chapter  11
51 Pages

Increasing the Government take

The 1975 Oil Taxation Act had been in force for only a very short time when concerns began to be raised about the effectiveness of some of its terms. First oil production had come from the Argyll fi eld in June 1975. The oil was landed in the UK but there was soon pressure from the licensees to permit the oil to be exported with the prospect of higher prices. One of the licensees was RTZ which had no refi ning capacity in the UK and had sold its oil at prices signifi cantly below those applicable to the cost, insurance and freight (c.i.f ). value of comparable imported crudes. This alarmed Lord Balogh, the Minister of State at the DEN, and he wrote to Mr Dell, the Paymaster General, on 8th October indicating his concern that, if small partners were not allowed to export and there was no fi xed posted price for North Sea oil, there was a danger that North Sea prices would be established below imported parity prices and the result would be a reduced tax take. He suggested that the possible solutions could be either (1) a reversal of the earlier decision not to have a posted price, or (2) allow exports of North Sea oil beyond the levels indicated earlier by Mr Varley in his disposal and refi ning policy statement. If neither of these options were pursued there would be pressure for BNOC to become involved in downstream activities where it could secure what he felt were the excess profi ts accruing to the refi ning subsidiaries of the majors. His preference was for a posted price.