HL Deb 20 January 1983 vol 437 cc1527-9

3.13 p.m.

Viscount Hanworth

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 consider setting aside funds arising from North Sea oil revenues to promote exploration of the continental shelf around the north and west coasts of the British Isles bearing in mind the difficulties likely to be encountered in those deep waters and the possibility of useful finds.

The Parliamentary Under-Secretary of State, Department of Energy (The Earl of Avon)

My Lords, it is not the Government's policy to set aside receipts of taxes and royalties from North Sea oil and gas production for specific purposes. They simply form a part of the general tax receipts which fund the Government's expenditure programme. However, we encourage the economic exploration and development of the United Kingdom Continental Shelf through a range of other policies.

Viscount Hanworth

My Lords, I thank the Minister for his Answer. May I ask him what other policies are likely to induce the oil companies into exploration in a very difficult area? Does he agree that at the moment it looks extremely unlikely that there will be any further major finds in our existing oilfields? Therefore, the possibility of finds on the continental shelf are extremely important for the future.

The Earl of Avon

My Lords, if I may, I shall give a threefold reply to the noble Viscount. First, it has not so far been found necessary to offer any incentives or special terms to explore frontier areas. The Government would not, however, rule out the possibility of such incentives where this was considered necessary. Secondly, under the current tax régime, fairly generous relief is available. Successful exploration and drilling costs are allowed in full against the field to which they relate. The third point is that the recent auction, which was concluded only yesterday, on the whole produced fairly good results.

Lord Strabolgi

My Lords, may I ask the noble Earl whether the Government are aware that in the view of the oil companies the present tax régime is a positive disincentive to further exploration? Now that we have the good fortune to have an Energy Minister in this House, will he urge on his colleagues to try to do something about it? Representations were made before the last Budget, but absolutely nothing was done.

The Earl of Avon

My Lords, of course I am aware that the industry is not satisfied with the general level of taxation of North Sea oil. Extensive consultations have been under way with the United Kingdom offshore operators' association in recent months. I would, however, draw the noble Lord's attention to the petrol revenue tax on exploration expenditure which, on my reading of it. seems to me to be quite generous. I know that I can now no longer hide under the words, "I shall take it back to my right honourable friend", but I will, of course, take his remarks to heart.

The Earl of Lauderdale

My Lords, is my noble friend aware, first, that his appointment to the Department of Energy is much welcomed? Secondly, is my noble friend aware that a deep hole was bored three years ago in the Rockall Trough, led by the British National Oil Corporation with the participation of the main oil majors? The results were very disappointing, and most oil companies are now more interested in the North Sea than in the North-West.

The Earl of Avon

My Lords, I am grateful to my noble friend for his kind remarks. I am also grateful to him for the lesson which he taught me in his secondary question. I was indeed aware of some aspects of the Rockall Trough, but I am grateful for the further information.

Baroness Gaitskell

My Lords, may I support the noble Viscount's Question? It seems to me to be absolutely sensible. I do not think that we need look to suffer at this time economically. I think that we should definitely take it up.

The Earl of Avon

My Lords, I am not absolutely clear about the noble Baroness's point, but I shall certainly read it in Hansard.

Lord Tanlaw

My Lords, may I ask the noble Earl also to accept my congratulations? At the same time may I ask him whether or not he agrees that this is the role which Britoil should be performing: exploring the waters around our shores and not those of other people's shores in the Middle East and the Far East?

The Earl of Avon

My Lords, I think it should be open to a wide field of people to do this, which we in this country are doing and which other countries do. Hence, Britoil is going outwards.

Viscount Massereene and Ferrard

My Lords, is my noble friend aware that local people in the Hebrides have known for some time that there is a shale belt? If there is shale oil, it is highly likely that there are very large deposits off the Hebrides.

The Earl of Avon

My Lords, I am grateful to my noble friend for his intervention. Having listened to him frequently on the Wildlife and Countryside Bill, I know with what expertise he speaks.

Lord Taylor of Gryfe

My Lords, would the noble Earl agree that the privatisation of BNOC and the fact that Britoil is now the exploration arm in the North Sea limits the Government's ability to take initiatives in this field, whereas BNOC, which was Government-owned, could be an instrument of Government policy in this area? Would the noble Earl also agree that by the privatisation arrangements we have lost the ability to take the initiative in this direction?

The Earl of Avon

My Lords, the noble Lord will be perfectly aware what my reply is going to be: that the Government believe in the working of the free market forces. This is the reason why we took this particular action.

The Earl of Lauderdale

My Lords, will not my noble friend agree that Britoil now enjoys freedom from Treasury control and can therefore go into the market in a big way?

The Earl of Avon

My Lords, I am happy to be sitting on the fence between this particular game of tennis.

Lord Airedale

My Lords, do such considerations apply to the excessive profits accruing to the gas industry as a result of Government policy?

The Earl of Avon

My Lords, I would not like to say that any excessive profits are accruing which are not to the benefit of the consumers. In fact, there is at the moment a freeze on gas prices.