§ Mr. Dempseyasked the Secretary of State for Energy whether, in the light of comments by the Public Accounts Committee contained in the Eighth Report of Session 1976–77 relating to charging to the British National Oil Corporation of interest on issues from the National Oil Account, he will now make a statement.
§ Dr. J. Dickson MabonThe Public Accounts Committee, in paragraph 93 of its Eighth Report Session 1976–77, said that it considered that an early decision should be taken whether to charge interest on issues of moneys to the British National Oil Corporation from the national oil account.
The Government have agreed with the British National Oil Corporation that the Corporation should consider its capital employed in the business as being divided in the ratio 40 per cent.-60 per cent. between capital regarded as subject to interest and capital regarded as not subject to interest—"equity capital"—and that this equity capital should be seen as being remunerated on a variable basis.
The British National Oil Corporation has been permitted by the Secretary of State, with the consent of the Treasury, to raise funds from capital markets and, subject to such consents, may do so 122W again. To the extent that the British National Oil Corporation does not resort to capital markets but is financed by money derived from petroleum licences—"royalty money"—which is made available from the national oil account for these purposes, the royalty money will be regarded as equity capital until the total of these advances, together with the British National Oil Corporation's internally-generated funds, reaches 60 per cent. of the total capital employed. Thereafter, royalty money made available from the national oil account will be divided between capital regarded as subject to interest and equity capital in such proportion as to maintain the 40 per cent: 60 per cent. ratio.
The rate of interest attributable to the royalty money which is regarded as subject to interest will be fixed for presentation in the British National Oil Corporation's accounts by analogy with the National Loan Fund interest rates and the remuneration attributable to the equity capital will be fixed by the Government after consultation with the British National Oil Corporation in the light of the Corporation's profits and prospects.
These arrangements do not affect the working of Section 40 of the Petroleum and Submarine Pipe-lines Act 1975, whereby sums which the Secretary of State considers are needed to enable the British National Oil Corporation to defray expenditure chargeable to revenue or capital account are to be paid out of the national oil account.