Orders of the Day — Energy Policy

Part of the debate – in the House of Commons at 12:00 am on 19th July 1973.

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Photo of Mr Dick Douglas Mr Dick Douglas , Clackmannan and East Stirlingshire 12:00 am, 19th July 1973

I fully recognise the point my hon. Friend makes. The Government have announced their intention, in relation to the reconstruction of the industry, of evolving a new holding company, but we still do not know what reactor system is to be favoured before the fast breeder system reaches the stage of commercial ordering by the late 1970s.

I recognise the Government's difficulties but, if the industry is to forge ahead and if we are to keep the design personnel in being, a decision must be made as to the type of reactor which is favoured. That would enable the Central Electricity Generating Board to make the correct decision or a wise decision. Such a decision must be backed by the Government. The industry knows that it must assess its potential for holding its labour force in terms of design and construction. That is a matter which the Government should try to clarify as soon as possible.

I now deal with oil and North Sea gas. Clearly, in terms of keeping pace with economic expansion, the fuels most likely to meet the short-run requirements of bridging the energy gap are oil and natural gas. The Government's recent publication "Production and Reserves of Oil and Natural Gas on the United Kingdom Continental Shelf" indicates that the production of gas from the North Sea is unlikely to expand much beyond 4,000 million cubic feet a day in the 1970s. The United Kingdom position could be assisted by the use of gas from other sectors of the Continental Shelf, but that will depend on detailed negotiations.

In the short run, therefore, it is oil which will have to fill the energy gap, not only for the United Kingdom but for the rest of the Western world. World energy consumption is expected to rise by annual increments of 6 per cent. in the period 1970–85. The European Economic Community countries will use oil to supply 60 per cent. of their energy requirements. For Japan the figure will be 70 per cent. and for the United States it is expected that, surprisingly, it will decline from 45 per cent. to 40 per cent.

That means that the EEC countries will consume 1,000 million tons of oil by 1985 instead of the present 500 million tons and that imports of oil by 1985 will be about 900 million tons. Figures of expected imports by the United States range from 600 million tons a year to 900 million by 1985, and Japan's imports might exceed 500 million tons.

The North Sea oil finds will have to be on a gigantic scale to make any impact on such enormous demands. Not even the most optimistic commentators suggest that that will be the case. Internationally, apart from the Soviet bloc, we are in the hands of the OPEC countries, with all the implications of being held to ransom and insecurity of supply.

Although I have somewhat played down the role of the North Sea finds in an international context, they are important in providing a bargaining counter vis-à-vis the OPEC nations. I consider the finds not as a bargaining item to obtain an EEC energy policy but rather as a means whereby the EEC can work with the United States and Japan to coordinate policy to ensure oil supplies for the Western industrial nations. No doubt the Minister, like me, will be pleased at the overtures between the United States and the Japanese Governments to see whether they can achieve co-ordination of oil policy, particularly in relation to the vexed question of investment.

It can be seen that the Government's tactics and strategy on North Sea oil are vital. The current licence conditions require the oil to be brought ashore in the United Kingdom except where permission not to do so is specifically granted. To achieve a better balance of payments advantage, the maximum amount of oil should be refined in the United Kingdom. That should mean a build-up of refining and allied capacity in the United Kingdom. Direct consultations should take place between the Government and the oil companies to map out a national approach for oil refining and to restrict the construction of refineries in the South-East of England, where the refineries under construction or planned are not desired by the population.

We know from parliamentary answers that the next round of licences is not due until after 1973. Of crucial importance are the terms we insert in the fifth round. A repetition of the fourth round fiasco would be unforgivable.

What, then, might be the minimum requirements? I list eight of them in order. I should be grateful if the Minister would give them some consideration and attention.

First, there should be a carried interest provision ranging from 30 per cent. to 50 per cent. Second, there should be a reduction on the life of the concession from the present 46 years to something under 30 years with half of the allocation being relinquished after six years. Third, the initial payments should be raised. Fourth, the royalty should be on a sliding scale ranging from 10 per cent. to, let us say, 16 per cent. Fifth, preference should be given to consortia having in their number companies in which there is a public shareholding and to nationalised industries. Sixth, in the absence of a clause requiring licensees to use United Kingdom equipment, manpower, services and bases, a clear understanding should be arrived at that the Government will expect fair bidding to be offered to all United Kingdom companies for orders.

I interpose here, in view of discussions in the House today, that I would welcome an assurance that, despite the overtures of the EEC Commission querying the 4 per cent. credits for mobile offshore equipment, nothing in the Commission's approach endangers the strategy outlined in the IMEG report for the offshore supply industries. In view of the exchanges in the House today, the industry would welcome such an assurance from the Minister.

Seventh, there should be a tightening of the arrangements for the landing of oil in the United Kingdom, with an understanding that it will be expected that the crude oil will be processed here unless good reasons are shown for its export. It may be appropriate to have terms which differentiate between areas where discoveries have already been made and new areas in deeper water which require more advanced technology for exploration and production. Eighth, the Government must insist on open information from the companies, not only from the viewpoint of royalties but also from the viewpoint of the general tax position.

Those are minimum requirements. What has to be assessed is the rate of exploitation of these resources, and this is a balanced judgment as to how fast we can go.

No matter how much we intensify the search for oil and coal, the quantity of these resources in world terms is finite. Attention must be turned to new sources of power. Given that we can avoid environmental hazards, the best medium-term bet seems to be nuclear power, if we can get the necessary breakthroughs in the fast breeder reactor. In the longer term, attention ought to be turned to the exploitation of solar power and the conversion of energy potential from the wind and the sea.

Commenting on the recent conference in Paris, jointly sponsored by UNESCO and the French Government, to discuss "The Sun in the Service of Mankind". the New Scientist claimed: There are many technological possibilities for solar energy. Most of them are well enough understood to convince all but the most sceptical that the sun can contribute significantly to man's energy supplies. The question is, can we develop these technologies so that the energy is available at a price we can afford? I should like to know the Government's attitude to such research and development. We know that the United States has a Solar Energy Panel which has made recommendations for short-term and long-term research running into billions of dollars. Have we in the United Kingdom any budget for this? Would it be appropriate to request the Prime Minister to place such a topic on the agenda for the forthcoming conference of Commonwealth Prime Ministers? This is an area of research in which the Commonwealth could be a unique institution for linking the needs of the developed and the developing world and in solving some of the problems of energy supplies.

In conclusion, may I say that I am conscious of how inadequately I have dealt with such a vast subject. I have not mentioned the special role of the electricity boards and their relationship with the construction and engineering industry and the effect on the employment prospects of thousands of our people.

What I should like to see is the Government creating a forum—call it if one will a National Fuel Council—to discuss investment plans and views of market shares in an atmosphere not of competition but of consultation. A short-term measure might be to require joint appointment to the boards of public corporations and to the British Petroleum Company. Additionally there is an urgent need to make us conservation-minded and to devise a fuel consumption and transport policy which saves scarce resources and does not squander them.

I end with a well-known quotation from Seneca: In a moment the ashes are made, but a forest is a long time growing.