet to be resolved. The first, of course, is the need for a common attitude among the E.E.C. countries towards exploration licences. After all, the range of activity varies between the extremes of auction at the one end and the heaviest carried interest at the other. Relevant to that is the need for an early delineation of median lines North of the 62nd Parallel—that means with Denmark, Iceland and Norway—and secondly in the Celtic Sea where some of the most promising basins straddle areas that are not yet determined.
Then there is the question of relations with the OPEC countries, although no firm proposals have yet emerged. The suggestion that one reads is that the E.E.C. countries should act on an E.E.C. to OPEC basis; this is, as one group of countries to another, trying to deal with them and trying to offer them all sorts of inducements—like investment of one sort or another, social and technical aid; the very things they do not want since, as the noble Lord, Lord Kennet, so rightly said, the situation is almost exactly the opposite. There are indeed now Middle East Sheikhs fat and rich on oil who are buying into the oil industry in this country, and in at least one case known to me, who are the controlling interest in an offshore supply company. The question to which I direct attention in the OPEC/E.E.C. matter is this: is it prudent, is it sophisticated, to try and deal with the OPEC countries on a Government to Government basis? Might it not be very much better to leave dealings with OPEC to the oil companies concerned?
697 Another matter which is, as it were. on the table in the Commission is the proposal for draft directives to limit the excise duty on heavy fuel oils to something like 2 dollars a tonne against, of course, the current British excise duty which converted at 2.40 to the pound works out at nearly 6 dollars. That was proposed in 1970. As of December, 1972, it appears that no discussions of substance had yet taken place on the structure of mineral oil duties. Britain here has a clear interest to see that at any rate her own fuel oil duties are cut to the French zero level. At present we have the highest duties in Europe. Then there is the difference between various Common Market countries over defining the country of origin of imported oil. Crude oil attracts no duty, whereas imported products attract something like 6 per cent. Surely the British interest, as an essentially oil balancing and therefore oil refining country, would match the French interest, which is to secure that the country of refining should be accepted as the country of origin.
Finally, there is the question of the Shelf. My noble friend Lord Bessborough was inclined to describe what I am now going to refer to as a "simple flurry". But, as I understand the matter, Holland is refusing the export of natural gas to Germany from the discoveries made by the Placid Oil Company on the grounds of domestic shortage. Germany, with the backing of the Commission, has been arguing that control of the Shelf is not sovereign, and has been claiming that the Shelf is covered by the E.E.C. Treaties, adhesion to which, so far as I have been able to discover, makes no reference to the matter at all. The Germans have been arguing that any denial of gas exports conflicts with Article 34 of the Treaty forbidding quantitative export restrictions, and one is informed that there is a serious possibility of this going to the European Court. This is a matter of supreme importance to our country, and I hope that the Minister will this evening take an opportunity once again to confirm, and to emphasise, his statement in this House on November 22 last, at column 1019, that:Our resources in the North Sea are national assets and will be treated as such.In these matters let us pray for a common approach. Let us, for Heaven's 698 sake, avoid dragging energy into the cauldron of Party politics in the way that steel has been, to the enormous damage of our country and people. For power is a trust—it was Disraeli who said it—and we are accountable for its exercise.
§ 6.32 p.m.
§ LORD WYNNE-JONES
My Lords, I am sure that the noble Lord, Lord Tan-law, must be gratified with the response that his Motion has received. I must congratulate him on introducing it, because I think the subject of fuel and energy is an extremely important one. He has used only the word "energy". It has become fashionable just to use the word "energy", but, as I suggested when the noble Lord, Lord Hinton, was speaking, actually the planning of energy is not a very difficult problem.
Looking at the consumption of energy over a very long period of time, in a debate I introduced in your Lordships' House six years ago on this very subject of fuel and energy I quoted figures from 1900, with an estimate up to 1975. I notice that the estimate which I quoted then, which came from oil sources, is very close to what we are likely to be consuming in that year. It was 340 million tons of coal equivalent. It is interesting to notice, too, that at the beginning of this century, in the year 1900, we were consuming 162 million tons of coal equivalent. It seems strange that, in spite of the population expansion and in spite of the growth of industry, we are using only just over twice as much coal equivalent as we were in 1900. Of course, the reason is that we are using it much more efficiently, probably something like 2½ or more times as efficiently now as then. Consequently, the ratio is really much bigger than would appear from those figures.
We can fairly easily predict over a shortish period of time what is going to be the energy consumption. The real problem is to deal with fuel. It is very difficult to predict exactly how much coal we are going to use, how much oil we are going to use, how much natural gas and how much nuclear energy; it is in these fields that it is so important for us to have some serious thought given and some planning worked out. As the noble Lord, Lord Hinton, clearly indicated, no plan can be a fixed and definite one in such a field as that, but that does not mean 699 that you should not be planning; it means that there ought to be a body which is concerned with planning this the whole time.
I have some figures given me by someone who is acting as chairman of a committee of an impartial outside body which I believe may be advising Government. The figures which he gave for the consequences of the energy requirements for the whole world in the year 2000 were very interesting. The estimate is that by the year 2000 the number of nuclear stations we shall need will require us to build a 1,000 megawatt station per week from now until the year 2000 in order to cope with the world requirements of energy in that year. This is a staggering figure. It means that if these figures have any significance at all—and I am quite sure they have—it is essential that we organise a nuclear power industry that is capable of carrying out that programme.
We have run into great difficulties in this country because we started probably too soon, as the noble Lord, Lord Hinton, said, with the programme of nuclear stations. We were forced into it largely by the Suez crisis. We started off on this programme probably before we should have done. Then we proceeded to slow down. That was fatal, because it meant that the nuclear power industry never got a chance to start developing the stations it was producing and to make better ones. Then people complained that the stations were behind time. This happened everywhere; the Americans have had exactly the same trouble. Even their development has not been rapid enough, and they have found that the handing over of stations to the power companies has fallen behind schedule all the time. This is the inevitable result of a new industry trying to do something which they have never done before, and not being given enough orders, enough authority, to go ahead and do it properly.
In fact I believe it is probably true that in this country we would have done better to stick to the old magnox nuclear station and gone on developing it, instead of saying "No. When we have built this first generation of magnox stations we will try something entirely new", and going off on to the A.G.R.; then saying, "No, we will go on with 700 something new, probably steam generating heavy water" or something like that. We have an entirely new technique, a new sort of thing to do. It cannot be done in a short time, and the industry cannot be expected to put the effort into doing this sort of thing if it is only going to turn out one or two or three stations.
All the time we have been obsessed with the idea that we have to sell these stations abroad, but the demand for them has been in this country. It was not necessary to worry whether we could sell them abroad. In fact, we have not sold a single one abroad. We do not sell them because the Americans are better salesmen than we are; they go ahead and use very powerful sales methods and convince anyone that what they are making is better than what we are making. We should not worry about that, if there is a demand in this country, and there has been a demand. According to figures I have been given, the demand will go on increasing; and the noble Lord, Lord Hinton, suggested that the demand will go on increasing.
If we look at the position, we must consider partly what we do with the nuclear industry, which is going to be extremely important, and partly what we do with the other sources of energy, the fossil fuels. We have in this country immense reserves of coal. They could last for about a couple of hundred years. I do not know how much it is, but we have perhaps 40 to 50 years' reserves of gas under the North Sea; certainly not more. In other words, the use of gas will go up and come down again. That has already happened in America. In America they scrapped their old coal gas industry over the whole of the East Coast of America, and there is not an oven making coal gas on the East Coast of America. Why? Because they piped all the gas across from Texas. They brought all the natural gas over, and ran industry on natural gas. Now there is not enough natural gas, and they are beginning to have to use petroleum in order to produce towns' gas on the East Coast. If they had been wise and not closed down their coke ovens originally, they would not have been forced into this position.
We can be forced into the same position if we are so foolish as to think that 701 because there is gas to-day there will be gas to-morrow. There will not. That is the one thing that one can predict with absolute certainty. I cannot be certain of the date, but natural gas will run out. The same is true of oil. We do not know when the oil will run out, but we are quite sure that, although we do not know all the world reserves of oil, they are less than the reserves of coal. Therefore we ought to think of gas and oil as being things to be used preciously and not to be squandered. It is ridiculous to use them when something else can be effective. That is the mistake that can be made in our policy.
So far as coal is concerned, we ought to think not only of the immediate future but of the long-term future. When all our other sources of hydrocarbons have disappeared, coal will be our one source of hydrocarbon, This will be important for the petrochemical industry in the future. The American oil industry has, over the last 15 years, been buying up coal mines, because they know that oil is going to run out and they must have coal. We should he considering exactly the same thing. Coal remains for us an extremely important raw material; a fuel, yes, but even more a raw material, and something that we dare not run down. We ought to keep our coal industry going effectively. The noble Lord, Lord Hinton, actually made reference to the estimate of the Ridley Committee. I looked up the debate of six years ago, and the figure that the Ridley Committee gave for coal production was not 210 or 220 million tons a year, but 250 million tons a year was to be the target. It would have been achieved but for the fact that oil came in. All the evidence that there is at the present time is that within a period of time, which may he 10 years, 15 years, 20 years, or perhaps longer, there will be a cross-over of the price of oil and coal, and oil will be more expensive than coal.
Therefore, everything points to the fact that we should have a fuel policy—and I should like to emphasise fuel policy, because I think the energy side of it is, in a sense, easy to decide and determine. It is important to decide the energy side, but it is easy to decide it; the difficult thing is the fuel side. We in this country must, in our own interests and in the interests of the future of this 702 country, have a proper fuel policy. This demands that there should be set up some body that is concerned continuously, not just now and again, with this problem of fuel policy. It should be a body which can advise the Minister. It is rather sad to notice the remark that the noble Lord, Lord Robens, made about the number of Ministers to whom he had been responsible while he was chairman of the National Coal Board. I think he said that he was responsible to ten Ministers in ten years. That suggests that the position of Minister of Fuel and Power was treated in far too trivial a way. In other words, it was either a stepping stone for the young politician on the way up, or a convenient graveyard for the old politician on the way out. Neither of these courses is sensible in such an important field of our activity as this. I hope that the Government will revive the Ministry of Fuel and Power, and make it a powerful Ministry.
§ 6.45 p.m.
§ LORD GISBOROUGH
My Lords, it is interesting that this debate should come at a time when we have news that schools in the United States are closed for lack of heating oil, and that corn cannot be dried for lack of oil. On top of that we hear that the demand in the United States, in spite of their lack of oil at the moment, is to be doubled in 15 years. This is not because of any physical shortage of oil. There are still nine years' proven reserves over there, even though the figure used to be 11. I understand that world wide there are 30 years' proven reserves, and this figure has remained constant year by year, in spite of rising demand and the ever-increasing cost of prospecting in increasingly remote and difficult areas of land or sea.
In addition to the new fields discovered, techniques of extraction improve, and it is becoming possible to raise the 30 per cent. extraction yield to up to 70 per cent., which will thus double the yield of every oil field that is discovered. There is no lack of oil, and I do not believe that there will be for many years to come. There seem to be two reasons for the problem in the States. First, the price of gas was too cheap, it was used too much, and then the multitude of privately owned wells. With cheap oil they have been wasteful of their supplies, and the ageing wells are now in decline. 703 Secondly, their environmental lobby has prevented the building of refineries—hence the shortage of aviation fuel—and prevented pipelines being laid to bring oil from Alaska, and prevented the maximum use of coal for generating stations. Were coal, with their 600 year supply, to he fully used for generating, the energy crisis would be imaginary. Therefore, they have decided to double coal production by 1985.
In the short-term the matter is very different; hence, we have seen the States suddenly becoming massive oil importers. This, in turn, has affected the enormous supply required for Europe and Japan, and suddenly created a potential and rather false energy crisis for our own countries and the rest of the world, which will last until such time as the United States has sorted out its own short-term prolems. When it has done this, the rest of the world will breathe again.
We enter, therefore, a period of years of extra high competitive demand from, and reliance upon, the Middle East and other producing countries. This is at a time of very sharply increased, and sharply increasing, prices. Most of these countries can afford to cut off their supplies and bring pressure on the Western developed nations. For example, the Kuwait Parliament voted in January to cut off supplies of oil in the event of a new Middle East war. There exists a situation in which the whole foreign policy of Europe and the West can be, and is likely to be, held to ransom by the small oil States, and where the industry and the very defence of Europe, with its 90 day supply of oil, can be severely threatened.
One could also visualise an oil-starved United States insisting on their companies in the Middle East giving them total priority, at the cost of supplies to Europe and Japan. There could develop a free-for-all dive for oil between Europe, Japan, and the States, sending prices rocketing and creating an explosive international climate. It is a situation that must never be allowed to occur. Far better that they should try to get together and buy as a world block, just as the sellers sell through OPEC. But, first, Europe must learn to work as one unit. To minimise these dangers, it is essential for Europe to maximise the short-term 704 supply of alternative sources of oil, such as the North Sea, over the next 20 years, and to develop and rely on the alternatives to oil which, while still plentiful, is eventually finite and will be increasingly expensive, both through royalties to the exporting countries and through the astronomically high and increasing cost of exploration in ever more remote and difficult fields. In the meantime, surely we must learn from America that the price of fuel must be made such as to discourage waste and to encourage adequate insulation, as was described by the noble Lord who opened this debate and by many other noble Lords.
But there are, after all, 10 million square miles of prospective Continental Shelf out of the 25 million still to be drilled, including the North Sea areas North of the 62nd Parallel, in which inhospitable seas many gas and oil fields are likely to be found. Already, the North Sea reserves could by 1985 provide three million barrels a day, which in quantity is equivalent to the needs of this country, though of course the crude is too light for all purposes and, anyhow, has to be shared out around Europe under O.E.C.D. rules. To fill the short-term needs of the next 30 years, every encouragement must be given to these North Sea explorations.
The British policy towards licensing seems to me to be just about right. It was no give-away, but it encouraged oil companies to come and prospect, even in what is the roughest sea in the world with the worst conditions. In the first instance, they were "wild-catting" and that could have involved huge expense, with no returns. Gradually, as certain areas become more promising, oil companies will expect to pay more for their licences. Yet when they start "wild-catting" West of the Shetlands, they will again expect the blocks to be cheap. But one must remember that drilling in the North Sea, with its high winds and waves, is the most difficult and expensive, and despite all the talk of discoveries and the massive investment the first ton of oil will not come ashore till 1974. Furthermore, it takes between 7 and 15 years from the date of survey for a well to get to its five-year peak production, with an investment for an off-shore oilfield of some £300 million, and that is tied up for most of that period before a ton of oil is brought ashore.
705 I agree with the noble Earl, Lord Lauderdale, that gas prices must vary to give adequate returns to the prospectors; but if gas and oil are found in British sectors of the sea by foreign firms they must either reinvest the money in North Sea exploration, or bring the oil and their profits through this country. One may compare British licensing with that of other countries. Norway, with their hydro-power and no balance of payments problem, were able to charge more for licences. While they have notable successes in their areas, there has been a falling-off in drilling due to the unattractive terms. The Dutch charged so much for licences off Groningen that they had no takers. Even after reducing their demands there was limited interest and no gas is produced in their sectors, and they now have a shortage of gas.
There is talk of nationalising North Sea oil. What talk could be better designed to scare off potential drillers whom we need so urgently to find oil and help free us from the stranglehold of OPEC, and to help our balance of payments? "Wild catting" and drilling is a very high risk venture, becoming higher as the most likely fields are already found. What a horrifying investment for a nation to embark upon! We have already seen some of the ills of politics. With the nationalisation of steel, then de-nationalisation, then the threat and fact of re-nationalisation, the uncertainty delayed adequate research into the supply of non-corrosive large diameter steel tubes for the building of rigs. This is one of the reasons why so few rigs compared with the total, have been built in this country; the other reasons of course are labour troubles and costly late deliveries. It is essential that the North Sea oil industry be kept out of politics and free from political uncertainty. If anything, it must be encouraged to grow by bigger rewards to the companies, to encourage them to prospect here rather than elsewhere in the world. After all, they are not making great profits at the moment, and the supply of local gas or oil is of paramount importance to this country. If they do make big profits, they may prospect more freely or pay more tax.
However, this is all in the short-term. In the long-term, oil is finite and surely must be reserved for chemicals, fertilisers, food and so on, which form the life-blood 706 of industry and of the world. Surely, it is too precious to burn. It is therefore vital to think 30 years ahead and to develop new sources of energy. Coal is by far the most plentiful and must be relied upon for electrical generating. We must not be afraid to buy American know-how on extracting oil and gas from coal seams, without mining. The coal industry must be kept strong and healthy. Even though it is the healthiest in Europe, the output per head is still five times worse than in America. The men must be kept, or they will not be there when they are needed. Nuclear power must be made to play its full part; and, again, let us buy any know-how from America if it will get rid of some of the troubles besetting these plants. But it is horrifying to think that we need to build one nuclear power station per week to satisfy our needs. Perhaps the most remote and long-term, but by far the most potentially rewarding, is the development of the fission reactor and the production of petrol from hydrogen. May we hear how far our research has progressed in this very important field?
§ 6.57 p.m.
§ LORD ENERGLYN
My Lords, too, should like to extend my thanks to the noble Lord, Lord Tanlaw, for introducing this important subject for debate into your Lordships' House. I can think of no other place in the world where a subject like this can be discussed so freely, unfettered by politics; and, as other noble Lords have said, this is a subject which must be looked at in a non-political fashion. As we have heard so many times this afternoon, Britain is endowed with four principal sources of fuel, thanks to geological circumstances, skill, science and technology, and if we set our minds to it we can possibly deploy them more efficiently than anyone else in the world.
May I take a slightly different route from some other noble Lords? We are all pretty convinced that nuclear energy offers one of the most reliable sources of electrical energy in the future, but, bearing in mind the point of the noble Lord, Lord Tanlaw, we must be realistic and look at what is possible before 1985. I would remind your Lordships that we shall need nuclear fuel, and that we shall be using the £50 million grant for deep exploration for non-ferrous minerals in the heart of Britain. It is geologically in- 707 conceivable that the roots of this fantastic geological phenomenon do not contain radioactive minerals, and in the next two to five years I think we shall have some very happy surprises and bonanzas in radioactive fuels which are as vital and exciting as North Sea gas.
If I may continue the theme of most noble Lords, which I so strongly applaud—that is, the conservation of energy—I should like to remind your Lordships of the successful experiments in using a high-level reservoir for the production of hydroelectricity to meet peak loads. At first sight it seems rather ludicrous to use electricity to pump water to a high level reservoir and then to let it run out again to obtain hydroelectric power. But in Ffestiniog you can generate 360 megawatts in 55 seconds; and the proposed new use of the high-level reservoir at Dinorwic will produce 1,400 megawatts in 10 seconds. Another important point is that such a station has a well-known life of about 50 years, whereas the life of a fossil-fuel plant is possibly as little as 30 years.
One of the problems in these high-level reservoirs is the amount of water evaporation, which has to be supplemented—and that means use of energy. But I would remind your Lordships that we have vast areas—and I do not exaggerate in using the term "vast areas"—of underground workings in Britain from which, in the past, coal has been taken. These subterranean areas are still available to receive water, and many of them, particularly in South Wales, lie above deep shafts of 1,000 feet in depth; and, if I may remind your Lordships, a 1,000-feet head of water is an enormous potential for driving hydro-electric turbines. So here we have not just a figure of speech but a fact: that within two or three years we can produce underground hydroelectric stations in our coalfields, and I am convinced, having carried out one or two trial exercises, that in South Wales alone the peak loads could be met by these underground coalmine hydro-electric stations. I would further remind your Lordships that these abandoned coalmines lie in the heart of the heavy industries of this country, where peak loads are so troublesome. So I commend this example to your Lordships within the theme of the conservation of energy.
708 Perhaps I may take up your Lordships' time further by going on to another important area in which conservation can take place; namely, in the making of iron and steel. In the smelting of low-grade iron ores, the balance between fuel and ore has always been against the low-grade iron ore, so that as the fuel became more expensive it became of necessity important to introduce rich hœmatite from abroad. But I would remind your Lordships that we won the war on home ores, and virtually the whole history of the iron and steel industry is built on the Jurassic iron ore of this country. Now the thing that bedevils the smelting of low-grade iron ores—and these are very widespread throughout the world—is the sedimentary mineral called chamosite, which is an alumino-silicate and which behaves in a rather stupid way. When the heat has destroyed it, as soon as the melt begins to cool down the iron rushes back into the molecule and goes away in the slag, so that you have great losses in that direction. Geologically, these minerals are formed by the excreta of marine organisms, and this means that if they were formed in an organic fashion the way to attack them is to attack them with organic compounds. It has now been found that if you blend these low-grade iron ores with organic compounds—and I am not trying to be amusing when I say that among them is town sewage—you provide that mix with the right type of thermo-chemical fuel which will compete very successfully with metallurgical coke. So I am not trying to be amusing in suggesting to your Lordships that in the immediate future we shall see, either in this country or in the Ruhr, where activity is taking place in this field, the use of sewage plants for the provision of metallurgical fuels.
I hope, my Lords, that this does not sound like a university lecture, but I should like to take one further point to illustrate the various ways in which, in the theme of the noble Lord, Lord Tan-law, we can to-day do something to conserve our energy in the world of metallurgy. At a recent visit to the research association dealing with coke and coal, I was shown a series of coal pellets which had passed through a furnace which ranged up to over 1,000 degrees centigrade. The pellets were completely undisturbed. They came through the furnace, 709 and their shape was perfectly preserved; and they still contain hydro-carbons. The moral behind this is that those coal pellets, like all the coal used in furnaces, had not consumed the full potential of organic content, and that is a waste of thermo-chemical energy. If, on the other hand, one then reminds oneself of some of the characteristics of coal, there are two that I should like to present to your Lordships which are relevant. The first is that coals all over the world are not of the same geological age, but the coals that have been found to be of great commercial value were formed about 200 million years ago. These so-called thermo-carboniferous coals were formed at a time when there were no flowering plants on earth, and the significance of that is that these coals contain strange and as yet not completely known organic compounds. When these come into contact with metals, they perform the most miraculous things. In the past we have only been able to observe them empirically, but now we know exactly how they work.
The problem is now simple: it is to bring these coal substances into absolute contact with the mineral. This brings out the next property of the coal, which is that, under pressure, the coal behaves like a plastic. So that if you have a mixture of minerals and coal and pressurise it, you form a hard plastic mass. When this is projected into a furnace and almost instantaneously ignited, these compounds completely react, there is no loss of energy and the metals are excluded in the most dramatic fashion. In fact, it can be shown that nickel can be extracted out of lean nickel ores at temperatures of 400 degrees centigrade lower than the melting point of the nickel. I need not elaborate on that any further, but I make that point rather vigorously, if I may, because what we have in our grasp now—and I repeat "now"—is complete freedom from using coals that can be made into coke. Any coal can now be used, and this means a great opening up of the picture of coal-mining, which has been becoming narrower and narrower because of the increasing demand for industrial coke. Now, this need no longer be the case; and this, I think, alters the whole picture.
My Lords, I have made these three points in an attempt to illustrate two 710 things. The first is to support the view that we must conserve energy in every possible way. Then I take the point of the noble Earl, Lord Bessborough, about integration: because we must add to conservation of energy the integration of energy. In order to do that, it seems to me that the first step that one has to take towards the production of an energy policy is to produce a pattern; to integrate, as my noble friend Lord Wynne-Jones said, the policies of industrial life into a pattern. I would recommend to Her Majesty's Government that they consider setting up a Committee of Inquiry—and I hope that the noble Earl, Lord Bessborough, will approve of the title—that will produce a pattern of industrial fuel or, if they please, of energy. In my view this can be done in six months if the Committee is composed of men who have all the information at their command, and it seems to me that the heads of the nationalised industries, a representative of the oil industry and a representative of the T.U.C. would fit into this category. Under a dedicated chairman, I am sure that the Committee (and I hope that the noble Earl, Lord Bessborough, will agree with me) could produce within six months a Green Paper of a pattern of either fuels or energy from which we could then proceed on the next round of an attempt to form a policy for energy.
§ LORD KENNET
My Lords, before the Minister rises to reply, with the leave of the House I should like to correct a mistake I made earlier. We were on the point of the depth under the sea at which oil could be obtained and how long it was likely to be before that depth was greatly increased. The Russians have a crawler operating at 4,000 feet under the sea, the Americans have one operating at 6,000 feet. It was reported in the Financial Times on September 17, 1971, that Shell had commissioned a ship capable of drilling in 2,000 feet of water. The name of the ship is "Sedco 445". Most important of all is the fact reported in the November, 1972, issue of Ocean Industry that Messrs. Lockheed have developed an overall system for obtaining oil which eliminates the use of divers and is designed to he used at a maximum depth of 3.000 feet of water. It has been tested at 900 feet and is now in the hands of the Shell Company producing 711 oil at a depth of 375 feet off the American town of Venice in the Gulf of Mexico. This, I think, is not a picture which suggests that very deep working is a remote prospect in the future. Nevertheless, what I said was wrong and I apologise to the House.
§ 7.15 p.m.
§ LORD DRUMALBYN
My Lords, I should like to start by congratulating the noble Lord, Lord Tanlaw, on having introduced this debate. I feel sure that he will be happy himself that he has done so because it has certainly justified the very high standard that he set at its outset. We have had speeches from experts and I think that the debate should well maintain the reputation of this House for discussions of this character when so much expertise can be deployed. I think it is true to say that there has been very largely a non-partisan approach to the debate. That is very welcome to me and also, I am sure, to the noble Lord, Lord Tanlaw. A great many questions have been flung at me, as representing the Government, and I do not want to detain your Lordships for a very long time. I will, if I may, deal by correspondence with some of the questions that cannot now answer, but I should like now to deal with those that seem to me to fit in most with the broad pattern of the debate—and "pattern" is a word that has been used often in the course of our discussion. I hope to show the Government's perspective on this subject to the best of my ability.
The debate has certainly served a useful purpose in making us all realise that neither this country nor any other European country, nor indeed any country, can take lightly the problem of providing itself with supplies of energy to meet the rising world demand. The public are becoming more and more aware, often through sad experience, of the massive investment and world-wide operation and the complex industries that stand behind the flicking of a light switch or the turning on of a cooker and the starting and running of a family car. These industries in turn rely on a whole range of natural resources, in exploiting which we must have due regard not only to their individual characteristics but also to the quantities of reserves of them which are known or presumed to exist, the changing 712 pattern of supply and demand (so far as that can be foreseen) and the environment.
Governments, companies and individual consumers each have their own point of view in this continuing process of matching demand with supply. Some want plans, targets, contracts of various kinds; others emphasise the need for freedom of choice and the benefits of competition if not only existing sources of energy but new sources are to be developed in the right quantities to meet the demand. Most recognise the need to take account of social considerations and also environmental considerations, but if one thing is certain, it is that the future is uncertain except perhaps in those respects indicated by the noble Lord, Lord Wynne-Jones. Neither the pattern of demand nor the pattern of supply can be determined in advance, even in an authoritarian State virtually self-sufficient in energy resources. Circumstances change, opinions change, indeed the extent of human knowledge, skill and technology changes.
We were fascinated to listen to the speech of the noble Lord, Lord Energlyn. He indicated three areas in which changes are taking place. I was particularly interested in his reference to pump storage because I remember that while I was still at the Scottish Office the pump storage scheme was introduced at Loch Awe. I do not know whether this scheme was before or after the Ffestiniog scheme; but to the extent that this type of system can be developed, it is obviously a very useful source of energy, particularly in its suitability to fill in at peak periods.
§ LORD WYNNE-JONES
My Lords, on that particular point which I think is very important, has the noble Lord any figures on the efficiency of pump storage? Because at first sight it looks as though it is not likely to be more than 64 per cent.
§ LORD DRUMALBYN
My Lords, I think the advantages of pump storage are first, as Lord Energlyn said, the length of time it lasts and, secondly, the fact that, in return for the expenditure over those years, it can usefully be brought in to fill in at peak periods, and in that sense it is a very good marginal addition to supplies. I hope the noble Lord, Lord Energlyn, will agree with me.
713 My Lords, in addition to these, new political and economic groupings emerge, and the relative position of one source of energy as compared with another varies from time to time. I suppose that the subject which has exercised the minds of your Lordships mostly in this debate has been the proposal for an Energy Commission. This, of course, is not a new idea; it has been well fostered by the noble Lord, Lord Robens, and undoubtedly it has attractions. But it has not found widespread acceptance in the past and I think that there are three reasons for that. First, it is difficult to see what powers such a body could have that are not already available to a Government Minister. Secondly, all the necessary skills and information for the formulation of energy policy are already available to Ministers and their Departments, and it seems doubtful whether interposing an Energy Commission would not complicate the lines of responsibility without necessarily effecting any improvement. Finally, and most important, all that has been said to-day points to the vital national importance of energy, and I took very much the point of the noble Lord, Lord Hinton of Bankside, that inevitably these matters involve political decisions, and it is difficult to see how the Government could step back, so to speak, from their responsibilities in this area by creating a new body that would inevitably stand between the industry and themselves. I agree with the noble Lord, Lord Hinton of Bankside, that this is a matter which should be dealt with within the Government machine, but I take on board also the point that the noble Lord, Lord Energlyn, has just been making about the possibility of some advisory committee being set up. Perhaps I could deal with that point at the end of my speech.
§ LORD AVEBURY
My Lords, if I may interrupt the noble Lord, the decisions of individual nationalised industries, particularly capital expenditure decisions, involve political factors which have to be taken into account by Ministers and dealt with, if necessary, by Ministerial directions to the industries concerned. What is lacking, as I think my noble friend explained, is any coordination between the gas, coal, oil and nuclear sectors and the C.E.G.B. which would bring all these factors together and propose to the Minister a comprehensive 714 set of decisions on which he could make his judgment. He has to make his judgment on a number of individual suggestions put up to him by the heads of the nationalised industries, which must involve very complicated calculations as opposed to the merits of each of them.
§ LORD DRUMALBYN
My Lords, this is exactly what the Ministry of Fuel and Power, now incorporated within the Department of Trade and Industry, exists to do. It has access to all manner of advice. The question is whether or not that form of advice should be formalised in an advisory council.
§ LORD KENNET
My Lords, I am sorry to interrupt the noble Lord, but is not the point that some independent commissions are expected by people to analyse and synthesise the situation publicly, and to publish reports? Ministries are not expected to do that. Historically, the two kinds of bodies live up to public expectations. This would be the advantage of a Commission as opposed to a Whitehall Ministry.
§ LORD DRUMALBYN
My Lords, I propose to come back to this at the end of my speech because I believe that our thinking will emerge from what I have to say. We have seen in the 1950s and 1960s how rapidly the forces of the market can alter the energy scene and re-establish constantly a new balance between supply and demand with a quite different pattern of use of fuel. As my noble friend has said, between 1950 and 1971 coal consumption fell from 201 million tons to less than 140 million tons; whereas oil consumption, in terms of coal equivalent, rose from 22 million to 147 million tons and natural gas from zero to 26 million tons. No matter what Governments may or may not do, we dare not assume that market forces, combined with research and exploration, will not produce far-reaching changes in supply and demand in the future, as they have done in the past two decades. That is not to diminish, or to deny in any way, the responsibilities of Government in the field of employment and the balance of payments as well as other such social and economic factors that the movements of the market may not fully acknowledge.
Let me take the example of coal. The Government took the view that a rapid 715 rate of run-down, which present relative costs of production and cost in use in comparison with other fuels could have provoked, would be quite unacceptable because of the social and regional consequences that it would entail. Nor would it be prudent to assume that the relative costs would remain the same for very long; the future price and supply of other fuels are bound to be uncertain. When I say that, one has only to consider estimates of the cost of energy produced by nuclear fuel and the outcome when it comes about. One can expect, and indeed one has come to expect—although I hope we shall curtail it to some extent—a steady rise in cost from year to year. It is therefore prudent and sensible to maintain a somewhat larger coal capacity than short-term economic considerations alone might indicate, provided that the cost of doing so is not exorbitant. Your Lordships will have the opportunity to consider the proposals in the Coal Industry Bill, to which a First Reading has already been given in this House.
The aim for coal must be to re-establish the viability of the National Coal Board. The rate of run-down during the period covered by the Bill will largely depend on how far the industry succeeds in improving productivity and keeping down the cost of production in relation to other fuels. The rate of reduction over the six years from 1964 to 1971 averaged 33,000 in manpower and nearly 8 million tons a year. Since then, the rate of rundown has been lower. Reference has been made to the use of coal for generating electricity. Coal-fuel plant still accounts for 70 per cent. of the C.E.G.B.'s total capacity and 66 per cent. of the units supplied in 1971–72. I got the impression that some of your Lordships thought that the coal-fired plant accounted for much less than this nowadays. The amount of oil-fired and nuclear capacity under construction will reduce the percentage of generation from coal, but I should like to make clear, in response to one thing that was said, that no consents to conversion from coal to oil have been given since 1970. The only outstanding applications are two, one for Padiham, (224 megawatts) and the other for York (38 megawatts) both to oil and both applications were made on clean 716 air grounds. After allowing for further conversions the proportion of coal fuel capacity is expected to be 62 per cent., sufficient to burn all coal likely to be produced at acceptable cost. The C.E.G.B. has said it could take up to 75 million tons of coal a year, if the price was right.
In nuclear power we still have the largest installed operational capacity in Europe. In 1971–72 it accounted for about 10 per cent. of the units of electricity supplied by the C.E.G.B. This was provided by the first generation Magnox stations. Of the five advanced gas-cooled reactor stations under construction the first should be on power next year. Although all new technology has involved uncertainties I agree with the noble Lord, Lord Hinton of Bankside, that the nuclear role in the supply of energy can be expected to increase. Last August the Government announced that the installation of nuclear plant would be intensified, so far as technological progress, environmental constraints, industrial capability and general plant requirement permit. In the long term, the Government see the fast breeder reactors as the main element of our nuclear generating capability and no country is more advanced than the United Kingdom in the development of this very promising system. But we shall continue to rely on thermal reactors until well into the 1980s, and they will make a significant contribution beyond that. The prototype fast reactor at Dounreay is due to be commissioned later this year ready for the first full-scale order to be placed in the latter part of the 1970s. The August 1972 statement announced an additional £15 million programme on the fast reactor which has started, and a study programme on four thermal reactor types—the steam generating heavy water reactor, the advanced gas-cooled reactor, the high temperature reactor based on DRAGON to which my noble friend Lord Bess-borough referred, and the light water reactor. These studies are making good progress. The objective of the studies is to assist the Government when the time comes to make a choice for future orders. All this work should next year reach the stage where firm orders can be placed. The timing of further orders depends on the needs of the electricity generating boards.
§ LORD AVEBURY
My Lords, we understand that a Select Committee in another place has asked for publication of the Vinter Report on future reactor choice. Can the noble Lord say anything about the Government's reaction and whether we shall have the advice of Mr. Vinter to place before the House and before another place?
§ LORD DRUMALBYN
I am not in a position to say that, my Lords. I do know that the Minister concerned, Mr. Boardman, has offered to appear before the Committee in person. The August statement also announced the Government's intention to encourage the formation of a single strong design and construction unit. It is generally accepted that there is not at present sufficient business for two existing companies, and the Government take the view that in the longer term the consortium structure on which both companies are based will not provide the strength and unity needed to meet the Generating Board's requirements.
My Lords, since August last the Secretary of State and the Minister for Industry have had very wide-ranging exploratory discussions with all the interests concerned including, I may say, the T.U.C. and staff associations, and a statement will be made as soon as possible. As to oil and gas, these have been so fully explored that I should like to study what has been said, as I know the Department will also do. But there are one or two things I would say. First of all, successive Governments have been criticised for failing to ensure that the nation obtains the maximum benefit from North Sea oil and gas which is of course a national asset. This is not so. All aspects of the North Sea, including the amount of Government take, are under review at present and we have already made it clear that a fair return to the nation as a whole is one of our main criteria. If I may make one general comment on the references which have been made to taxation policy at that point, I am sure that no one will expect me to say anything about this at this time of the year.
My Lords, I would just say with regard to the future of production that, whatever production proves to be in the North Sea, it will certainly be a most welcome addition to our energy resources and 718 an equally welcome relief to our balance of payments. It will also enable us to become not only an oil producing country but one which specialises in oil technology. Perhaps I might refer at this point to what my noble friend Lord Lauderdale said about IMEG. Of course my noble friend fires off so many questions and covers such an enormous amount of ground that I know he does not really expect anybody to engage in hot pursuit of him in these matters. The Government anticipated one very important IMEG recommendation, that it should get more information about goods and equipment purchased by the North Sea producers, and it has set up a system of periodic reports on actual and prospective purchase. The Government know very well the urgency of taking action on all IMEG's recommendations and they have already set up the offshore supply office whose responsibility it will be to coordinate action, but I say to my noble friends that they must be given time to decide what is the most effective action to take.
My noble friend also asked about the status of the Shelf under the Treaty and I can only confirm what I told him on the last occasion. That still remains very firmly the position of Her Majesty's Government.
§ THE EARL OF LAUDERDALE
My Lords, since there is a possibility of this Shelf question coming before the European Court, no doubt the Government will watch those proceedings with great care and if necessary be prepared to take up a protective stance before the court should it arise.
§ LORD DRUMALBYN
My Lords, I have no doubt that if the Government feel that their interests are involved they will be suitably represented before the court.
My Lords, my noble friend Lord Bess-borough made what I thought was a very interesting speech about the consideration that is being given to energy problems in the E.E.C. He has long been making a special study of all the issues and, as he said, he is now himself a member of the European Parliament. For the reasons I have given, I do not entirely share his view that there will necessarily be a major world crisis by 1980. There is undoubtedly growing pressure on world resources and 719 we may be facing a difficult period in the next ten to twenty years until nuclear power is more widely available and other new energy extraction and conversion technologies are more fully established. But that there can and should be some acceptable co-ordination among the nine I agree.
So far the main objectives of the Commission—and as the debate refers particularly to the E.E.C. I ought to say this—in the oil sector are secure and sufficient oil supplies and progress towards a single oil market in the Community. The Commission is seeking co-operation between oil importing countries and also seeking links with producer States; seeking research in energy resources and the protection of the environment; information by member states on oil imports, investment programmes, exploration; development of the Continental Shelf; common stock piling policies; Community help for oil projects, furthering the security of supplies; price and fiscal harmonisation and common import policies. There is by no means inaction. I recall that one noble Lord, I think the noble Lord, Lord Kennet, himself, gave the impression that the Commission had not done very much so far.
§ LORD DRUMALBYN
My Lords, some specific measures have been achieved and others put forward for discussion which are aimed at securing these main objectives. Perhaps I should mention one or two. Two regulations have already been agreed and will be binding on the United Kingdom from the middle of this year. One is on imports and requires periodic reports on actual imports of crude oil and natural gas and en programmes for a year ahead. The other is on investments on the oil and gas side and requires reports on plans for the next three years in refining, transport, storage and distribution. There is also a 1968 directive to which I think the noble Lord, Lord Kennet, referred which requires stocks of the three main refined products to be maintained at a level of 65 days' domestic consumption.
A new directive last year extended the cover to ninety days, and may I say in 720 passing that the United Kingdom is keeping its stock at that level. The United Kingdom has supported this extension and details are under discussion. There is a draft directive which would lay down maximum level of duties for heavy and light fuel oil, and my noble friend Lord Lauderdale referred to this. This harmonisation of mineral oil duties is still under discussion. A proposal to give fiscal and financial advantages to undertakings of outstanding importance to the Community in the hydrocarbons field is also under discussion, as is the hurmonisition of regulations concerning safety measures for the construction and use of pipe-lines. I think this is a point that was referred to obliquely by the noble Lord, Lord Kennet.
Finally, a draft directive has been prepared calling on member States to take measures to co-ordinate the use of oil in times of supply difficulties together with a draft regulation allowing some measure of control in the interests of the Community, especially in times of crisis. Obviously this regulation will need careful consideration, and it has been having careful consideration on the Continent.
I was asked about the general position of the E.E.C. on oil and on energy as a whole. Perhaps I might remind your Lordships of what the Summit final Communiqué actually said. It said:The heads of State and heads of Government invite Community institutions to formulate as soon as possible an energy policy guaranteeing certain and lasting supplies under satisfactory economic conditions.The present Government have not so far specifically considered any proposal for an energy commission in Europe. As to the Club of Rome document, we are well aware of this document and we are studying it. It is well known that the Club of Rome analysis has both its critics as well as its supporters among the experts.
§ LORD KENNET
My Lords, the House will be profoundly cheered to know that it is being studied. I did ask whether any report was expected, whether publicly to the world and Parliament, or privately to the Secretary of State.
§ LORD DRUMALBYN
My Lords, I do not think we have reached the stage yet where it is possible to say whether there will be such a report or not.
721 I think this would be an appropriate moment at which to say something about the Government's action on the world situation as a whole. The Government really approach this matter in three ways. First, we study world trends and the means of predicting them. This should give us the necessary basic information in an area where reliable data on some key aspects is hard to come by. Secondly, we believe it is important that there should be increased international consultation about future energy policy, and this is being pursued on a number of fronts. For example, the Prime Minister exchanged views with President Nixon when he was visiting the United States recently; and since the E.E.C. Summit last October, work has been set in hand on concerting European Community policy in this area. Finally, as is evidenced by last year's policy statements on nuclear energy and coal, the Government are determined to make the best possible use of the United Kingdom's indigenous energy resources. But there are obvious limits to the influence that any single country can exert upon the world situation as a whole.
My noble friend Lord Orr-Ewing is not in his place and, as time is getting on, perhaps I might write to him. Lord Orr-Ewing asked about whether the British Gas Corporation had put in a bid for acreage in the Norwegian sector. I would only say that the British Gas Corporation could bid for blocks overseas with the permission of the Secretary of State, but no such application has yet been made.
I should like to say one or two words in order to try to crystallise the Government's attitude to the whole of this matter. Our general position remains that the petroleum resources of the whole of the United Kingdom Continental Shelf will continue to be treated as a national asset for their exploration and exploitation. I again give that assurance to my noble friend. Let me summarise the way in which energy requirements are planned. I do not see the noble Lord, Lord Avebury, in his place. However, in the nationalised sector the Gas Council, the Coal Board and the Electricity Board put forward their programmes for capital development and expenditure for the next year and the ensuing four years for the approval of the Government. Each bases its programme on commercial considerations 722 and its forecast of future demand. It is the duty of the Government to evaluate this in the light of their own responsibilities and knowledge. The total capital investment is shown on the Public Expenditure Survey. The December survey indicates estimated capital expenditure for 1973–74 at £809.3 million for these three groups of gas, electricity and coal. This is by any standards a sizeable chunk of public expenditure; and it is due to rise to £874 million, at 1972 survey prices, in 1976–77. Expenditure in the earlier years of the programme largely represents decisions taken two, three or more years ago, when approval was given to starting construction of a major plant, and also in part on entirely new investment.
My Lords, the questions really are these, are they not? How far should the public sector involve itself in expenditure on exploration and exploitation of oil and gas? My noble friend Lord Orr-Ewing went into those points, and, as I have said, they are all being fully considered at the present time. On what terms should the Government license others to explore and produce? To what extent should they seek to conserve oil resources? How fast should they be developed? These are questions that are being carefully examined at the present time, in the knowledge that decisions now do not result in any supplies of oil for five, six or seven years. The decisions are taken by the same people as take the final decisions on the programme of capital expenditure for the nationalised industries. They are taken to meet constantly changing conditions. It follows that as much flexibility as possible to allow for changes in circumstances is needed.
These uncertainties provoke the question of whether any sort of planning is possible in these circumstances. A plan in the sense of a decision to have some particular pattern of energy supply at a particular future date certainly has great disadvantages. The situation can change so rapidly that the adoption of such fixed positions can incur heavy penalties if forecasts prove inaccurate. The underlying objectives are, however, clear. We must seek at an early stage to meet energy requirements fully and securely and at the lowest total cost. We must do so without short-term upheavals in employment, or avoidable damage to the 723 environment. The means of achieving these ends, however, do not necessarily remain constant. This is why we keep both the international and the domestic prospects under constant review, enabling us to take the right decisions at the right time, as we are now about to invite Parliament to do in the case of coal. In this sense of a systematic attempt to identify forthcoming difficulties and act accordingly, energy planning is not only desirable but essential. As the noble Lord, Lord Hinton, said, it must be alive. It is alive. It is being done. It is a continuous process, not a single effort at a given point of time. It is flexible and constantly under revision; it is unbiased, and we hope it is courageous. But we shall certainly bear in mind what has been said in the course of this debate, and also what has been said about the possibility of publishing further information in the form of a White or Green Paper, although I can of course give no promise about that.
May I, in conclusion, my Lords, as I see the noble Viscount, Lord Hanworth, in his place, say a word on the environmental side? The noble Lord talked about the insulation of housing. The Government is certainly concerned with the possibilities of improving the efficiency with which energy is generated, distributed and used. In practice, the energy industries themselves play the major part by developing improved equipment and procedures. This is in their commercial interest, but of course, the Government, too, have a role and in this connection some of my noble friends may have noticed that our consultative document on the proposed building Bill mentions the conservation of fuel as a new factor which it may be necesary to take up again in framing new Building Regulations. The new regulations and the revised 1965 regulations are in course of preparation. If they are presented as we contemplate at the present moment, there should be a saving of about 20 per cent. on fuel for heating compared with houses built to the present minimum, at an additional insulating cost of about £50 for an average semidetached house. I hope I have dealt with as many questions as possible in the time given to me. I would say how indebted we are to the noble Lord, Lord 724 Tanlaw, for initiating this debate and, indeed, to all who have spoken in it, for the advice they have given, as I have said, in a non-partisan way, which makes it all the easier to listen to and all the better to study.
§ 7.51 p.m.
§ LORD TANLAW
My Lords, it only remains for me to thank your Lordships very much for your support for this Motion, and for coming here to speak, because I imagine some may have had some difficulty with transport to-day. I should like to make two or three very short comments, the first of which is that I think that in the course of the debate there may have been some difficulty in distinguishing between an energy plan and an energy policy. It was my understanding when I used the word "policy" in this Motion that these were the objectives—ideals if you like—behind a plan, but plans can go right or wrong. They must be based on some form of principle or objective, and this is what I was trying to seek. I was also most pleased to hear the general support given to the idea of an Energy Commission. This has been mentioned before; it is not original. I should like to think that the contributions made this afternoon have taken us one step nearer to the reality of such a commission.
To take up the point that the noble Lord, Lord Drumalbyn, made about the ail-Party approach to this Motion, it was my intention to make an all-Party approach from the start in introducing the Motion; and this point was taken up from all sides of the House. An all-Party approach to an Energy Commission is the only hope of making any such commission work.
The noble Lord did not convince me very clearly on the other two points he made about a commission. For instance, the permanency of the commission is essential, for the same reason that the all-Party approach is essential. There are changes in Civil Service personnel but whether the noble Lord is aware of that I do not know. This was one complaint I had from the oil industry while preparing the Motion. He also omitted to mention the importance I attached to the integration of energy as a whole, both in a commission and in Government thinking. I am sure what the noble Lord 725 says is right about having an energy policy, but I cannot see, unless there is a closer integration of the fuel policies under one roof, or at least under one policy-making body—
§ LORD DRUMALBYN
This was exactly my point, that it is the whole function of the Department of Trade and Industry to do this and keep it under continuous review by co-ordinating all the investment proposals. It is able to do this.
§ LORD TANLAW
My Lords, yes, I agree, but I think the point made by the noble Earl, Lord Lauderdale, disproves this, for how on earth can a hydroelectricity board start advising people on natural gas power generation? It seems to me that here is a case in point where this co-operation is perhaps not operating, or operating too well—I do not know.
I would mention one or two points made by the noble Lord, Lord Kennet, in a speech which added a great deal to the debate. He used his knowledge of the subject to great effect and introduced some useful and original ideas. One of the more interesting of these ideas referred to mineral rights under the ocean floor, and the noble Lord, Lord Drumalbyn, helped clarify this suggestion. The noble Earl, Lord Ferrers, made the interesting point that energy costs affect everything. This is a phrase that I would have liked to use in my introduction. This is true, and it emerged in the course of the debate.
My Lords, it was excellent to hear in the speech of the noble Earl, Lord Bessborough, a voice from Europe on this subject. I was most grateful to have his contribution and although apparently we disagree in our approach towards the formation of an E.E.C. policy, I do not think that in fact we do. I think we cannot make a real contribution towards the Community energy policy until we ourselves have come to grips with the very same problems that they are facing at this moment. I disagree with the noble Earl, Lord Lauderdale, but agree with the noble Earl, Lord Bessborough, in the emphasis to be placed on the necessity of the Community speaking with one voice when it comes to negotiating with the 726 OPEC countries. I also wish to endorse what the noble Lord, Lord Drumalbyn, said to the noble Viscount, Lord Hanworth. There was enough material in his speech, which was taken up by the noble Lord, Lord Orr-Ewing, to be the basis for another debate on another day. I feel we shall hear more of this question of domestic insulation.
My Lords, the noble Lord, Lord Hinton of Bankside, made a very deep contribution to our discussion this afternoon. I was particularly impressed with his practical suggestion of a Green Paper as a start towards what I call a real energy policy. Then, my Lords, I was most interested in hearing the noble Lord, Lord Gisborough. I do not know whether he subscribes to the Christian Science Monitor, but I imagine he got most of the material from there in covering the subject of the fuel shortages in the mid-West. I did not bring it into my own speech because I thought it too dramatic, but it is an important issue in America, the question of the shut-down of schools and departments in the mid-West through lack of adequate heating.
The noble Lord, Lord Energlyn, made a highly technical contribution to what was after all a technical debate. One of the interesting points of a debate in your Lordships' House, is that your Lordships can draw on expertise from all sections, to focus on the Motion. The noble Lord used his expertise in the form of a short lecture to educate us a little more on the variations of the approach to the breakdown of hydrocarbons. I was especially pleased to learn of his suggestions on a committee of inquiry.
I think that we have had a very good debate on this subject. I can say no more now, except that I beg leave to withdraw my Motion.
§ Motion for Papers, by leave, withdrawn.