§ 3.50 p.m.
§ The MINISTER of STATE, DEPARTMENT of ENERGY (Lord Balogh)My Lords, with your permission, may I repeat a Statement that has been made in another place by my right honourable friend the Secretary of State for Energy.
" About a year ago, Burmah Oil Company approached the Government and the Bank of England about its difficulties in meeting the technical requirements of certain loan agreements, notably those covering its large borrowings in dollars from a group of North American Banks. As the House will know, it was agreed that the Bank should guarantee the North American borrowings for a period of 12 months and should also provide a further measure of support by way of a standby facility. However, Burmah has not been able to proceed as rapidly as expected with the sale of its United States assets.
" The Government have therefore reviewed the situation with the Company, including its cash needs, in consultation with the Bank of England and Peat, Marwick and Mitchell. It has been decided that the dollar borrowing 621 guarantee should be renewed for a further nine months so as to give further time for the Company to realise its United States assets at a satisfactory price. In addition, the Government have offered to purchase the whole or a substantial part of Burmah's North Sea Oil assets at a fair price to he negotiated on an arm's length basis. The Board of Burmah are ready to enter into immediate discussions with the Government to explore all possibilities, subject to it being satisfied that the interests of the Company are fully safeguarded. These discussions will necessarily take some time and both parties are hopeful that they will be successfully concluded. Both parties are determined that the negotiations shall not hinder the continuing development of the North Sea."
My Lords, that is the end of the Statement.
Lord CAMPBELL of CROYMy Lords, we are grateful to the noble Lord for repeating the Statement which has been made in another place. Is the noble Lord aware that the way in which support for Burmah was arranged a year ago has caused so far thousands of small investors to be deprived of over half the value of their savings? Will the noble Lord confirm that the loss to the stockholders in value as a whole is to date about £260 million since the arbitrary purchase price of 230p was selected, related to a price last January? Will this be a priority consideration in the Government's mind during the discussions which are now to take place?
§ Lord AVEBURYMy Lords, I have two questions arising out of this Statement which I thank the noble Lord for repeating. Considering the forecasts which have been made of a strong recovery in the United States' economy in 1976 and the likelihood that the value of the Burmah Company's assets in the United States will rise accordingly, will the Government be prepared to consider any further extension of the guarantee beyond the period of nine months if at the end of that time it appears likely that an even higher price can be achieved with benefit to both the shareholders of the company and our balance of payments? Secondly, may I ask the noble Lord what exactly is meant by "an arm's length basis" for the 622 purchase of Burmah's North Sea oil assets?—bearing in mind that the shareholders did not get a particularly good bargain, as the noble Lord has just said, when they were forced to dispose of their holding in BP. May I ask the noble Lord to consider whether or not it would be appropriate in the circumstances to have an independent valuation made of Burmah's North Sea assets on which the purchase price could be determined.
§ Lord BALOGHMy Lords, "an arm's length basis" means a sale from a willing seller to a willing buyer. We are in negotiation with the Burmah Company and, as is said in the Statement which I have repeated, a fair price is to be negotiated on an arm's length basis. So far as the guarantee is concerned, the company is satisfied with this guarantee and I will leave it at that. So far as BP shares are concerned, we cannot accept that the purchase of BP shares took place at that time at other than market or above market prices. This is a matter on which Ministers have made Statements a number of times and I would refer the noble Lord to them.
§ The Earl of LAUDERDALEMy Lords, could the noble Lord go a little further and explain to us just what "arm's length" means in this connection? Can he assure us that the fair price to be negotiated at arm's length will not be affected in any way by the prospect or spectre of participation?
§ Lord BALOGHMy Lords, that is a completely different question. As I have said, this is an offer to acquire at a fair price.
§ The Earl of LAUDERDALEMy Lords, I thank the noble Lord for his reply. If the sale is at arms' length, if there is to be negotiation between a willing buyer and a willing seller and if it is the case that participation is not wholly popular in the industry and has been accepted by Burmah only with various reservations, surely that is a compromising factor which compromises the arm's length position.
§ Lord BALOGHMy Lords, it should not compromise the arm's length position.
§ Lord CARRINGTONMy Lords, in the circumstances can Burmah be anything else but a willing seller?
§ Lord BALOGHMy Lords, certainly it could be. We have guaranteed it and there is a—
§ Lord CARRINGTONMy Lords, that is the point.
§ Lord BALOGHMy Lords, if that is the point, then Burmah is a willing seller.
§ Lord HARMAR-NICHOLLSMy Lords, is the noble Lord aware that the extension of the guarantee will be generally welcomed? At the end of the day it allows British assets to obtain their best price and not to be in a forced sale situation as regards any potential purchaser. May I ask the noble Lord whether the undertaking to sell the North Sea assets, either on an arm's length or any other basis, was suggested by Burmah oil, or whether it was a condition attached by the Government? If it was a condition in order to do a sensible thing, it would make many of us very worried,
§ Lord BALOGHMy Lords, the Burmah Company is under no pressure.
§ Lord WYNNE-JONESMy Lords, I have an interest to declare, because I am a shareholder in Burmah Oil. May I ask my noble friend whether he is aware that many of us feel that the country's interests are paramount?
§ Lord STRATHCONA and MOUNT ROYALMy Lords, could the noble Lord confirm a point which was raised by my noble friend? The Statement mentions an offer by the Government to purchase Burmah's assets. What will happen if the Government and the company are unable to agree the terms of this purchase? If I correctly understood the noble Lord, he said that this is an arm's length negotiation which presupposes that there is an option not to accept.
§ Lord BALOGHMy Lords, certainly there is an option not to accept.
§ Lord HARMAR-NICHOLLSMy Lords, in his answer to me the noble Lord said that there would be no pressure from the Government, but he did not answer my question about whether the offer to sell the North Sea assets was a voluntary offer by Burmah Oil or whether the suggestion was put to them by the Government.
§ Lord BALOGHMy Lords, we have offered to negotiate with Burmah for the sale of some or all of their North Sea assets.