HL Deb 11 November 1975 vol 365 cc1772-7

[Nos. 17 and 18]

Clause 48, page 45, line 13, at end insert— ("(d) permits the Secretary of State to exercise or not to exercise any power or authority or to withhold any consent, approval or authorisation or to make provisions terms or conditions pursuant to this Act or a licence for the time being in force by virtue of the Petroleum (Production) Act 1934 with a view to securing participation by the Government of the United Kingdom, or by the Corporation or any other body on behalf of the Government, in activities connected with petroleum beneath controlled waters.").

The Commons disagreed to this Amendment for the following Reason:

Because the Secretary of State's discretion in the use of his powers under licences should not be unduly limited.


My Lords, I beg to move that this House doth not insist on their Amendment No. 17 to which the Commons have disagreed for the Reason numbered 18. I must recognise that noble Lords have felt strongly about this Amendment. They dislike participation, but I cannot help thinking that this Amendment was really attacking it by the back door. It is true that the Bill and the licence terms (before amendment by the Bill as well as after) bestow wide powers on the Secretary of State which, as the Secretary of State himself pointed out, could be used in an unreasonable manner. But they are not being so used, and Clause 19(6) of the Bill as first printed for this House, as well as my assurances and those of my colleagues, are evidence of our good faith in this. On the other hand, and noble Lords opposite must surely recognise this, to deny the Secretary of State the right to use any of his powers of consent to promote a policy which is in the national interest, would indeed be to send him naked to the negotiating table—if I may use a well-worn cliché.

The negotiations are voluntary (if not, they would have been completed long before now), but that does not preclude hard bargaining—on both sides. We have no objection to that nor, I believe, have the companies we are negotiating with. They, too, have strong bargaining counters. Precisely because the negotiations are voluntary, it is unrealistic to expect the Government to accept that their own position should be eroded in the way the Amendment would provide. I must ask noble Lords not to insist on it.

Moved, That the House doth not insist on Amendment No. 17 to which the Commons have disagreed for the Reason numbered 18.—(Lord Balogh.)


My Lords, this was one of the Amendments which we thought the Government would accept. They have said that their policy of 51 per cent. participation is to be carried out by voluntary negotiation with the oil companies. Therefore this Amendment was proposed to the Bill as an addition which would have made clear in the Bill what the Government had stated was their intention; namely, that they would not use the sanctions which this Bill gives the Government to press companies into 51 per cent. participation. On various occasions the Government have said that the negotiation is to be voluntary, but there has been little evidence of that so far. We know that negotiations are being carried on with individual companies confidentially, but I have asked the Government before and I ask the noble Lord again—and this is the third occasion—whether there have been any instances where permission has been sought for re-arrangement of licences and where the permission has been granted and where the company has not at the same time had to agree to participation in principle.

Our reading of the Press reports is that so far in every such case the permission has only been given with the company at the same time announcing its agreement in principle to participation, and that seems to be evidence that pressure in those cases had been put upon them before they were granted their request. The policy of 51 per cent. participation more than anything else is causing a slow-down beyond the immediate programmes to which companies are already committed. While the immediate programmes are not being slowed down, the succeeding stages are.

The Prime Minister was reported in the Press as saying last night at the Lord Mayor's Banquet: By 1980, we expect to be producing as much oil as we shall be consuming that year. So his statement is that we should reach self-sufficiency by 1980. That is certainly what we were expecting two years ago, but if the present situation continues I do not think that the Prime Minister can count on that happening in 1980, because we know of the postponements and the shelving of plans beyond immediate programmes. Observers are now suggesting that it will be 1981 or 1982. Certainly, the Prime Minister's assertion is open to challenge and none of us ought to be surprised if the official estimate for 1980 is revised in a few months' time.

Fifty-one per cent. participation is also causing uncertainty and second thoughts where orders for the building of platforms are concerned. The Secretary of State for Energy is rightly concerned about the lack of orders for platform building. Platforms are not to be confused with drilling rigs; platforms are the massive permanent structures in the fields, which have to be built fairly near to them. Each one can be worth £50 million to £100 million—together with the modules and equipment that go on them—to the country where it is produced. As I understand it, at the end of last week the Department of Energy made public that the Secretary of State had asked about 20 companies whether they could advance orders for platforms, and he had received negative answers. The companies had looked at the situation but found that they could not bring forward orders.

I entirely understand the concern felt by the Secretary of State for Energy, which is widely reported in the Press in Scotland where many of the fabrication yards are situated, because there is a large number of unemployed at some of them. Within two years, the Government have transformed the situation from one where yards were busy building platforms, to the present position, and yards are now being created, with a total Government commitment of about £30 million, with no order yet in sight. This situation of flagging platform building is a clear indicator of second thoughts and postponements of the plans to follow the present programmes for offshore activities. Some companies arc committed to large sums in their immediate programmes, but companies ought also to be proceeding with the plans for the next stages if. by 1980 and beyond, we are to get all the oil which the Government are expecting. Of course, they will not place orders for platforms until exploration and appraisal have shown where they are needed, and what kinds are suitable. Unless companies are encouraged to launch out again, they will not go ahead with these plans in the time which the Government have in mind.

My Lords, I know that in our last debate on this Bill the noble Lord, Lord Balogh, promised us that he would make some florid utterances at this stage, and no doubt he is saving them for what will probably be the last debate on this Bill. But I would say again to him that in less than two years his Government, through their policies, have changed the bustling competitive British platform building scene into stagnation.

7.41 p.m.


My Lords, surely, that is a little exaggerated. I have been told that, unlike the noble Lord, Lord Goodman, I should facilitate the passing of this Bill in the shortest possible time, because of the human needs of your Lordships after the previous gruelling treatment. The Government do not accept that uncertainty on their part about the contents of the Bill was one of the main reasons for the lower level of platform ordering. First, there is a growing experience and, as in the case of the Forties field, fortunately we have been wrong in our appraisal of the yield. This field is gushing forth far more quickly than we expected. In the Forties field, the drilling of wells has not caused an ebb in the other wells which exist, so that the amount of oil available is much higher than we thought. The same is true for Argyll.

I can assure the noble Lord, Lord Campbell of Croy, that those fields which are underdeveloped now will be quite sufficient to carry us into independence by 1980. We do not need to think in terms beyond that. Of course, we need a continuation of drilling, but I am sure that once the uncertainty caused by the absence of a law which gives firm assurance as to what will and will not happen has passed, the growing experience and appraisal of drilling which the noble Lord mentioned, greater detailed knowledge of the field structure and of seabed technology, will combine to make oil operators aware of the danger of defining their platform requirements before they know the extent of the oil.

On the question of assignments, the embargo was lifted last February. Since then some 14 companies, involving 40 licences, have applied for various assignment projects. They have conceded participation in principle, as have BP and certain other companies about whom I will not speak at the moment, because of problems of confidentiality which I am sure the noble Lord will understand. No field has been delayed because of lack of finance. A number of financial packages are currently being negotiated. and the announcements can be expected shortly. At the end of the year, well over £1,000 million will have been spent in the North Sea, which is slightly inconsistent with the view of the Opposition that the policy of the Government has scared off platform builders.

7.45 p.m.