HL Deb 03 November 1976 vol 376 cc1254-60

2.45 p.m.

The Earl of LAUDERDALE

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether they will now comment on the reports, mentioned during Questions on 20th October, of pressures allegedly brought to bear on oil companies applying for new licences under the Fifth Round to agree to BNOC participation in licences already granted before BNOC came into being.

Lord STRABOLGI

My Lords, suggestions that undue pressure has been applied to companies during the participation negotiations are quite unfounded. The noble Earl has also made reference to a letter sent to certain of the companies which have applied for Fifth Round licences. I should like to assure him that this letter was simply an invitation to these companies to indicate their attitude to the principle of participation. Noble Lords will recall that one of the factors which the Secretary of State for Energy has announced that he will bear particularly in mind when examining applications, is the degree to which the applicant has demonstrated his agreement to the conceding to the State of a majority share in any discovery made under existing licences. Her Majesty's Government have already sufficient information, in respect of many of the applicants, to assess this. It was necessary, however, that those companies about which not enough was known should be given an opportunity to indicate their acceptance of this important element of Her Majesty's Government's policy for the development of the United Kingdom's offshore oil resources.

The Earl of LAUDERDALE

My Lords, in thanking the noble Lord for that very smooth reply, may I ask him whether he considers that a 10-day ultimatum can properly be called an invitation?

Lord STRABOLGI

My Lords, I am sorry if the noble Earl thought my reply was smooth. It was intended to give him as much information as possible. This is quite a straightforward matter. The different factors were spelled out in the London Gazette and the Edinburgh Gazette on 20th August. The seventh factor (g) made it clear that one of the points to be taken into account was State participation in existing contracts. Certain of the companies did not comment on this in their applications and so a letter was sent on 12th October, asking for their views.

The Earl of LAUDERDALE

My Lords, I am sure the noble Lord will appreciate that I appreciate his efforts to give a helpful reply. I do not doubt for a moment that that is his purpose. But would he not agree that this letter, which refers to a "fair" price instead of a "market" price as hitherto in such discussions, does break new ground and therefore goes beyond the published general conditions which were made known some months back? In view of that, would the noble Lord consider asking his right honourable friend to publish his letter so that any doubts may be set at rest?

Lord STRABOLGI

My Lords, participation negotiations are being conducted on a basis that will leave the companies financially no worse off. BNOC will, of course, pay the market price for the oil taken under participation agreements in the form now being negotiated. Perhaps the noble Earl will contain himself for a moment because I am just going to come on to his second point. With regard to the letter of 12th October, I have it here on the file. If the noble Earl would like me to send him a copy I shall be happy to do so. I will also make a copy available in your Lordships' Library and publish it in Hansard.—[See below.]

Lord SLATER

My Lords, is my noble friend aware that, in view of the Question and supplementary question put by the noble Earl, Lord Lauderdale, one gets the impression that this is where vested interests come into the picture and one really feel, in view of the questions asked by the noble Earl, that he must have tremendous interests which are vested inside—

Several noble Lords: Oh! Oh!

Lord SLATER

—inside this particular issue on which he has questioned the Minister?

Lord CARRINGTON

My Lords, I really must ask the Leader of the House whether it is proper to make allegations of that kind.

The LORD PRIVY SEAL (Lord Peart)

My Lords, I hope that my noble friend Lord Slater will withdraw his remark.

Lord SLATER

My Lords, I do not see why my noble friend the Leader of the House and the Leader of the Opposition are taking exception to the question which I have asked. Is it not the custom of this House for individuals, who have vested interests in certain organisations and so on to declare those interests? As I understand the position, there is nothing to stop any Member from asking a direct question about whether the individual concerned has a vested interest.

Several noble Lords: Withdraw!

The Earl of LAUDERDALE

My Lords, may I set your Lordships' minds at rest and declare that I have altogether 200 shares in Shell, and those are the only shares I have in any oil company of any kind whatsoever, or have ever had at any time.

Lord PEART

My Lords, I hope that my noble friend will really withdraw graciously.

Lord SLATER

My Lords, is my noble friend the Leader of the House—

Several noble Lords: Withdraw!

Lord SLATER

Shut your mouths! Is my noble friend the Leader of the House aware that I have been in this type of life too long to be drowned by people on the other side. But I withdraw the statement that I made to which they take exception.

The Earl of LAUDERDALE

My Lords, can we get back? May I thank the noble Lord, Lord Strabolgi, for offering to publish this letter? If he would publish it in Hansard that would be helpful, because it would clear up the question whether it refers to a fair price, as I understood, or whether it refers to a market price, which the noble Lord said is the Government's position in this matter.

Lord ORR-EWING

My Lords, will the noble Lord consider whether it is reasonable, as this letter suggests, on anything of such importance as retrospective participation on existing licences, that they should have an answer to this letter within 10 days? I think it is a little unreasonable on an enormous business venture of this kind, where millions of pounds and many jobs are at risk, and it is pressing the bargaining power of the Government a little far. Would the noble Lord also confirm that if it ever was said that a resident's licence should be withdrawn, that was improper and will never be said on any future occasion?

Lord STRABOLGI

My Lords, with regard to the first part of the noble Lord's question, this was a question of principle that was being asked, and it was decided by my right honourable friend that the time which the noble Lord has mentioned was sufficient. With regard to the so-called threats to withdraw—I cannot remember whether it was passports, residents' permits or something like that—there is absolutely no truth in that. It is absurd.

Baroness ELLES

My Lords, can the Minister inform the House whether he is satisfied that the participation agreements are not in contravention of the monopolies provision of the EEC Treaty? Also, will he kindly inform the House whether any consultation has taken place with the European Commission on this monopoly activity of BNOC?

Lord STRABOLGI

My Lords, I think that that is quite a different question.

Lord BLYTON

My Lords, is the Minister aware that it is a poor company which applies for a licence and does not know the basic principle of the Government, that they want 51 per cent participation in any licences granted for this oil which belongs to this country, instead of its being handed over to private enterprise to make profits? If some day we have to nationalise it, it will cost millions of pounds in compensation.

Lord STRABOLGI

My Lords, there is a great deal in what my noble friend has said. The White Paper stated the Government's belief that majority State participation in existing licences provides the best means for the nation to share fully in the benefits of North Sea oil.

The Earl of LAUDERDALE

My Lords, will the noble Lord answer one other point? He has been good enough to deny altogether the story, which I brought to this House in good faith, about a threat to withdraw a resident's permit. He said that that kind of thing is absolute rubbish, and I am very glad to hear that it is. But is he aware that the noble Lord, Lord Balogh, who unhappily is not here—he is a great friend of mine and I wish that he were here—told us in the Committee stage of the Petroleum and Submarine Pipelines Act that the Government would use their strongest cards and full bargaining power, and on another occasion said, "We have other cards up our sleeves", and there is reason to expect the Government to use all kinds of pressure?

Lord STRABOLGI

My Lords, all I can say is that Her Majesty's Government do not conduct their negotiations like that.

Lord PARGITER

My Lords, can my noble friend say whether or not—

Lord PEART

My Lords, I think that we should proceed.

Lord PARGITER

—there would be quite so much worry about a fair or a market price, if the fair price happened to be higher than the market price?

Following is the letter referred to:

DEPARTMENT OF ENERGY

12th October 1976

Dear Sir,

Your company is amongst those which have recently applied for an offshore petroleum production licence.

Fifth Round licences will of course be awarded on the basis that BNOC is a 51 per cent. partner from the outset, but the Gazette Notice inviting applications set down that one of the factors which the Secretary of State would bear in mind when examining applications would be the degree to which:

  1. (a) the applicant; or
  2. (b) any existing licensee in whom he has a controlling interest; or
  3. (c) any existing licensee who has a controlling interest in the applicant;
has demonstrated his agreement to the conceding to the State a majority share in any discovery made under existing licences.

The Government is already in discussion with companies with existing commercial oil fields and a number of other companies have informed us that they accept the principle of participation in the event of a discovery being declared commercial. We now seek an indication of the attitude towards participation of those companies with interests in existing licences whose views are not already known, or are known in respect of part of their licence interests only.

Our intention is to seek an indication of your acceptance of the principle of majority State participation in the event of a commercial discovery in any of the licence interests presently held by your company. Where no commercial development is in prospect it is not our intention to initiate a new round of negotiations at this stage, but your acceptance would mean that when any find in which your company has an interest through an existing licence is declared commercial, your company would be prepared directly to enter into negotiations with the Department for majority State participation in that interest. While the terms of participation would be negotiable in each case and could be expected to vary according to circumstance, you will no doubt know that participation agreements so far concluded provide for BNOC to have an effective voice in the decision making processes of the field, and a right at its option to take up to 51 per cent. of the petroleum produced but on a basis which secures to the company a fair price for any taken up.

To confirm that our records are complete, if categories (b) or (c) above apply to your company I should be grateful if you would notify me of names and addresses within the next few days.

When replying to this letter, would you please write on behalf of any company in category (b), and ask any company in category (c) to write to me direct, in both cases covering all the interests presently held by the company concerned.

In order that your application may be given full consideration within the time available I should be grateful if I could have your reply within ten days of the date of this letter.

Yours faithfully

(Signed) Robert Priddle.