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North Sea Oil

Volume 24: debated on Monday 17 May 1982

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asked the Secretary of State for Energy when he expects to announce a new series of licence applications for North Sea exploration.

I am today circulating in the Official Report proposals for a new eighth round of offshore licensing. The formal invitation to apply will follow in a few months' time.

I thank my right hon. Friend for that preliminary answer. Is he confident that small British companies will have a fair chance of making successful applications when the round is promulgated?

In today's climate some small companies may find it difficult to raise the finance needed to participate. However, I hope that a fair smattering of licences will be granted to small companies if, as I hope, they apply. Although some of the blocks will be offered by the auction method, for the first time since the fourth round over 10 years ago, the majority will be offered in the same discretionary way as in most previous rounds. That provides a balance between the interests of the larger and smaller companies.

Does not auctioning mean putting the new North Sea licences, and no doubt the prize licences, into the hands of the multinationals once more? Does not auctioning mean going against the concept of development by small, independent British companies? Auctioning gives power to the big boys, but not to the small companies. How large is the licensed area likely to be in the eighth round? The right hon. Gentleman has not mentioned any acreage.

The hon. Gentleman cannot have been listening with his customary attentiveness. I said that only a minority of the blocks would be offered for auction. I expect about 85 blocks to be awarded.

Will the Secretary of State consider the suggestion of dropping the option of 51 per cent. for BNOC in this round?

The arrangements will be precisely the same, for the reasons discussed in our numerous debates on the Oil and Gas (Enterprise) Bill.

Is the Secretary of State aware that there is considerable anxiety that some marginal fields may not be exploited? If there is not a good response, will the right hon. Gentleman consider reducing the incidence of taxation to ensure that all marginal fields are exploited?

That question has nothing whatever to do with the licensing round, although the hon. Gentleman may be interested to know that the majority of blocks on offer will be in the frontier areas of previously undrilled areas of sea round our shores.

Following are the proposals:

The main objectives are to open up areas in which exploratory drilling has not yet taken place and to provide further opportunities to explore in the established gas province.
I have in mind licensing in total about 85 blocks drawn from the following:
  • (i) a wide selection of blocks in the previously undrilled areas of Unst, Fair Isle and West Orkney Basins, East Shetlands Platform, Forth Approaches, Southern Sub-basin—entrance to Bristol Channel—and the mid-North Sea High—an area between latitudes 55° and 56° North;
  • (ii) a number of blocks between 53° 10' North and 54° 20' North in the southern basin of the North Sea; and
  • (iii) a small selection of blocks in the mature oil province of the central North Sea.
  • I shall be inviting cash tender bids for the blocks in (iii) above; all other licences in the round will be awarded purely on the basis of assessment against published criteria. These criteria will be broadly similar to those for the seventh round. An undertaking along the lines of that attaching to seventh round licences, to allow BNOC an option to acquire up to 51 per cent. of any petroleum produced, will be required.
    I expect the closing date for the eighth round to be towards the end of the year. In the coming weeks I intend to discuss my detailed proposals with those involved. I shall welcome any views or comments from interested parties on the plans I have outlined, with particular reference to areas where they believe special care and attention in the conduct of exploration and development may be needed for environmental, fishing or other reasons.


    asked the Secretary of State for Energy what representations he has received concerning the effects of lower oil prices on exploration and development in the North Sea.

    There is no doubt that lower oil prices have had an effect on licensees' plans for future North Sea developments.

    Does my hon. Friend agree that lower oil prices, higher levels of taxation, and the increased cost of development combine to make marginal fields much more difficult to develop? Given the importance of our marginal oilfields for self-sufficiency in the 1990s, will my hon. Friend consult his colleagues in the Treasury to ensure that some changes are made in the tax regime to help the development of those marginal fields?

    My hon. Friend has devoted much time to this subject and he will appreciate that taxation is only one of the issues involved in any discussion of developments within the North Sea. The postponement of certain developments in recent months has been due more to technical problems and the weak oil price than to the tax regime. However, I accept that the companies have always included the tax regime in their reasons. That is only natural, because they wish to focus attention on their problem with tax.