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North Sea Oil

Volume 894: debated on Wednesday 25 June 1975

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The following Questions stood upon the Order Paper:


To ask the Chancellor of the Duchy of Lancaster if he will make a statement on progress in the discharge of his responsibilities with regard to oil and energy matters.


To ask the Chancellor of the Duchy of Lancaster whether he will report progress on his negotiations with the oil industry on State participation.

I should like, Mr. Speaker, the leave of the House to answer Questions Nos. 41 and 42.

We are having constructive discussions with a substantial number of companies which now, on any reckoning, represent over half the interests in the North Sea. Of these companies, Burmah, Deminex, Tricentrol and Blackfriars Oil have agreed in principle to 51 per cent. Government participation in their commercial oil fields. In our discussions detailed proposals for giving effect to participation are being considered.

Is my right hon. Friend satisfied that he has obtained the best possible deal for the British people? Is he satisfied that the matters concerning the exploitation of North Sea oil have now been agreed in principle? That having been done, is he now considering transferring his outstanding responsibilities to the Secretary of State for Energy?

I am satisfied that the Government are in the process of securing—and have already to a large extent secured—an excellent deal for the British people. That deal, not unnaturally, is not incompatible with the success of those who are developing the North Sea. Secondly, I am not able to say at this stage how all the deals will conclude. Therefore, I cannot raise my hon. Friend's anticipation about my future removal to areas which will cause him less anxiety than my present responsibilities.

How does the Chancellor reconcile his efforts to nationalise 51 per cent. of the North Sea oil, at an estimated cost of approximately £1 billion of tax- payers' money, with the advice he gave to the Prime Minister on the need to curtail inflation and the public borrowing requirement?

I do not accept the hon. Gentleman's description of my efforts—and even less the broad estimate of the cost which he attributes as likely to result from them. I therefore have no difficulty in reconciling the efforts to secure for the British people a fair share of the control of this vital national resource with our great determination—which was commented on in appropriate parts of Question Time—to deal with the problem of inflation.

Can we have a word from the Minister on the question of the conservation aspects of the development of the oil fields? Is the Minister aware that the EEC thinks that 180 million tons a year are appropriate, that the British Government are on record as saying that the figure of 110 million tons is the maximum, and that the Scottish National Party's view, in the best interests of Scotland's preservation, is 50 million tons a year? Does he understand that the question of preservation is not a joke to those people who live in the communities affected by the extraction of oil? Will the Minister say a word on this important question?

Happily, it is not for me to decide between the EEC Commission's view of the wise rate of exploitation of North Sea oil and the view of the Scottish National Party on the conservation of oil, and the wisdom of the respective positions of the Scottish National Party and the EEC.

My right hon. Friend read out a list of the companies which he said had agreed to the State taking 51 per cent. of their shares. Does that list represent all the companies, or are there still companies with which he has to negotiate, or with which he is still negotiating but which are proving somewhat difficult?

The companies the names of which I read out are those which have so far firmly accepted in principle 51 per cent. State participation. I do not regard those which have not yet seen fit to reach such an agreement as being difficult. But it is a matter of choice. They are considering the Government's proposals and are discussing the various problems, as they see them, which arise. I hope to make substantial further progress steadily in this way.

Will the right hon. Gentleman answer the question put to him by my hon. Friend the Member for Derbyshire, South-East (Mr. Rost)? If the Government are going to come forward in a few weeks with a harsh and unpalatable programme of public expenditure cuts, how can it conceivably make sense for them to lay out hundreds of millions, possibly thousands of millions, of pounds in buying out the North Sea oil companies?

The right hon. Gentleman appears not to have followed the clear explanation given by myself and other members of the Government about our purposes. We are not laying out these sums, which are torturing the fantasies of the Conservative Party and the Opposition. We are negotiating on the basis of making a contribution to the future cost of the development of the North Sea as appropriate. We would advance money promptly only where the alternative to doing so would be to hold up the further exploration and exploitation of this vital asset.

Does my right hon. Friend agree that a number of the companies on the list which he read out have had to negotiate from a position of relative weakness rather than strength? Does he expect some of the larger, more efficient and better backed companies to agree as readily as those which he has mentioned? Will he take on board the proposition that if he is successful he might have to live by the present Cabinet maxim, which is that if any Cabinet Minister tends to carry out Labour Party policy too well he is shifted sideways or downwards?

The occupational risk of Labour and Conservative Cabinet Ministers being successful can be regarded as one of the lesser risks in both cases. However, I do not believe that sideways, upwards or downwards movements of Cabinet Ministers are directly relevant to my negotiations about the North Sea.

To answer the more serious part of my hon. Friend's question, naturally there is an unevenness in the response to the proposals which I made, which some companies accepted fairly readily, while some were more cautious about the problems which might be involved for them and which needed further examination.

The Government formed the view that this was not a nationalisation operation but was a participation operation to give us control of an adequate percentage of North Sea oil and to allow us to develop expertise and to put the further development of the North Sea more readily within the reach of the Government through the BNOC. That being the Government position, we did not feel the need for any compulsory powers. We believed that we could reach a fair basis with those reasonable companies which were willing to deal with us sufficiently to fulfil the Government's purpose of achieving 51 per cent. Government participation in the commercial oil fields of the North Sea. I have no reason to feel pessimistic in any way about accomplishing that purpose in due time.

As the Chancellor of the Duchy indicated in his answer the nature of his wide-ranging powers over North Sea oil, and as we are also aware of the Paymaster-General's extensive responsibilities in the financial and taxation aspects of North Sea oil, will the right hon. Gentleman clarify for us exactly what the Secretary of State for Energy is allowed to do all day long in the matter of North Sea oil?

It is absolutely impossible to create that disunity between members of the Government Front Bench which exists between members of the Opposition Front Bench. I assure the hon. Gentleman that my duties in regard to North Sea oil are limited to being chief negotiator with the oil companies for the Government's purpose of achieving a 51 per cent. participation. My right hon. Friend the Paymaster-General has charge of the fiscal aspects of the North Sea—the petroleum revenue tax and similar fiscal aspects. If the hon. Gentleman will ponder the resulting equation, he will see that the Secretary of State for Energy has a considerable remit.

Is my right hon. Friend aware that Scottish trade unionists will applaud his rejection of the idea put forward by the hon. Member for Moray and Nairn (Mrs. Ewing) on behalf of the Scottish National Party? Will he confirm that if we reduce the rate of exploration and output to 50 million tons a year we shall need fewer rigs, fewer platforms, fewer supply ships, and less engineering activity—which will mean fewer jobs for Scottish workers?

I am grateful to my hon. Friend for pointing out in so forthright a way the consequences that would follow any effort to hamstring the reasonable development and the reasonably speedy exploitation of the North Sea. Every reduction required by the SNP or anyone else would be accompanied by a loss of indirect and direct revenue for the Scottish people and would thereby affect the considerable achievement of improving the standard of life in Scotland which has already taken place and which will continue.

Are the Government fully satisfied that, disregarding all these ideological considerations, they have obtained as good a deal for Britain as the Norwegian Government obtained for Norway?

It is difficult to compare precisely the relevant deals achieved. The Norwegian Government have perhaps exacted greater control and a greater share of the profits in their area than is the position in our area. But there are differences in the exploration position, in the licensing terms and in many other aspects. We are negotiating as firmly and toughly as is compatible with a scrupulous respect for our obligations and the fair reward offered to the companies which matches the needs of the British people—and Scots people are included in that entity—to get their fair share of the proceeds of the North Sea oil.

In view of the totally unsatisfactory nature of that reply I beg to seek leave to raise the matter on the Adjournment at the earliest opportunity.