Shell to Sea People’s Forum,
Inver, July 2, 2011
Shell to Sea has a lot to be proud of. In its ten years of existence it has achieved many successes. Most notably it has forced the would-be mandarins in government departments, regulatory authorities and local government to rethink their old â€œtouch the forelockâ€ attitudes to the multinational oil companies and their followers, in favour of a more citizen friendly approach.
The favourable impact is not only on Shell and its partners but also on other individuals and corporations that attempt to ride roughshod other the rights and interests of people and communities both now and in the future. Of course, there is more to be done but much has been achieved.
It is arguable that many towns in Mayo would never has been connected the natural gas grid had it not been for the Shell to Sea campaign. It wasnâ€™t an objective of the campaign but it is one of the side-effects achieved as a result of the attempts by Shell and its official backers attempted to buy support.
Those who have benefited from Shellâ€™s seeming largess should realise that without the Shell to Sea campaign there would have been a lot less of it.
Another very notable success of the Shell to Sea campaign has been its highlighting of the scandalous way that our natural resources are been given away. The campaign undoubtedly played a part in forcing the Government to improve the licensing terms in 2007. But they are still far too generous to the oil companies and much more needs to be done, and urgently.
Last year Conor Lenihan, then junior minister to Ã‰amon Ryan in the Department of Communications, Energy and Natural Resources invited applications for licensing options to all of the remaining areas off the west coast. Fifteen applications had been received by the end of May and they are now being assessed in the Department.
It can be assumed that these applications cover all of the remaining potential oil and gas bearing structures in the area. If these licences are issued, there will be little left to licence in the future.
Given the rapidly changing world energy market and the spiralling cost of oil and gas, it is essential that government policy with regard to the exploitation of any hydrocarbon reserves be reassessed before any fresh licences are issued.
Following a DÃ¡il debate on offshore licensing terms in May, the Minister for Communications, Energy and Natural Resources, Pat Rabbitte undertook to have the current terms considered by an Oireachtas Committee. This is the least that should be done before any new licences are issued. The Committee should have the widest possible brief to consider not only the changes necessary in the licensing terms but also alternatives involving a more direct State involvement.
But there is still no guarantee that new licences will not be issued before the promised review takes place or, ven if they are put on hold, that the review will be adequate in its scope. Up to now Mr Rabbitte has shown no sign of deviating from the policies pursued by his predecessors. Only two pages of the briefing document were devoted to hydrocarbon exploration including the Corrib debacle and in the DÃ¡il debate initiated by Sinn FÃ©in last month the Minister showed no sign of any fresh thinking on the issue.
It was very clear that the permanent government is alive and well in the Department of Communications, Energy and Natural Resources, and that Mr Rabbitte has taken his brief only too well from his department chiefs who were described during the debate as very dogmatic on the issue of our offshore resources by former minister Ã‰amon O Cuiv.
The Departmentâ€™s dogmatic view was accepted by Mr Rabbitteâ€™s predecessors, Ã‰amon Ryan, Conor Lenihan and before them by Fianna Fail minister Noel Dempsey and it seems that the Labour minister has succumbed within weeks of taking office. We can only hope that given time he will consider the possibility that the Department might just be wrong and that there are alternative policies that need to be considered.
That type of unquestioning attitude to the dogmatism of the bankers, the regulators and many civil servants is at the root of much of our current financial problems. Yet we seem bound to repeat our mistakes.
While later conceding An tUas O Cuivâ€™s suggestion that the issues should be considered by an Oireachas Committee, Mr Rabbitte gave no indication of backing down on his intention to issue fresh licences under the current terms and conditions. This is nothing short of scandalous and in no way justified by the general arguments he put forward in the DÃ¡il.
The fifteen consortia that have applied for licences under the current round have clearly
cherry picked the best prospect. If they are granted licences, they wonâ€™t even be required to drill a well. All theyâ€™ll have to do is pay a fee of only â‚¬1,520 and buy, or carry out, some seismic exploration using boats that may never even call into an Irish port. In return they gain an option to get a full exploration licence at any time during the following two years. Such a licence would allow them to exploit any find at the current generous fiscal terms.
The Department itself, in an official document available on its web site, describes our terms as â€œamongst the most attractive in the worldâ€. For many finds the State take would be no more that a 25% corporation tax charged on profits after allowance has been made for all exploration and development costs.Â For very large finds the take can go up to 40% but even thatâ€™s low by international standards.
In North America the minimum Government stake according to a report prepared within Mr Lenihanâ€™s department is 42% and it can rise above 60%.Â South American governments get between 25% and 90%. The take in sub Saharan Africa ranges from 44% to 85%.
Just how generous our terms are was made clear when Tony Oâ€™Reillyâ€™s Providence Resources got an exploration licence in 2006 and was able to do a deal with Exxon Mobile under which the US giant took 80% in return for giving Providence and itâ€™s partner, Sosina Exploration, a free ride on the other 20%.
So Exxon Mobile was willing to give away a 20% free stake. That could have been got by the State rather than Providence.
The licence covers the Dunquin prospect that on some relatively conservative estimates could be five times as big as the Kinsale gas field.
Our very favourable licensing terms have been defended in the past on the basis that we still need to prove the potential of Irish waters to yield sizeable oil and gas finds.Â Once weâ€™ve made that big strike, it has been argued, we can then up the anti for new licences.Â It might be a valid argument if we hadnâ€™t already licensed many of the most promising areas, most of them at the previous give-away terms under which the State can get no more than a 25% profit tax irrespective of the size of the find.
There is no case at all to be made for now letting the oil companies lay claim to the most promising of the remaining areas of the Atlantic margin at the current terms.Â Thereâ€™ll be nothing left on which we can demand the type of return due to the Irish people for the exploitation of their natural resources.
Putting the issue of new licences on hold wouldnâ€™t put an end to exploration. There are plenty of scope for exploration in areas already licensed.Â Mr Rabbitte made great play, in his DÃ¡il contribution, of the fact that only four discoveries off the Irish coast have been declared commercial. Thatâ€™s true but 13 other discoveries are still being assessed. There have been two oil finds and three gas finds since 2002.
Davy stockbrokers in a report prepared earlier this month on Providence Resources pointed out that contrary to popular perception, oil and gas have been found offshore Ireland on numerous occasions. High oil prices and technological advances now offer an opportunity to revisit some of the earlier finds.
Security of supply was another issue raised in the DÃ¡il debate mainly in relation to getting the Corrib gas ashore as quickly as possible. The trouble is that the pipelines bringing gas into Ireland can just as easily bring it out. Shell can sell the gas to whoever it likes and no-one has ever claimed that Bord Gais has rights under any contract.
Even if it has, it doesnâ€™t guarantee security of supply. If gas was ever in short supply in the EU for some reason or other, weâ€™d undoubtedly have to accept a limited supply or else we wouldnâ€™t get any oil.
Even an oil find wouldnâ€™t guarantee security of supply since there is no requirement in the offshore licences for companies to land product in Ireland. Providence Resources is currently examining the possibly of piping oil from some small finds off the south coast into tankers that would most likely take the oil off to a British refinery.
Departmental officials did recommend that the State should be able to demand payment in kind of the extra tax introduced to licences issued after 2007.Â But that proposal was overruled by the Minister or the Government. It never found itâ€™s way into law.
Gas found off the west coast would almost certainly be landed in Ireland but oil could go anywhere. It could be piped from sub-sea facilities into tankers for shipment to refineries anywhere in the world.
We urgently need a debate on the lines suggested by Ã‰amon O Cuiv and a DÃ¡il committee would be as good a place as any to hold it with Department officials having to answer for their views in public. According to the briefing document prepared for Mr Rabbitte they view the oil industryâ€™s representative body, the IOOA, and individual companies as the key stakeholders. Some TDs might be able to remind them that the public that they represent, are the major stakeholders since they own the resources.