Orders of the Day — Petroleum Royalties (Relief) Bill

Part of the debate – in the House of Commons at 4:25 pm on 2nd November 1983.

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Photo of Mr Ted Rowlands Mr Ted Rowlands , Merthyr Tydfil and Rhymney 4:25 pm, 2nd November 1983

Not only is it an absurd posture, but the reply to that argument from Ministers is that they will impose taxes. Yet I thought that we were trying to produce a stable, fiscal regime for development. It would be better to have a sensitive, tailor-made system of relief related to the size of the field.

Hon. Members who served on the Committee will know that one of the major propositions put forward by the Opposition was that there should be a discriminating character to relief related to the size of fields. I am surprised at the complacency and misunderstanding shown by both the Secretary of State on Second Reading and the Minister in Committee and again today about the role of royalty oil during an oil shortage crisis. The Secretary of State in 1979, the right hon. Member for Guildford (Mr. Howell), faced a serious oil shortage crisis. We all remember the emotional feelings on both sides of the House about the possibility of shortages, and even of rationing. What did the right hon. Member for Guildford say and do then? He said that one of the most useful ways to handle an immediate oil shortage crisis was to take royalty oil in kind or in cash.

It is all right for complacent Secretaries of State, who have not gone through the mill of such a crisis, to argue against that now. I had a great deal of sympathy with the right hon. Member for Guildford when he was struggling through a crisis. Yet he immediately sought to use his power of royalty oil and turn it into barrels of oil to cover the United Kingdom market.

The argument against such a course put by the Secretary of State on Second Reading and by the Minister today is that it involves only a small percentage of oil—6·5 per cent. —because of the participation oil arrangements. I do not need to be converted to the value of participation oil. Indeed. I made a sporting effort to convert the Government to participation oil in the argument about oil and gas enterprise.

In 1979 there were such participation arrangements in place. The Secretary of State for Energy then had a productive oilfield as large as any Secretary of State for Energy will ever have in the late 1980s. The fallacy of the Minister's argument is that in handling an oil crisis such as that which occurred—even a bogus one—in 1979–80, it is not a question of the total amount of oil being produced but rather how much oil can be redirected at any time into the national oil market. It need only be, as it was in 1979–80 a fractional amount of oil. It was not the total amount of oil being produced in the North sea, put the percentage of oil, over which at that time the Secretary of State had a measure of control that was important.

The then Secretary of State deemed that the marginal amounts of royalty oil available during the 1979–80 crisis were most important, and a useful contribution. Those would be denied to a further Secretary of State for Energy if we continued the principles of the Bill. He will not have the right to have royalty oil in kind in 1989–90 out of these fields— which will be marginal, even with the great stimulation of oilfields that we can imagine—as he now has. Therefore, he is taking away, if we approve the Bill without modification, a useful power which, in 1979, the Secretary of State felt was not only useful but essential. He told the House then that this was one of the means by which he intended to handle the crisis. He was not talking about millions of tonnes but about small amounts of oil over which he had a measure of control at any given time.

Thus, it is not a question of the total amount of oil production but of the degree of control, and the power that the Secretary of State has at one moment in time to bring oil back into the United Kingdom market. One of the most simple ways to do that in 1979 was to exercise the right to call in royalty oil in kind, a principle and power that would be denied to a future Secretary of State in such a crisis if we approve the Bill unamended. I hope that the Minister will not return to these arguments again, unless he addresses himself to the specific point and case that I have made. It is not just a problem of amounts, but of access, availability, and capacity to control at any one moment a certain amount of oil.

There is also the problem of participation oil. The Minister has justified the happy abandonment of such power over royalty oil by saying that we have participation oil. I am glad that he is now a keen and enthusiastic supporter of participation oil. Some Conservative Members have not gone into the scheme as enthusiastically as I have. In fairness, the Minister spent a great deal of time on an earlier Bill trying to make sure that there were not large scale leakages on our rates of participation oil. However, there have been significant leakages as a result of the silly acts of privatisation.

In this connection, I have a simple question for the Minister. We have been reading in the press during the recess reports that the Secretary of State has been reviewing BNOC (Trading) Ltd. There have been a few heavily-laden rumours that the Government intend to wind it up. BNOC (Trading) is the centrepiece of oil participation, and I hope that the Minister will give a categoric assurance on this matter and scotch rumours that he is reviewing more than certain aspects of the operations of the company. We are all interested in that and happy to investigate and inquire into such matters in detail. Is the Minister contemplating the abolition or the wind-up of BNOC (Trading)? Is that one of the possible actions that he is considering, as one of the press rumours is suggesting? If so, this is a serious issue. We have been asked to approve the Bill on the grounds that the successful participation arrangements are in place, and the organisation that understands participation is BNOC (Trading). If we are winding that up, what will be the effect on our participation arrangements?