HC Deb 09 December 1976 vol 922 cc311-5W
Mr. Campbell

asked the Secretary of State for Energy what action he proposes to take in the light of responses to his invitation for comments on the Williams-Merz study on gas-gathering pipeline systems in the North Sea.

Mr. Benn

I commissioned the Williams-Benz study to see whether there was a prima facie case for a pipeline system to gather the gas, especially that produced in association with oil, in the northern basin of the North Sea. Working on the limited data available, Williams-Merz estimated that a pipeline gathering system could deliver over at least 12 years some 1,000 million to 1,500 million cubic feet a day of gas suitable for the national grid and a further 6 million to 9 million tons a year of the heavier gases, ethane, propane and butane. The availability of ethane and other associated heavy natural gases could be the basis of the substantial new petrochemical investment in the United Kingdom envisaged by our industrial strategy, which my right hon. Friend the Secretary of State for Industry endorsed in his answer on 10th November to my hon. Friend the Member for Leeds, West (Mr. Dean).

When the Williams-Merz Report was published, I stressed that it was intended to give a rapid overview and that its scope had had to be limited by simplifying assumptions which excluded from consideration some of the costs involved. I invited all interested parties to let me have their views on the validity of these assumptions and on the further action required.

The responses to this invitation confirmed that further detailed studies costing initially perhaps £3 million would be needed to establish the viability of and select the best route for a gathering pipeline system and that the Williams-Metz study demonstrated that the costs of such studies were worth incurring. These studies should include more detailed assessments of the reservoirs and of the relevant production and pipeline technologies; investigation of the markets for ethane and LPG; examination of terminal and onshore constraints; consideration of organizational structures and methods of financing.

To plan and commission such studies, I propose that a study company be established—Gas Gathering Pipelines (North Sea) Ltd. The company will cease operations once it has completed its studies so that its structure will not anticipate the arrangements which may later be made for the ownership of the pipeline, should one prove viable, and which can be decided only in the light of the company's studies. If the studs company is to succeed, participants in it must meet certain working conditions. To avoid fragmentation and ensure serious commitment, I shall require each participant company to subscribe a substantial sum—say, £¼ million. This will be a risk investment.

Participants will have no right to preference in respect of contracts awarded either in the study stage or in the subsequent construction of any gas-gathering project that develops. On the other hand, participants in the study will obtain first-hand knowledge of the commercial and engineering issues at stake; in particular this is likely to confer advantage if the project goes ahead to development. The studies will require access to all available data and participants will have to subscribe to the procedures I am developing in consultation with offshore operators to safeguard the necessary confidentiality.

I have discussed this with BGC and BNOC, in view of their national responsibilities. They have accepted these working conditions and offered to establish the company with themselves jointly holding a majority. The success of this ambitious venture will require close co-operation between the private and public sectors and it is important that the organisation for the study stage should open the way for possible private sector participation in any pipeline system that may eventually be built. To enable all the resources of expertise and experience in the private or public sector to be harnessed to the task, I have made provision with BGC and BNOC for a significant minority of the study company to be owned by private sector interests as the third partner.

I shall be inviting the study company to structure its studies so that a definitive conclusion will be reached either on the nature of the project to be undertaken or that no project is currently viable. I shall be asking the company to submit an initial report and recommendation by 31st December 1977, updated by 31st March 1978. So as to proceed immediately with the planning of these studies, BGC and BNOC have agreed immediately to set up the study company. I now invite any company wishing to participate on the basis I have described to let me know its interest by the end of the year, whereafter detailed discussions can be arranged.

A paper describing the background to this decision can be obtained free from the Library of the Department of Energy. Copies have been placed in the Libraries of both Houses.

Mr. Robert Hughes

asked the Secretary of State for Energy (1) whether he is now in a position to authorise, under the Petroleum and Submarine Pipe-lines Act 1975, the whole of the gas pipeline from the Brent field to St. Fergus;

(2) whether he has issued further consents under model clause 21(3) of the terms of the petroleum production licences for flaring gas.

Mr. Benn

The Brent oilfield, the largest of our United Kingdom oilfields, is also a major source of gas, and the operator's development plan provides for the storage of gas in the first phase of oil production and for delivery on shore by pipeline in the second phase. The gas to be delivered on shore in 1979 or 1980 will be supplied to British Gas, which concluded in June 1975 a contract for the purchase of the gas from Shell and Esso, the holders of the licence for the Brent field. For this purpose a submarine pipeline is being laid to bring the gas ashore. I announced on 14th July my decision to issue to Shell an authorisation for the laying of part of the gas pipeline. The section of the route which was not then settled has since been agreed by all interested parties and I have now decided to authorise the laying of this remaining section.

Before gas supply through this pipeline can begin, gas from the Brent oilfield will for the most part be reinjected into the field for later recovery. However, the gas compression equipment necessary for the reinjection of gas into the reservoir cannot be delivered for installation on the platform before about June 1977. Without the compressors there is no means, except by flaring, of disposing of the gas produced with the oil—and surplus to platform fuel requirements. The only way of avoiding the flaring of this gas would have been by delaying the start-up of the field, and so losing the important contribution that Brent oil production will make to improving our balance of payments on current account and to our build-up to self-sufficiency in oil supply.

In view of the complexity of this problem of gas flaring between now and mid-1977, my Department earlier this year engaged a group of specialist consultants to study Shell's proposals and its detailed programme for the installation of the compressors. The consultants have confirmed that Shell has taken all reasonable care in the planning of the development programme on Brent to provide for the full utilisation of gas, and no better programme to meet the best interests of the United Kingdom is available at this stage in the development.

I have carefully considered all the factors involved, and I am satisfied that it would not be in the national interest to hold back Brent oil production. I have therefore given my initial consent to the flaring of Brent gas from the time of start-up of the field in November 1976 for a period of three months and I will review the position again at the end of this period.

I intend to leave the producers in no doubt of the importance I attach to their ensuring that the amount of gas flared is held to the absolute minimum, and to this end I am instituting a system of progress monitoring of the Shell programme by my Department from now until the gas injection facilities are in operation.

There will also be limited quantities of surplus gas produced with the oil from the Piper field. Here the circumstances are very different from the Brent case as the development plans provide for the reinjection and storage of the gas and the necessary gas compression facilities are available from the outset. However, injection cannot begin until suitable gas wells are drilled in Piper. This means that the flaring of limited quantities of gas is inevitable during the early months of Piper oil production. The gas stored in the Piper formation will be among the quantities of associated gas which can be tied into a future gas-gathering pipeline system provided such a system proves to be viable.

The possibility of using the very small quantity of surplus gas that will be produced on shore at the Flotta terminal is under discussion between my Department and those concerned with a view to avoiding the wastage of gas.

In order to enable Piper oil production to proceed, I have agreed to the flaring of small quantities of gas for a limited period of three months both at the platform and at Flotta and will review the position again at the end of this period.

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