Bright trade figures as British oil flows

Press, 24 May 1977, Page 18

Bright trade figures as British oil flows

By

SIMON KENT in London.

Britain has just turned in its best quarter’s trade figures in more than five years. In April exports rose in real volume terms, as well as in value, and the balance of payments was in the black by almost $2OO million. The trade figures reflect Britain’s emergence as a major oil oducer and the beginning of the 10 years of grace it has to rebuild its industrial base. Some of the improvement is the result of production other than oil including food and drink, processed foods, textiles, and metal industries. The chief reason for the change has been a reduction in crude oil imports of $5OO million in the last quarter and an increase in oil exports to $250 million, compared with only $l2 million a year ago. All this year production will be building up from the Forties, Piper, Brent, and Beryl Fields in the North Sea, together with initial production from the Claymore and Thistle Fields. During 1977 Britain should move towards 50 per cent self-sufficiency in oil. reaching 100 per cent in 1980. According to forecasts this month by a reliable firm of City stockbrokers, Phillips and Drew, Britain’s current account on balance of payments should benefit this year by $2300 million, rising to $4250 million in 1980, and to $6BOO million in 1984. These figures assume that at their July 8 meeting in Stockholm the Organisation of Petroleum Exporting Countries will agree on the

Saudi Arabian compromise, dropping both the further 5 per cent increase agreed last November and the two-tier system, so that effectively O.P.E.C. prices rise a total of 10 per cent in the present 18-month period. The figures also assume an average rate of inflation of 8 per cent in the O.E.C.D. countries, and further annual increases in oil prices beyond 1978 of 5 per cent payable in dollars. Some of these assumptions, particularly in the short term, may be overcautious, but the Phillips and Drew forecasts indicate the extent to which the British Government can draw on North Sea support for its “industrial i evolution.” North Sea exploration is far from finished. Development decisions are likely this year on the Tartan, North Cormorant, Magnus and Moray Firth Fields: steel supplies for the platform on the Murchison Field are on order. The early difficulties about Government participation, licensing and taxation have been settled; after the oil companies had got over the shock of discovering that the old laissez-faire policy was dead, they realised that the terms imposed were no more onerous than those in most of the other countries with which they dealt.' The effect of participation means that the British Government gets about 70 per cent of the oil income, but only on the unlikely assumption that no new investment is being made. The oil companies, while exercising their wrath in public relations. have nonetheless

scrambled for a piece of the action in the fifth round of licensing now under way. With costs under tighter control finance for investment is easier to arrange. Most of the $15,000 million spent sc fare has been found by the major oil companies as part of their investment programmes, with perhaps a third coming from international banks. The North Sea bonanza is operating to Britain’s benefit, but progress in other industries is still slow. In the motor industry only one American multi-national, Ford, is increasing output at anywhere near the levels needed to create incentive for further investment. In other industries investment is rising, but only slowly. — 0.F.N.5., Copyright.