15. 5. 75 Official  Journal  of the European  Communities No C 108/55 
Opinion  on the  proposal  for a Council  Regulation  concerning  support  to common 
projects  for  hydrocarbon  exploration 
The text  referred  to the Committee  was  published  in Official  Journal  of the European 
Communities,  No  C 18 of 25 January  1975,  pages  3 to 5. 
A. LEGAL  BASIS  FOR  THE  OPINION 
On 10 December  1974,  the Council  referred  the above  mentioned  proposal  to the 
Economic  and  Social  Committee  under  Article  198  of the  Treaty  establishing  the 
European  Economic  Community. 
B. OPINION  OF  THE  ECONOMIC  AND  SOCIAL  COMMITTEE 
The Economic  and Social  Committee  drew  up its Opinion  at its 128th  plenary  session, 
held in Brussels  on 26 and  27 February  1975 
The Opinion  is published  below: 
THE  ECONOMIC  AND  SOCIAL  COMMITTEE, 
Having  regard  to the referral  on 11 December  1974 
by the Council  of the European  Communities  of the 
proposed  Council  Regulation  concerning  support 
to common  projects.for  hydrocarbon  exploration; 
Having  regard  to the Treaty  establishing  the Euro-
pean  Economic  Community,  and  in particular 
Article  198  thereof; 
Having  regard  to the decision  taken  by its Bureau 
on 18 December  1974,  instructing  the Section  for 
Energy  and  Nuclear  Questions  to draw  up an 
Opinion  and  a report  on the matter; 
Having  regard  to the  Opinion  adopted  by the 
Section  for  Energy  and  Nuclear  Questions  at its 
meeting  on 7 February  1975; 
Having  regard  to the  report  submitted  at this 
meeting  by the Rapporteur,  Mr Noordwal; 
Having  regard  to the discussions  at its 128th  plenary 
session  of 26 and  27 February  1975,  sitting  of 
27 February  1975; 
Whereas  there  is an urgent  need  to implement  a 
common  energy  policy  for the Community  which 
minimizes  its external  dependence; 
Whereas  the  development  of energy  sources  in 
general  and  hydrocarbons  in particular  must  play 
a vital  role  in such  a policy; Whereas  appropriate  financial  assistance  from  the 
Community  could  provide  useful  encouragement 
towards  the fulfilment  of its energy  policy  objectives, 
HAS  ADOPTED  THE  FOLLOWING  OPINION 
by 36 votes  to six with  one  abstention: 
1. General  comments 
1.1. Overall  remarks 
1.1.1.  The  Committee  endorses  the Commission's 
proposal  to grant  support  to common  projects  for 
hydrocarbon  exploration,  subject  to the  remarks 
outlined  below.  It considers  that  any  such  measures 
taken  to reduce  the Community's  external  energy 
dependence  are worthy  of the fullest  support. 
1.1.2.  It  is worth  recalling  that  the  Community 
has already  implemented  a somewhat  similar 
Regulation  (EEC)  No 3056/73  (x) of 9 November  1973 
granting  support  to technological  development  and 
transport  activities  in the  hydrocarbons  fields. 
Both  this  proposal  and  the  favourable  Opinion 
expressed  by the Committee  thereon  (2) were  drawn 
up long  before  the substantially  altered  situation 
(x) OJ  No L 312,  13. 11. 1973,  p. 1. 
(a) OJ  No C 36, 1. 6. 1973,  p. 27. 
No C 108/56 Official  Journal  of the  European  Communities 15. 5. 75 
on the world  energy  market  had  been  precipitated 
by the events  of October  1973.  As  a result  of these 
developments,  the  justification  for  such  measures 
has been  further  reinforced. not peculiar  to operations  at sea,  they  are  also 
present  on  dry  land.  Consequently,  the  draft 
Regulation  should  be extended  to cover  exploration 
on dry land,  provided  certain  conditions  are met. 
1.1.3.  The  Committee  notes  that,  while  the Regu-
lation  (EEC)  No  3056/73  was  applied  only  to pro-
jects  for 'technological  development  directly  connec-
ted with  prospecting,  producing,  storing  and  trans-
porting  hydrocarbons',  the  present  proposal 
envisages  Community  support  for  the  actual  pros-
pecting  of hydrocarbons. 
1.1.4.  The  principal  objective  of the  present 
proposal  must  be to promote  the search  for hydro-
carbons  which  will  improve  the  security  of the 
Community's  energy  supply.  Accordingly,  the 
Community  must  be given  adequate  means  of 
influence  and  supervision  to ensure  that  the  funds 
are used  for the purpose  for which  they  were  intended. 
When  granting  Community  support,  special  atten-
tion must  be given  to the problem  of ensuring  that, 
where  a discovery  is made,  it is exploited  in such  a 
way as to make  a concrete  contribution  to this 
objective  within  the  framework  of a Community 
policy. 
1.1.5.  The  Committee  points  out that  exploration 
work  only  constitutes  a small  proportion  of the 
total  cost  of bringing  new  sources  of hydrocarbons 
into production.  After  exploration  has  successfully 
been  completed  there  remain  formidable  financial 
and technical  problems  to be overcome  both  in 
building  and  installing  production  and  transport 
equipment.  It  is hoped  that,  once  the  present 
Regulation  has  been  adopted,  the Commission  will 
examine  what  role  the  Community  should  play  in 
these  subsequent  phases  of development  work. 
1.2. Territorial  scope  of the draft  Regulation 1.2.2.  The  Committee  considers  that,  if certain 
conditions  are  met,  hydrocarbon  production  in 
territories  outside  those  suggested  by  the  Com-
mission  can  improve  the  supply  situation,  for 
instance,  if a Community  undertaking  extracts 
hydrocarbons  in a non-member  country  by virtue 
of a participation  agreement  with  the host  country 
which  settles  the exploration  risk  on the Community 
undertaking.  In  such  cases,  and  in cases  where 
exploration  is subject  to the difficulties  and  expense 
mentioned  in the draft  Regulation,  the Community 
undertakings  concerned  should  be  eligible  for 
Community  support. 
1.3. Recipients  of support 
1.3.1.  It  is noted  that  the  proposal  for  support 
is also  restricted  to projects  which  'take  the  form 
of cooperation  between  several  Community  com-
panies'.  The  Committee  refers  to its Opinion  on 
the proposal  for a Council  Regulation  on applying 
the status  of joint  undertaking  to the  activities 
carried  out  by the hydrocarbons  industry  in which 
clarification  of the  legal  nature  of a joint  under-
taking  was  requested  and  in which  it was  pointed 
out that,  while  the  participation  in the  projects 
by a number  of undertakings  from  several  Member 
States  was  desirable,  it should  not,  however,  be made 
an essential  condition. 
1.3.2.  In  view  of the legal  considerations  involved 
(viz. Article  4 of the proposal),  the draft  Regulation 
should  state  that  the 'undertakings  carrying  out  the 
exploration  projects',  and  not  'exploration  pro-
jects',  are eligible  for support. 
1.2.1.  The  Community  must,  of course,  take  all 
appropriate  steps  to increase  indigenous  hydrocarbon 
production,  since  this  is a preferable  solution  to 
the problems  of security  of supply  and  lightening 
the burden  of international  payments.  The  Com-
mission  proposes  support  for 'exploration  operations 
presenting  a prime  interest  to the  Community  and 
entailing  particular  risks'.  However,  it is unclear 
why this  support  should  be limited  to offshore 
operations.  Environmental,  technical  (great  depths, 
etc.) and  geological  (formations  which  make  seismic 
exploration  inoperable  or inefficient)  difficulties  are 1.3.3.  In  some  of the  areas'  covered  by the  draft 
Regulation,  Community  operators  have  already 
established  consortia  with  operators  from  non-
member  countries  for schemes  which  have  not  yet 
been  commenced.  Any  exploration  projects  arising 
from  these  activities  should  not  be denied  Commu-
nity support,  even  though  Article  1 of the  draft 
Regulation  clearly  states  that  there  must  be coope-
ration  'between  several  Community  companies'. 
In these  cases  Community  support  should  only 
reflect  the  degree  of involvement  of the  EEC 
operator  or operators. 
15. 5. 75 Official  Journal  of the  European  Communities No C 108/57 
1.3.4.  In  order  to pursue  the  object  of the draft 
Regulation  to the  full,  the Community  would  have 
to take  active  steps  to encourage  consortia  to be set up 
to deal  with  areas  where  operators  from  the Commu-
nity and  non-member  countries  have  not  yet  com-
menced  joint  activities.  Undertakings  from  all 
the Member  States  would  be eligible  to join  these 
consortia.  The  Committee  considers  that  it is 
essential  to mobilize  all available  resources  for the 
hydrocarbons  exploration  effort  and  that,  apart 
from  the legal  considerations  involved,  it would  be 
undesirable  to exclude  subsidiaries  whose  parent 
companies  are  constituted  and  based  outside  the 
Community.  It holds  that  these  undertakings  have, 
for a long  time  been  active  participants  in the 
exploration  of hydrocarbons  and  have  thus  acquired 
considerable  technical  experience  and  should,  with 
adequate  guarantees,  be also  eligible  to participate 
in projects  benefiting  from  Community  support. 
1.4. Allocation  of support 
1.4.1.  The  fact  that  the Community  stands  to gain 
by increasing  the amount  of hydrocarbons  directly 
available  to it is good  reason  for not  compounding 
the difficulties  involved  in selecting  the  projects 
to be supported  (it is to be inferred  from  the second 
paragraph  of Article  1 that  Community  support 
will not  be automatically  granted  to all projects  by 
making  it difficult  to determine  how  much  support 
should  be  allocated.  The  Committee  therefore 
requests  that  the words  'where  essential'  should  be 
deleted. work  and  that  required  after  exploratory  work 
has been  carried  out. 
1.4.3.  The  proposal  does  not  state  whether  the 
commercial  viability  of a deposit  is to be determined 
unilaterally  by the  discoverer  or jointly  with  the 
Commission.  In  the  first  case,  if the  decision  is 
negative,  the  deposit  would  not  be exploited  and 
the financial  support  would  not  be  reimbursed. 
The result  would  be the same  in the second  case  if 
the discoverer  did  not  accept  the  Commission's 
conclusions  and  the  Commission  did  not  have  the 
power  to impose  its views  on the  other  party. 
As the  proposal  reads,  the  decision  on whether  a 
deposit  is commercially  viable  or not  is determined 
by the profitability  evaluation  made  by the discoverer 
on the  basis  of subjective  commercial  criteria.  It 
then  has  to be asked  whether  the  Community's 
prime  interest  of expanding  its internal  resources 
is adequately  protected  if the exploitation  of deposits 
is dependent  solely  on private-enterprise  profitability. 
The Committee  considers  that  the  determination  of 
profitability  cannot  be left  entirely  either  to the 
undertakings  or to the  Commission.  Where  there 
is disagreement  between  their  respective  estimates  of 
the commercial  viability  of a project,  the  matter 
should  be referred  to an independent  arbitrator 
whose  decision  should  be binding. 
1.4.4.  The  difficulties  arising  from  the  adoption 
of the  'commercial  success'  criterion  can  only  be 
eased  by introducing  a sufficiently  clear  statement 
of reimbursement  procedures  in  the  proposed 
Regulation. 
1.4.2.  The  Committee  notes  that  Article  6 of the 
draft  Regulation  makes  the granting  of support  and 
its amount  contingent  on two  factors  : 
(a) the  risks  entailed  by the difficulties  involved  in 
exploration,  and 
(b) the  project's  'anticipated  contribution  to the 
supply  of the  Community'. 
Factor  (b)  should  not  be  narrowly  interpreted. 
It will  be impossible  to forecast  output  in terms  of 
quality  and  quantity  when  the  Council  decision 
is taken,  since  the  field  will  not  yet  have  been 
discovered.  The  spirit  of the  draft  Regulation 
would  be served  sufficiently  if the criterion  followed 
is that  of the technical  and  climatic  difficulties  invol-
ved, their  impact  on costs  and,  if need  be,  the 
probability  of making  a discovery.  The  Committee 
therefore  suggests  that  the  proposed  Regulation 
should  make  a distinction  between  information 
which  is required  before  undertaking  exploratory 1.5. Budgetary  allocation 
1.5.1.  The  Commission's  proposal  makes  no 
provision  for  the  total  amount  of money  to be 
reserved  in the  Community's  budget  for  support 
granted  under  the proposed  Regulation.  However, 
it is noted  that  the Commission  in its communication 
to the Council,  entitled  'A Community  policy  in the 
hydrocarbons  sector',  mentions  an annual  figure 
of 50 million  units  of account  from  1976  onwards 
for technological  development  projects  to  be 
carried  out  under  Regulation  (EEC)  No  3056/73. 
The Committee  would  point  out  that  for  support 
for exploration  work  itself  under  the present  proposal 
a substantially  larger  allocation  would  be required. 
The magnitude  of the  problem  is underlined  when 
one considers  that,  in the  case  of offshore  work, 
the cost  of drilling  a single  well  can  amount  to 
3*5 to four  million  units  of account  and  that  the 
ratio  of significant  discoveries  to wells  sunk  is at 
least  of the order  of one  to ten.  If the Community 
No C 108/58 Official  Journal  of the European  Communities 15. 5. 75 
effort  is to have  any  significant  impact,  much 
greater  financial  provision  must  be made.  It is 
perhaps  also  worth  pointing  out that  an accelerated 
programme  to develop  hydrocarbons  in the  next 
decade  will  mean  a heavy  concentration  of expen-
diture  on exploratory  work  in the next  five  years  for 
which  special  provision  should  be made.  At  the 
same  time  it is important  that  a certain  amount  in 
the Community's  budget  should  be set aside  every 
year in order  to ensure  the continuity  of the hydro-
carbons  exploration  effort  over  a longer  period  of 
time. 
1.6. Obligations  of participating  companies 
1.6.1.  The  obligations  incumbent  upon  the under-
takings  which  benefit  from  Community  support, 
as defined  in Article  6 (2), are unsatisfactory. 
1.6.2.  There  may  well  be no point  in exchanging 
information  on projects  in areas  which  are far apart 
and have  very  different  environmental  and geological 
conditions.  Moreover,  such  exchanges  would  be 
inappropriate  if between,  or adjacent  to,  areas 
covered  by individual  projects  there  were  to remain 
non-assigned  areas  to which  the  undertakings 
involved  might  aspire  in competition  with  one 
another.  The  obligations  to exchange  information 
should  be specifically  limited  to relevant  information 
resulting  from  the projects.  The  question  is taken 
up in greater  detail  in the specific  comments. 
1.6.3.  Information  should  also  be sought  from 
the companies  on their  broad  plans  for the method 
of extraction,  transport,  refining  location  and marke-
ting of any  hydrocarbon  discoveries  made.  Where 
a contract  for support  is signed  between  the Commu-
nity and  the  operating  company  it should  include 
assurances  that  any  finds  made  would  be used  to im-
prove  the  energy  supply  position  of the  Member 
States. 
1.7. The  three-year  exploration  programme 
1.7.1.  According  to the  present  wording,  the 
allocation  of Community  aid  is subject  to the 
Council  Decision  on a three-year  exploration  pro-
gramme  submitted  by  the  Commission.  The 
Committee  considers  that  the  Commission  must clarify  what  is meant  by 'a three-year  programme 
of exploration  chosen  from  the  projects  sub-
mitted'. 
1.7.2.  The  Committee  finds  it strange  that  no 
reference  has  been  made  as to how  the  proposed 
programme  would  be integrated  in the framework 
of the new  energy  policy  strategy  and,  in particular, 
the energy  targets  which  have  been  set for 1985. 
1.7.3.  The  Committee  can  accept  the  concept 
of such  a three-year  programme  provided  that 
the Commission  makes  it clear  that  the programme 
would  be continued  beyond  the first  three  years  of 
its operation  and  that  it would  also  take  on a 
revolving  character  through  the  use  of money 
repaid  in the  event  of commercial  success  to 
finance  new  projects. 
1.7.4.  The  Committee  also  wonders  whether  the 
proposed  procedure  for  the  approval  of projects 
might  be somewhat  cumbersome  in that  considerable 
time could  elapse  between  the  submission  of an 
individual  project  to the  Commission  and  the 
completion  by the latter  of its proposal  for a complete 
three-year  exploration  programme.  The  Committee 
feels  it would  be undesirable  to hold  up a good 
proposal  until  all applications  had been  received  and 
processed  as this  delay  would  have  to be super-
imposed  on the  time  required  to carry  out  the 
exploratory  work  and,  where  successful,  on the 
substantial  lead-time  required  to bring  the well  into 
production.  There  also  is no reason  to refuse 
Community  aid to, or to delay  exploratory  projects 
which,  if excluded  from  a programme,  could  be 
launched  in the  three-year  interval  between  one 
programme  and  the next.  The  Commission  should 
therefore  state  clearly  that  the three-year  exploration 
programme  once  established  would  not be immuta-
table.  Moreover,  the very  nature  of oil and  gas 
exploration  means  that  programmes  must  be 
speeded  up or slowed  down  in response  to the 
possible  difficulties  which  may  arise.  For  this 
reason,  the  programme  should  also  be open  to 
revision  in the  light  of results  obtained  provided 
that this  would  not lead  to the suspension  of support 
already  promised. 
1.7.5.  The  period  from  the date  of submission  of 
the programme,  within  which  the  Council  must 
take its decision,  should  also  be indicated. 
1.7.6.  The  procedure  for  Council  approval  of 
projects  should  be clarified.  Article  5 states  that 
the individual  projects  are to be submitted  separately 
15. 5. 75 Official  Journal  of the  European  Communities No C 108/59 
to the  Council,  while  Article  6 includes  them  in 
the programme. 
1.8. Worker  safety  and  environmental  protection 
1.8.1.  The  Commission  must  ensure  that,  in the 
case of offshore  projects  benefiting  from  Community 
support,  adequate  provisions  should  be included 
both  for  worker  safety  and  environmental  protec-
tion,  particularly  where  projects  are situated  in deep 
sea conditions  and  exposed  locations.  For  this 
reason  the  information  submitted  on  projects 
proposed  for offshore  areas  should  include  technical 
and operational  data  which  would  permit  evaluation 
of safety  standards,  particularly  for  underwater 
work,  and  blow-out  prevention  and  oil  spillage 
clean-up  procedures  both  during  exploratory  work 
and at the  subsequent  production  stage.  As  a 
more  general  rule,  these  standards,  where  not 
already  governed  by national  legislation  in some  of 
the Member  States,  should  be worked  out  in nego-
tiations  between  the trade  unions  and  the operating 
companies. 
2. Specific  comments 
2.1. Article  1 (1) 
2.1.1.  Since  both  the  text  of the  statement  of 
reasons  and  that  of the  recitals  cover  the  same 
ground  as the  text  of the  Articles,  the Committee 
makes  its specific  comments  under  the latter  heading. 
These  comments  apply  equally  to the  two  former 
headings. 
2.1.2.  The  Committee  suggests  that,  for the reasons 
outlined  in the general  comments,  the words  'where 
essential'  should  be deleted. 
2.2. Article  1 (2) 
2.2.1.  The  Committee  feels  that  it would,  a priori, 
be a pity  to exclude  projects  holding  interest  for the 
Community  and,  in particular,  for  its security  of 
supply  for the sole  reason  that  these  had  been  put 
forward  by one  undertaking.  It therefore  proposes 
that the paragraph  be amended  to read: 
'Projects  eligible  to benefit  from  the Community 
support...  should  preferably  take  the  form  of 
cooperation  (etc.)...' 
2.2.2.  The  Committee  considers  that,  in order  to 
mobilize  all available  resources  for the hydrocarbons exploration  effort,  Community-based  subsidiaries, 
whose  parent  companies  are  constituted  and  based 
outside  the  Community,  should,  with  adequate 
guarantees,  also  be eligible  to participate  in projects 
benefiting  from  Community  support.  It points  out 
that these  companies  have  acquired  considerable 
technical  experience  in the  field  of hydrocarbons 
exploration  and  have,  moreover,  for a very  long  time 
worked  in cooperation  with  Community  companies 
in this  area. 
2.3. Article  2 
2.3.1.  Because  stratographic  drilling  can,  in some 
cases,  be dispensed  with,  the  words  'of  strata' 
should  be deleted. 
2.3.2.  The  Committee  considers  the limitation  of 
Community  support  to a maximum  of two  wells  — or 
three  as orally  suggested  by the representatives  of 
the Commission  — is both  too  stringent  and  too 
arbitrary.  Normally,  in the  event  of a show  of 
hydrocarbons,  it will  be necessary  to drill  a number 
of appraisal  wells  before  the  size  of the  deposit, 
and hence  its commercial  viability,  can be established. 
Even  at this  stage  the  undertaking  will  still  have 
to meet,  without  Community  support,  the substan-
tially  larger  costs  of installing  production  and 
transport  equipment  before  the hydrocarbons  can  be 
extracted.  Accordingly,  the  Committee  proposes 
that the second  indent  of the  first  paragraph  should 
be amended  to read  as follows: 
' — the drilling  of one  or more  wells  to determine 
the importance  and  profitability  of the deposit.' 
2.4. Article  3 
2.4.1.  In  order  to ensure  that  all legal  entities  who 
might  be  involved  in hydrocarbon  exploration 
work,  particularly  some  of those  in the  United 
Kingdom  (Gas  Council,  National  Coal  Board)  are 
covered  by the definition  in the second  paragraph,  the 
first sentence  thereof  should  be amended  to read 
as follows  : 
'If the  creation  of a legal  entity  to undertake  a 
project  involves  additional  costs  for  the  partici-
pating  firms,  such  a project  may  be carried  out 
by simple  cooperation  between  natural  or legal 
persons  or legal  undertakings.' 
2.5. Article  4 (1) 
2.5.1.  For  the  same  reasons  as outlined  in the 
comments  on Article  2 above,  continued  activity 
after  the  completion  of two  or three  exploratory 
No C 108/60 Official  Journal  of the  European  Communities 15. 5. 75 
wells  cannot  be taken  as a criterion  for commercial 
success.  The  final  sentence  should,  therefore,  be 
amended  to read  as follows: 
'A commercial  success  is considered  to be the 
discovery  and  exploitation  of a deposit  the  size 
and quality  of which  present  sufficient  guarantees 
of profitability'. 
2.5.2.  Normally,  it will  be in the interest  of both 
the companies  and  the  Community  to exploit  a 
deposit  which  is considered  to be profitable.  It can 
only  be considered  a 'commercial  success'  when  it 
has been  put  into  production  and  it is only  at that 
stage  that  the  repayment  procedure  contained  in 
this Article  should  come  into  effect. 
2.5.3.  Further  definitions  may  be  necessary  in 
determining  'commercial  success'  as this  concept 
can depend  on the allowance  that  is made  for depre-
ciation  and  for  economico-political  factors  such  as 
operating  conditions  laid  down  by national  autho-
rities. 
2.6. Article  4 (2) 
2.6.1.  The  Committee  believes  that  the limitation 
of a Community  support  to a maximum  of 25 % 
of the total  cost  of the project  is too restrictive  when 
it is considered  that  the more  or less  similar  Commu-
nity support  granted  by the  Council  on 17 De-
cember  1974  to 21 projects  under  Regulation  (EEC) 
No 3056/73  amounted  to 40 % in five  cases  and 
constituted  an average  of 34 % for  the  group  of 
projects  as a whole.  It accordingly  proposes  that 
the ceiling  be raised  to 40 % in the case  of the present 
Regulation. 
2.6.2.  The  Committee  agrees  that  subsidies  paid 
by the Community  should  be repaid  in the event  of 
the project  becoming  commercially  successful. 
However,  in the text  of the proposal,  it is far from 
clear  on what  basis,  when  and  by whom  a project 
may be determined  a success  or a failure.  This 
cannot  be left  entirely  either  to the undertakings  or 
to the  Commission.  Where  there  is disagreement 
between  their  respective  estimates  of the commercial 
viability  of a project,  the matter  should  be referred 
to an independent  arbitrator,  whose  decision  should 
be binding. 
2.6.3.  The  proposed  Regulation  should  also 
include  detailed  instructions  setting  out  procedures 
to be followed  in the event  of repayment.  This  is 
important  because  undertakings  cannot  be left  in 
doubt  about  the  date  on which  repayment  is to 
commence,  and  the method  of payment. 2.6.4.  The  procedure  for repayment  in the event 
of a commercial  success,  should  also  take  into 
account,  the  undertakings'  payment  schedule  for 
their  fiscal  commitments  to national  authorities. 
2.7. Article  5 (1) 
2.7.1.  The  Committee  feels  that  it should  be 
made  clear  that  it is intended  for  each  project  to 
consult  all Member  States  and  not  simply  those 
Member  States  who  are  hosts  to the  undertakings 
responsible  for the  individual  projects. 
2.7.2.  It  is also  not  clear  what  is expected  of the 
Member  States  consulted  on  projects  submitted 
directly  to the  Commission. 
2.8. Article  5 (2) 
2.8.1.  The  text  as presently  drafted  may  give  rise 
to confusion  since  some  of the  various  items  of 
information  requested  may  not  be available  until 
after  the exploratory  drilling  work  has  been  carried 
out. The  Committee  therefore  suggests  that  the 
report  requested  in this  Article  should  be limited 
to information  which  is available  before  the explo-
ratory  work  is carried  out,  while  the obligation  to 
submit  all subsequent  information  should  be built 
into a separate  Article.  The  second  sentence  of the 
Article  should  thus  be amended  to read: 
'This  report  shall  give: 
— a detailed  description  of the project  and  most 
particularly  the  drilling  programme; 
— the results  of geophysical  studies  undertaken; 
— the  nature  and  extent  of the risks  involved; 
— the  cost  of the  project  and  the  financial 
methods  for carrying  it out; 
— all other  factors  which  justify  the importance 
of the  support  proposed  by the  Commission 
for this  project; 
— details  of standards  observed  for worker  safety 
and environmental  protection  where  not  al-
ready  covered  by national  legislation; 
— the financial  situation  and  the technical  capa-
city of those  responsible  for the project; 
— the  measures  of support  forecast  or anticipated 
by the member  countries  for the achievement 
of the project; 
— the  possible  support  from  the  European 
Investment  Bank.' 
15.5.75 Official  Journal  of the  European  Communities No C 108/61 
2.9. Article  6 (1) 
2.9.1.  The  Committee  considers  that  Council 
decisions  on the  three-year  programme  should  be 
taken  by a qualified  majority  and  proposes  that 
the first  sentence  of this  Article  be amended  accor-
dingly.  In  line  with  the  general  comments  made 
above  in paragraph  1.7.4.  concerning  the three-year 
programme,  the  Committee  proposes  the  addition 
of the  following  sentence  at the  end  of the  para-
graph  : 
'The  three-year  programme  may,  where  neces-
sary,  be revised  from  time  to time  by the Council 
acting  on  a proposal  from  the  Commission, 
provided  that  such  revision  will  not  result  in the 
termination  or curtailment  of support  which  has 
already  been  approved.' 
2.10.  Article  6 (2) 
2.10.1  Cooperation  on  the  exchange  of infor-
mation  between  companies  should  be declared  by 
the Commission  to be compatible  with  the terms  of 
Articles  85 and  86 of the  Treaty  of Rome  dealing 
with  freedom  of competition  and  relationships 
between  undertakings. 
2.10.2  In  view  of the remarks  made  in the general 
comments  under  1.6  and  the  remarks  made  on 
Article  5 above,  beneficiaries'  obligations  should  be 
covered  by a separate  Article  in the  Regulation 
which  should  replace  paragraph  2 of Article  6 and 
which  should  read  as* follows: 
1 Article  6 (a) 
(i) Undertakings  which  receive  Community  sup-
port shall  agree  to forward  to the Commission 
all information  obtained  in connection  with 
the financed  project  and,  in particular,  the 
following: 
— indications  of the  probable  presence  of 
hydrocarbons  in the areas  of exploration; 
— the  estimated  profitability  of exploitation; 
— intentions  to carry  out further  exploratory 
work; 
— where  successful,  plans  for  bringing  the 
well into  production. 
(ii) The  Commission  shall  hold  preliminary 
consultations  with  these  undertakings  when-
ever it considers  that  such  information 
should  be communicated  to other  under-
takings. 
(iii) Undertakings  shall  cooperate  on the technical 
level  in order  to guarantee  an  optimum 
development  in the regions  covered  by these 
programmes. (iv) Undertakings  shall  provide  adequate  assu-
rances  that  hydrocarbons  extracted  from 
wells  benefiting  from  Community  support 
will be used  to improve  the  energy  supply 
position  of the  Member  States. 
(v) The  procedures  for  communicating  and 
exchanging  information  and  for  technical 
cooperation  between  undertakings  shall  be 
laid down  in a separate  Regulation'. 
2.11.  Article  7 
2.11.1.  The  Committee  upholds  the Commission's 
view  that  financial  support  granted  by the Commu-
nity must  not distort  competition  and  must  therefore 
also be compatible  with  the  requirements  set out 
in Articles  85 and  86 of the  Treaty. 
2.12.  Article  9 
2.12.1.  It  is stated  that  'information  received 
through  the  application  of the.  .. Regulation  will 
be treated  confidentially'.  In order  to protect  their 
legitimate  interests,  the  contracts  signed  between 
the undertakings  and  the Commission  should  specify 
clearly  the information  which  would  be treated  as 
confidential. 
2.13.  Article  10 
2.13.1  While  the concept  of an annual  report  to 
the European  Parliament  and  to the  Council  is 
desirable,  it would  be useful  to know  exactly  how 
it would  conform  with  the assurance  of confidentia-
lity outlined  in Article  9. 
2.13.2.  The  Committee  also  proposes  that  the 
Article  should  read  as follows: 
'The  Commission  will  report  annually  to the 
European  Parliament,  the  Economic  and  Social 
Committee  and  the Council  on the programme  of 
exploration  and  on the  progress  made  on each 
project.' 
2.14.  Annex 
2.14.1.  The  Committee  considers  that  the geogra-
phical  limitation  of projects  eligible  for Community 
support  is too  restrictive.  Exploration  activities  on 
dry land  should  also  be covered  where  there  exist 
technical  difficulties  entailing  high  risks  and  high 
costs.  The  Committee  therefore  proposes  that  the 
Annex  to the Regulation  should  be reworded  to read: 
'The  Community  projects  for  exploration  of 
hydrocarbons  which  can  benefit  from  Community 
support  must  be carried  out: 
No C 108/62 Official  Journal  of the  European  Communities 15. 5. 75 
(a) on the  territory  of the  Member  States,  or limitation  of depth,  beyond  the  60°  N parallel 
and between  20**  E and  70 °W. 
Done  at Brussels,  27 February  1975. (b) in the  territorial  waters  of the  Member  States 
or in adjacent  zones  for  which  the  Member 
States  enjoy  an exclusive  right  of exploration 
recognized  by international  conventions,  where 
the depth  of water  exceeds  100  m, or without The Chairman 
of the  Economic  and  Social  Committee 
Henri  CANONGE 
ANNEX 
to the  Opinion  of the  Economic  and  Social  Committee 
The following  original  text  from  the section  Opinion  was  reworded  as a result  of an amend-
ment  adopted  unanimously  during  the  discussions: 
Paragraph  1.1.4. 
'1.1.4.  The  principal  objective  of the  present  proposal  must  be to promote  the  search 
for hydrocarbons  which  will  improve  the  security  of the  Community's  energy  supply. 
When  granting  Community  support,  special  attention  must  be given  to the  problem  of 
ensuring  that,  where  a discovery  is made,  it is exploited  in such  a way  as to make  a concrete 
contribution  to this  objective.' 
The following  amendments  were  rejected: 
Paragraph  1.3.4. 
Replacement  of the  third  and  fourth  sentences  by the following: 
'However,  the Committee  considers  that  subsidiaries  whose  parent  companies  are  consti-
tuted  and  based  outside  the Community  should  be excluded.' 
Result  of the  vote 
For:  8; against:  40; abstentions:  1. 
Reasons  for  the  above  amendment 
While  it may  be considered  that  companies  based  outside  the  EEC  can  contribute  to the 
search  for new  hydrocarbon  resources  on the territory  of the nine  Member  States,  they  must 
use their  own  capital  to finance  their  activities. 
It is a question  not  only  of finding  more  oil but of tightening  the Community's  control  over 
its supplies.  In conclusion,  it therefore  seems  proper  to reserve  Community  funds  for Commu-
nity-based  companies. 
Paragraph  1.3.4. 
Deletion  of the  last  two  sentences. 
Result  of the  vote 
For:  9; against:  35;  abstentions:  5. 
Reasons  for  the  above  amendment 
The Opinion  makes  no mention  of distinguishing  between  EEC  and  non-EEC  companies 
for the purposes  of allocating  aid.  It follows  that  these  two  sentences  have  no reason  to appear 
in the  Opinion. 
Paragraph  1.4.2. 
Deletion  of the  last  sentence. 
Result  of the  vote 
For:  6; against:  38;  abstentions:  6. 
15. 5. 75 Official  Journal  of the  European  Communities No C 108/63 
Reasons  for  the  above  amendment 
Section  1.4.2  relates  to Article  6 (1).  Article  6 (1) sets  out  the  criteria  which  the  Council  is 
to follow  when  deciding  on the allocation  of the aid.  But,  when  the Council  makes  its deci-
sion the project's  'anticipated  contribution  to the supply  of the Community'  cannot  be known. 
It follows  that  the requirement  to supply  information  after  exploratory  work  has  been  carried 
out cannot  apply  to Article  6 (1),  but only,  if at all, to Article  6 (2). 
Paragraph  1.7.5. 
Addition  of the  following  new  paragraph  after  1.7.4: 
'1.7.5.  In  the  absence  of any  explanation  about  the  scope  of the  programme  and  its 
periodicity,  the Committee  considers  that  the  procedure  for examining  the projects  should 
be amended.  The  Committee  suggests  that  the  Commission  in the  first  quarter  of each 
year  (or of a number  of years  to be specified)  asks  interested  companies  to submit  to it the 
exploration  projects  for which  they  want  Community  financial  support;  that  applications 
must  reach  the Commission  within  a certain  period  (e.g.  60 days)  after  the above  commu-
nication  has  been  made,  together  with  the particulars  stipulated  in Article  5 and  that  the 
Council  shall  give  its ruling  on the  said  applications  within  a certain  period  (e.g.  90 days) 
to be reckoned  from  the expiry  of the first  deadline.' 
Result  of the  vote 
For:  9; against:  29;  abstentions:  13. 
Reasons  for  the  above  amendment 
None. 
Paragraphs  2.3.1  and  2.3.2. 
Replacement  of these  paragraphs  by: 
'2.3.1.  The  Committee  considers  that  the  programme  of work  outlined  in Article  2 
is in line  with  neither  the  realities  of exploration  nor  the  scope  of the  draft  Regulation. 
2.3.2.  The  first  indent  of paragraph  1 of Article  2 stipulates  one  stratigraphic  drilling 
(translator's  note:  the  English  text  seems  to deviate  from  the  other  texts  here).  But,  if 
a stratigraphic  drilling  is not carried  out,  as is very  frequently  the case,  the exploration  dril-
ling,  which  clearly  has  to be made,  is precluded  from  receiving  support. 
2.3.3.  Furthermore,  the  stipulation  of only  one  exploration  drilling  means  that  all pro-
jects  in which  this  drilling  does  not  yield  a discovery  — and  experience  tells  us that  this 
will be the  most  common  case  — will  receive  non-repayable  Community  support  on the 
basis  of this  well  alone.  This  means  that  projects  which  come  up against  greater  difficulties 
and incur  higher  costs  will  be at a disadvantage  compared  with  projects  in which  a discovery 
is made  with  only  one  exploration  drilling. 
2.3.4.  The  Committee,  therefore,  proposes  that  the  two  indents  of the  first  paragraph 
of Article  2 should  be reworded  to read: 
— a maximum  of three  exploration  drillings; 
— two  appraisal  drillings  to determine  the  size  and  profitability  of the  discovery  made 
with  the first  exploration  drilling  to yield  a positive  result. 
The Community  support  shall  be grantable  in respect  of two  appraisal  drillings  even  if 
the discovery  was  made  by means  of an exploration  drilling  which  was  not  Community 
financed.' 
Result  of the  vote 
For:  12;  against:  23;  abstentions:  14. 
Reasons  for  the  above  amendment 
None. 
The following  original  text  from  the section  Opinion  was  altered  as a result  of an amendment 
which  was  adopted  by 40 votes  to five,  with  one  abstention. 
Paragraph  2.9.1. 
'2.9.1.  In  line  with  the  general  comments  made  above  in paragraph  1.7.4.  concerning 
the three-year  programme,  the  section  proposes  the  addition  of the  following  sentence 
at the  end  of the  paragraph; 
"The  three-year  programme  may,  where  necessary,  be revised  from  time  to time  by the 
Council,  acting  on a proposal  from  the  Commission,  provided  that  such  revision  will 
not result  in the termination  or curtailment  of support  which  has already  been  approved.'  " 
The following  amendments,  tabled  in accordance  with  the Rules  of Procedure,  were  rejected. 
No C 108/64 Official  Journal  of the  European  Communities 15. 5. 75 
Paragraph.  2.10.2. 
Replacement  of the  text  of Article  6 (a),  (iv),  by the  following: 
'Hydrocarbon  exploration  projects  which  receive  Community  support  must  embody  the 
following: 
— supply  guarantees  negotiated  by the  interested  parties.  Such  guarantees  must  accord 
with  the requirements  of each  Member  State  and  with  the proven  exploitation  potential; 
— guarantees  against  price  inflation. 
Result  of the  vote 
For:  15;  against:  26;  abstentions:  3. 
Reasons  for  the  above  amendment 
Point  2 of the explanatory  memorandum  of the proposal  anticipates  that  Community  support 
will be extended  to exploration,  exploitation,  storage  and  transport  activities. 
Therefore,  the Committee  is obliged  to deliver  an Opinion  which  covers  every  aspect  of the 
projects,  as the  Commission  does. 
Any project  which  the  Commission  supports  must  be regarded  as a public  contribution. 
Therefore,  the Commission  is entitled  to obtain,  via the  national  institutions,  adequate  gua-
rantees  as regards  the  policy  of the  oil companies.  Supply  and  price  problems  are  a cause 
for concern  for the  Member  States  for several  reasons. 
Considerable  attention  must  be devoted  to the  quantitative  supply  of the  Member  States. 
It must  be in line  with  the actual  exploitation  potential  and  the needs  of each  Member  State. 
North  Sea  oil and  gas are regarded  as a means  of freeing  the Member  States  and  the Community 
from  their  dependence  on imported  energy.  North  Sea  supplies  must  be seen  as a weapon 
in the fight  against  inflation. 
Therefore,  each  Member  State  and  its respective  national  institutions  must  be recommended 
to introduce  laws  to ease  the tax burden  on the final  consumer  and  to ensure  that  the oil com-
panies  are  properly  taxed. 
Paragraph  2.10.2. 
Replacement  of the  text  of Article  6 (a),  (iv),  by the  following  commentary: 
'Tax  law  must  be revised  and  each  Member  State  must  take  the  appropriate  steps.  The 
Committee  considers  that  such  a revision  of tax  law  must,  firstly,  aim  at easing  the  tax 
burden  on the final  consumer  and,  secondly,  must  ensure  proper  taxation  of oil companies 
which  benefit  from  Community  support  for projects  which  have  been  adopted  and  which 
have  exploration,  exploitation,  storage  or transport  potential.' 
Result  of the  vote 
For:  3; against:  32;  abstentions:  8. 
Reasons  for  the  above  amendment 
As for the first  amendment  to paragraph  2.10.2  above. 
The following  passage  from  the section  Opinion  was  replaced  by an amendment  which  was 
adopted  by 21 votes  to eight,  with  12 abstentions. 
Paragraph  2.14.1. 
'2.14.1.  The  Committee  believes  that  the  wording  "or  adjacent  zones  not  subject  to 
sovereignty"  is inadequate,  firstly,  since  it is not  clear  geographically  how  far an "adjacent 
zone"  can  extend  and,  secondly,  sea areas  "not  subject  to sovereignty"  meaning  "not  subject 
to the sovereignty  of any  nation"  are,  given  the present  number  of internationally  disputed 
areas,  hard  to define. 
2.14.2.  In  any  case,  the Committee  considers  that  the geographical  limitation  of projects 
benefiting  from  Community  support  is too restrictive.  Onshore  exploration  activity  should, 
under  certain  conditions,  also  be covered.  Indeed,  subject  to assurances  included  in parti-
cipation  agreements  that  any  finds  made  would  be used  to improve  the Community's  energy 
supply  position,  the  Committee  believes  that  no specific  geographic  restriction  should  be 
imposed.  Accordingly,  both  the  Annex  and  the  reference  made  to it in Article  1 of the 
Commission's  proposal  should  be deleted.'