Britain's Stormy Petrol

To hear many of Britain's leaders tell it, that financially uptight little island need only await the imminent tapping of North Sea oil and gas for the dawning of a bright new day. Prime Minister Harold Wilson jokes: "There is speculation which member of the Cabinet will become chairman of OPEC in the 1980s." Chancellor of the Exchequer Denis Healey says that Britain's petroleum import needs will be halved by 1977 and eliminated within five years.

Last week Texaco announced the discovery of a major field about 110 miles northeast of Aberdeen. Eleven other commercial fields stretch in a 600-mile band from the Shetland Islands west of Norway down as far as the south-central coast of England. Drilling is being done by British Petroleum, Exxon, Gulf, Texaco, Shell, Mobil and 35 other companies. They will start to produce small amounts later this year and expect to be bringing in 2 million bbl. a day by 1980. But a hot taxation feud between the companies and the Labor government threatens to stall development.

Left-wing Labor backbenchers have called for a tax of 90%. Caught between threats from the oil companies to move their drilling rigs elsewhere and the demands of the left-wing backbenchers to stand firm, the Wilson government has been searching for a solution. Within the past few weeks oilmen have been mildly encouraged by signs of government backpedaling. The Cabinet is expected to announce soon a tax rate between 50% and 60%, with special incentives for developers of the smaller fields. But oilmen still grumble that this would leave too little profit if oil prices drop.

Government Takeover. Another complication is that during last year's election campaign, Wilson promised voters a 51% government takeover of the North Sea oilfields. The companies complain that when the Labor government first granted them concessions in the late 1960s, a takeover was not part of the deal. Worried about all those problems, bankers have been reluctant to grant new loans for North Sea operations, and Amoco, Conoco, Occidental and Phillips Petroleum have lately scaled down drilling additional wells.

The companies argue that they need a better shake in order to pay for their huge development expenses. Exploration and drilling costs are running five times what they are in the placid blue of the Persian Gulf. One reason: the treasure is deep. Oilmen must drop their rigging 400 to 600 ft. beneath turbulent waves then drill another 8,000 to 12,000 ft. beneath the sea floor (see diagram). And North Sea weather is worse than bleak. Last month a crew member on a British Petroleum rig was swept into the sea in an icy storm; his death was the 43rd since drilling began in 1964.

Meanwhile, the government of another country has recognized that it cannot extract all that it would like from the oilmen. Norway had hoped to tax away 90% of the companies' North Sea profits. Last week, however, Oslo's Labor Party government reduced its preliminary tax proposal to 70% to 75% --still too high in the view of the oilmen, but at least a step in their direction.

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