Oil Prices and Depletion Policy (Hansard, 30 April 1986)

Lord St. John of Bletso
My Lords, I beg leave to ask the Question standing in my name on the Order Paper.

§ The Minister of State, Scottish Office (Lord Gray of Contin)
My Lords, our approach on depletion policy is to leave decisions on production levels to the oil companies, subject to maintenance of good oilfield practice. This is an important factor in creating a climate in which the oil companies are ready to take the major arid high-risk investment decisions necessary to find and develop new oilfields. We see no case for changing this policy.

Lord St. John of Bletso
My Lords I thank the noble Lord the Minister for his Answer. Can he say how the Government intend to ensure that the economy remains energy self-sufficient through the 1990s when an energy shortage is widely predicted, particularly in the light of the implications for the nuclear industry following the recent Soviet disaster?

§ Lord Gray of Contin
My Lords, I am quite sure that those who take an interest in energy matters would agree with me that there are many pitfalls involved in energy forecasting. However, I believe that a country such as ours, which is rich in energy availability—being able to call on oil, gas, coal and nuclear power—must remain self-sufficient, or nearly so for some considerable time in the future.
The noble Lord has made mention of the disaster in Russia. Of course, like all other Members, I am sure, I am appalled at what must be a very severe situation with possibly great loss of life. I am also appalled at the lack of information from the Russians in this matter. It seems to me that all countries which have been involved in the nuclear energy field up until now have readily made available, one to the other, as much information as possible. The situation in the case of the Russians seems regrettable.

§ Lord Stoddart of Swindon
My Lords, is the noble Lord aware that I agree absolutely with him that it is deplorable that the Russian Government have not made available to the rest of the world the full extent of the catastrophe that occurred, the reasons for it and what is being done to control it? Will he also agree that it has implications for the Government's energy policy? May I ask the noble Lord whether, in the light of the catastrophe in Russia, the Government will be considering their nuclear policy? If they are so doing they will have the support of the Opposition.
In relation to oil, will the noble Lord agree that the price of oil, at 12 dollars a barrel, has implications for exploration and for the coal industry? In spite of what he said about the oil companies and their plans, is it not absurd that we should now be selling oil at 12 dollars a barrel when in the 1990s we shall probably—indeed, almost certainly—be importing oil 258 at 40 dollars a barrel? Does this not require government action on depletion now?

§ Lord Gray of Contin
My Lords, perhaps I ma' take the first point that the noble Lord raised. I anticipated that he would agree with my remarks about information being made available from country to country in the event of nuclear mishaps or nuclear disasters. I am grateful to have his support on that matter. With regard to the implications for our energy policy, we shall wait and shall assess very carefully whatever report is made known by the Russians as to the causes of the accident. I would point out that there is no direct implication so far as our nuclear industry is concerned, for the simple reason that the type of reactor involved is not a type that is used in this country. In addition to that, our safety requirements with regard to the nuclear industry and the construction of reactors are much more stringent.
Perhaps I may turn to the point raised by the noble Lord on depletion policy. I am afraid that I cannot agree with him. I think he was suggesting that we should be having production cuts for oil. I ask the noble Lord to bear in mind that that would have little effect on the oil price. Our contribution in world terms is a mere 5 per cent. of world oil production.
The OPEC countries are still far and away the leaders so far as oil production is concerned, and whatever action they take, either up or down, has a very much greater effect on price than anything that we could do. In addition, as I said in my initial Answer, I believe that we must ensure that those who make massive investment in the exploration and development of oil are left to be the best judge as to how and when that oil is uplifted.

Lord Campbell of Croy
My Lords, I agree with what my noble friend has said, especially as regards the Soviet accident and also policy as regards the production of oil within the United Kingdom. However, I should like to ask him a question. As the oil companies have always had to be conscious of how volatile the world price of crude oil can be and are therefore ready for contingencies, such as the difficult ones produced by the present situation, should not policy also include other energy industries, in particular the coal industry, which may feel most acutely the present collapse in oil prices?

§ Lord Gray of Contin
My Lords, I agree with my noble friend. His experience in these matters is readily available to the House and we always appreciate his views. However, I think that the coal industry is on an upward curve of success. Since the disastrous miners' strike, there has been a complete change of attitude within the industry and happily production is now on the increase. The reports and the outlook for the future are healthy.

§ Lord Strabolgi
My Lords, do the Government not have an overall long-term plan for all our energy resources considered together? How can they have such a policy if they do not have a depletion policy such as that which the Labour Government had?

§ Lord Gray of Contin
My Lords, I am sorry to say that that was one of the troubles with the Labour Government. They never maximised the potential of the various energy industries. We believe that there is healthy competition among the energy industries and that can only be good for the consumer.

§ Lord Stoddart of Swindon
My Lords, is the noble Lord aware that the Labour Government did, indeed, have a long-term energy strategy and that that strategy made use of all the elements of fuel: coal, oil, gas and, indeed, nuclear generation? It is because the Government have thrown everything to the winds and left it to market forces that their energy policy is now in a mess. Is he absolutely sure about the assurances which he has given regarding nuclear safety and that such an occurrence could not happen here? Is he aware as regards Three Mile Island that the residents of Harrisburg were assured that the accident which occurred could not happen, and that in Russia the residents were given the same assurances? I hope that the noble Lord's assurances are not the same as theirs.

§ Lord Gray of Contin
My Lords, it would be silly to hide the fact that there is always an element of risk and to be complacent. It is precisely for those reasons that energy policy in connection with the safety of the nuclear industry—which has been wholly supported by successive governments in this country—is of such a high standard. Although we should never dare to suggest that there could not be an accident in this country, we do everything conceivable to ensure that such an accident, if it did happen, would be minimised.
On the question of energy policy, I am afraid that the noble Lord and I will have to disagree. However, I suggest to him that the oil industry, the gas industry, the nuclear industry and the coal industry are all in a much healthier state now than they were before 1979.

§ Lord Parry
My Lords, the politics of the situation apart, I should like to support the noble Lord, Lord Campbell of Croy, and ask whether the Minister honestly believes that an international oil price of 10 dollars or less a barrel would make the British coal industry able to support our needs or to continue with its present plans?

§ Lord Gray of Contin
My Lords, I think that the coal industry is revising and has revised a great many of its plans and is now embarking upon a policy which we hope will enable it to compete in the energy world. As far as the price of oil is concerned, whether it be 10 dollars or 20 dollars a barrel, it must be achieved without the Government interfering. It will be taken care of by the market. As far as depletion is concerned, if the price falls to 10 dollars or even less, the companies themselves will regulate the amount of production in which they engage.

§ Lord Parry
My Lords, I accept that qualification hopefully.