From KEN COATES in London

Press, 29 March 1980, Page 16

From KEN COATES in London

' Ths British Government has an .eight per cent share in North Sea reserves, and also has the right to buy at market prices'sl per cent of each company’s oroduction. The ‘ Conservatives swept into office keen to sell off State-run enterprises and raise muchneeded funds. Some Government owned B.P. shares have been sold publicly, but there is reported to be second thoughts about disposing of part of the 8.N.0.C. worth at least $5.4 billion.

The Labour Party is strongly opposed to any disposal of Government interests, and a number of Conservative M.P.s are reported to be uneasy at the prospect of handing over control entirely to the oil companies.

Philosophically, the present Government favours private enterprise rather than State-run business, but the prospect of vast taxes rolling into the Government coffers is making it cautious. The three sources of tax are: 12.5 per ■ cent of the oil’s well-head value; petroleum revenue tax (60 per cent of gross income, less operating and other costs, with smaller fields exempt): and corporation tax at 52 per cent, against which revenue tax is allowable. With an estimated $32 billion rolling into the taxman by 1985, oil tax will Obviously be a major factor for the government’s finances and its borrowing.

Britain is in the curious position of being both producer . and . consumer. While the Government has been anxious not to contribute to spiralling prices, fixing the price at below

market rates, this ’has meant an estimated SI.2M annual loss in revenue.

When North African crudes, were recently selling for $34 to $35 a barrel, the North Sea price was only $29.75. The price has since been raised fb. $33.75. but is still below the market level. There have been no. hard and fast decisions on conserving the oil reserves. But at least some effort has been made t,o reduce what must . surely be one of the most flagrant examples of. waste of precious energy .anywhere in the. world — the flaring off of gas on the Brent field. When oil is extracted, so is gas, but there is frequently no storage or lines to pipe it ashore. This meant that at Breht, 340 million cubic feet a day had to be burned — almost a tenth of Britain’s dailv needs.

The Government ordered companies to cut oil production from 185.000'barrels a day to 100,000. —• but even then 170. million cubic feet of gas .a .day.-is flared off into the cold North Sea sky. - I* It is estimated that by the mid-eighties, the North Sea will be producing J5O per cent mote oil thin Britain uses. If the Government decided on really strict conservation' to the point of cutting back production to the self-suf-ficient level of 1.9 million barrels a day, then the country ■ could be self-suf-ficient well into the next century.

But the temptation wi|l be to use oil. funds to bolster the economy and improve election chances. In this ; case, the short-lived, boost..: could; come to >an abrupt end about 1990. ’ •