HL Deb 23 July 1979 vol 401 cc1619-21

2.48 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 propose to modify the staged approvals procedure in regard to oilfield development plans on the United Kingdom Continental Shelf so that consent to develop is given for the lifetime of a field instead of a period equal to about a third of its life as under the last Administration.

The MINISTER of STATE, DEPARTMENT of EMPLOYMENT (The Earl of Gowrie)

My Lords, the Government have reviewed the system of staged approval of offshore oilfield developments, and while the particular circumstances of individual fields will be taken into account, we take the view that it strikes an appropriate balance between the licensees' need for a secure period of production to recover and to make a reasonable return on high levels of investment, and the inevitable pre-development and production uncertainties.

The Earl of LAUDERDALE

My Lords, in thanking the noble Earl for that reply, which appears to confirm the previous Government's policy, would he not agree that the effect of the staged approvals procedure is to raise uncertainty about the future of the field which, in turn, raises the cost of finance, and in turn amounts ultimately to a production disincentive?

The Earl of GOWRIE

My Lords, I am not sure if I really agree with that. Obviously the staged approval system has been of great interest and concern to those who helped to finance the developments, but discussions between my right honourable friend's Department and licensees, and the licensees' bankers, suggest that there is no impact on the availability of funds for offshore developments. Noble Lords familiar with these matters will, I think, have appreciated that staged approvals extend well beyond the points in time at which the lenders expect to have been repaid.

Lord HARMAR-NICHOLLS

My Lords, will my noble friend keep in mind that, while he may not be able to accede to what my noble friend has just asked for in this case, competition in the world for the skills required for both exploring and developing is very keen? Unless we have terms which make it reasonably attractive, we may be too far back in the queue to get the benefits at a time when we want them.

The Earl of GOWRIE

My Lords, I agree with my noble friend, but I think in fact we have terms that make it attractive where the staged approvals are concerned. Certainly I have no evidence—and I would welcome any from noble Lords if they care to write to me—that any proposals to develop oilfields have foundered on this account.

Lord STRABOLGI

My Lords, may I ask the Government if they agree that their present Answer is rather more encouraging than ones given so far during this Parliament? Will the Government confirm that they intend to maintain national control over the depletion rate, as happened before?

The Earl of GOWRIE

My Lords, I cannot confirm to the noble Lord, Lord Strabolgi, that all my Answers will be as satisfactory to him as my Answer has been today.

Lord STRABOLGI

My Lords, will the noble Earl answer the second question, which is to confirm that they will continue to maintain national control over the depletion rate of our oil, or will they let it rip?

The Earl of GOWRIE

My Lords, I think there is no evidence that the Government are relinquishing any control of this kind whatsoever.

The Earl of LAUDERDALE

My Lords, will the noble Earl agree that, while he has said there is no shortage of availability of funds, the point in my Question was the cost of funds, which rises with the degree of uncertainty? On the question of depletion, will he not also accept that the companies themselves have a strong incentive not to let the oilfields rip, in view of the continually rising price of oil in real terms, so that depletion, as raised by the noble Lord opposite, is not really quite as urgent a question as he thinks?

The Earl of GOWRIE

My Lords, the latter part of my noble friend's supplementary is certainly of great interest. It has not of course passed the Government by because the Government, too, may have an interest in the accumulation of reserves at a time of rapidly rising prices.

The Earl of LAUDERDALE

My Lords, may I ask my noble friend to pick up the point about the cost, which rises with the rise of uncertainty in the individual field?

The Earl of GOWRIE

I think it is balanced by what I said, my Lords; of course the costs of profit and return rise also, at the same time.