Oil and Pipelines Bill (Hansard, 22 October 1985)

§ Lord Stoddart of Swindon

My Lords, I should like to say a few words before we actually pass this dreadful Bill. First, however, I should like to thank the noble Lord, Lord Gray, for his courtesy during all stages of the Bill. That is probably the last nice thing I shall say about him. Nevertheless, he has been courteous and all those who have taken part will, I am sure, wish to thank him for that.

This is a Bill that has not exactly set the world alight. There has not been a great deal of interest in it. I appreciate the efforts of those few who did take part during the various stages of the Bill, notably the noble Lords, Lord Lloyd of Kilgerran and Lord Ezra, the noble Earl, Lord Lauderdale, and the noble Lord, Lord Taylor of Gryfe. Perhaps the lack of interest stems from the realisation that this Bill is merely the final act in the Tory farce of disengaging the state from any real participation in the North Sea oil industry. In doing so, they have rendered this country almost unique among the oil producing nations of the world. The Norwegians have certainly not disengaged themselves from the North Sea. Neither have the 1027 Arabs disengaged themselves from their oil industry. But the British Government have done it, and they have done it just about completely.

The Opposition have tried hard during the Committee and Report stages to improve the Bill. Indeed, we have striven to persuade the Government to accept amendments with a view not only to ensuring that they would have some real control over security of supply but also to ensuring that the agency itself operates more effectively. But all to no avail! Despite the fact that all of us from the Opposition Benches have stripped our contributions of party political rhetoric and have concentrated on the fundamental needs of the nation's oil policy, the courtesy of the noble Lord, Lord Gray—he has, as I say, been courtesy itself: of that there can be no doubt—has been accompanied by an attitude of complete obduracy, no doubt dictated by his masters in the Cabinet. Stonewall Hamish, no less!

However, even at this late stage of the Bill, I must return to the question of security of supply and reiterate the Opposition's view that it is nothing short of scandalous that the Government should wilfully disengage themselves from proper and direct involvement in arrangements to secure the nation's oil supplies in the event of crisis. I said at Second Reading that the Government were elected to safeguard Britain's national interests, not to subordinate them to informal assurances from the oil companies. That remains my view. Nothing that has been said from the Government Front Bench during the passage of the Bill through the House assuages in any way our fears about the security of our oil supplies. Indeed, quite the reverse.

The complacency of the Government in this regard has become more evident as the noble Lord opposite has struggled on amendment after amendment to defend what he himself knows to be the indefensible. He knows perfectly well that only three months before this Bill was introduced he was advocating the very policy that we have been advocating from these Benches during the passage of the Bill. So he knows himself that the Bill is indefensible.

Even our attempts to see that Parliament is properly informed, involved and consulted have been stonewalled by the noble Lord opposite. Indeed, in cricket parlance, the noble Lord, Lord Gray of Contin, has made Trevor Bailey look a veritable Ian Botham by comparison. This debate tonight is the end of a long chapter in the North Sea oil saga, a chapter redolent of Tory dogma which sacrifices the vital interests of the nation and the people to the vagaries of the market place. But it is not the end of the story. For the Labour Party fully intends that state participation in the North Sea will be restored and that Government will have a real influence in ensuring security of supply. I give notice now that when the Labour Party is restored to office at the next general election we will indeed see to it that we re-enter the North Sea in every respect and safeguard the nation's vital oil interests.

§ Lord Gray of Contin

My Lords, may I first thank the noble Lord, Lord Stoddart, for his very kind remarks which he has made about the way I have tried to handle the proceedings during the progress of this 1028 Bill. I can perhaps reciprocate by saying that although he is always hard hitting and forthright he has, from my position at this Box, a twinkle which is unmistakable and which reveals a good sense of humour at the same time.

I shall take up the points which he made in a minute or two, but I should first also like to thank the noble Lord, Lord Lloyd of Kilgerran, who contacted me today and said how sorry he was that he would not be able to be with us this evening, and also the noble Lords, Lord Ezra and Lord Taylor of Gryfe, as well as my noble friend Lord Lauderdale for the part which all of them played during our deliberations.

We have had a very interesting series of debates over this Bill. During the Committee and Report stages I have been able to describe the Government's reasons for introducing this Bill and their plans for the proposed Oil and Pipelines Agency. My right honourable friend the Minister of State for Energy in another place has already announced the names of three distinguished people who will be appointed to the agency's board. I am glad to be able to inform your Lordships that my right honourable friend the Secretary of State for Energy has now also designated Mr. Christopher Finch for appointment as a non-executive member. He has no further appointments in mind. Mr. Finch is currently the BNOC board member for finance and will bring to the agency wide experience of the financial aspects of oil trading and of public corporations. That will be particularly valuable in the transition from BNOC to the agency.

Perhaps the most important theme running through our debates—and rightly so—has been the security of oil supplies. The noble Lord, Lord Stoddart, returned to that subject again today. Without repeating the substance of earlier debates, I should like to make one or two points on this subject. OPA, or indeed BNOC if it were to continue in its old form, has no special relevance to a major interruption in oil supply. For such a case we have international obligations and mechanisms and if those fail we have the full panoply of powers under the Energy Act, which enable Government completely to control any oil produced from the Continental Shelf or imported into Britain. Our concern is therefore limited to what are known as "sub-crises" when oil supplies to IEA countries are reduced by less than 7 per cent.

The first point I want to make is a simple one. We cannot guarantee security of supply just because we are self-sufficient. Quite apart from the costs that would be incurred if we were to adopt an isolationist policy, North Sea oil is itself not 100 per cent. secure. It is produced in a hostile environment. It is a volatile and inflammable fluid processed in large, complicated and technically advanced plants. Isolating the United Kingdom from the world market would reduce rather than enhance security.

Secondly, the sub-crises of the seventies—which did so much damage to the world economy—did not in fact reduce supply below normal demand. It was the anticipation of a shortage that led to a surge in demand from both consumers of oil products and their supplying companies. I am afraid, prompted by consumer Governments, this was the situation; and that was the penalty which our countries have to accept.

1029 To anticipate such surges in demand would require massive investments in infrastructure which would be idle most of the time. The cost simply would not be justified. Most importantly, the damage done to the world economy did not stem directly from any physical shortage but from the ratcheting up of world oil prices.

We did not and cannot isolate the United Kingdom economy from the world economy. Accordingly, the main national objective for a future sub-crisis must be to seek to moderate the effect on world oil prices. That can be achieved only through international cooperation. I am glad to be able to report to noble Lords that in the last two years the International Energy Agency governments have advanced significantly both in their recognition of that objective and their contingency arrangements for achieving it in a sub-crisis.

My fourth point is that imposing novel arrangements in a sub-crisis is likley to worsen local dislocations and increase confusion. Diversion of the physical flows of oil from their normal channels, unless very carefully handled, will be apt to lead to higher price rises because it will compartmentalise markets. The following point is very relevant to the Oil and Pipelines Agency's role. Governments in any future sub-crisis will succeed best both in matching United Kingdom supply and demand and therefore in moderating price increases if they play, so far as possible, with the grain of the market and of established patterns of trade and distribution.

I make these points not because they are politically controversial. The behaviour of previous Administrations has shown that they were well aware of them. But in detailed debates on what might be done to enhance security it is so easy to forget the limits of what is practical or desirable.

The noble Lord has already given notice that should his party be elected to power they will immediately create once again a Government presence in the North Sea. I think that this would be a tragedy. The development of the North Sea has been due to the expertise and the enterprise of the private sector. And the fact that oil came ashore within five years from the date of the first discovery of oil in the North Sea was as the result of the very great expertise of Hamilton Brothers in the Argyle Field. This was followed by BP in Forties Field.

It so happens that I was on the opposition Front Bench at the time that the British National Oil Corporation was created. I remember so well saying that one day we would see the end of this corporation because we considered that there was no place for this in oil production in the North Sea; but in the interim period we wished the corporation well. I have to say that in some regards it performed a useful function but it has now outlived its usefulness. That is, indeed, why we introduced this Bill, virtually to remove the last of the powers of the BNOC and transfer them to a very minor body by comparison.

In conclusion, may I say that I believe this Bill to be a small but very important Bill. I thank your Lordships for your tolerance in dealing with it in this House, and I finally commend the Bill on passing.