[Shell to Sea] It’s a damning indictment of Irish media that most of the media referring to the Irish oil and gas give away recently is from across the water.
Discovery of oil off the southwest cost of Ireland has prompted talk of it being great news for the Irish economy. It could certainly do with some. But the announcement that known oil reserves are commercially recoverable is unlikely to offer any great boon to the economy as a whole. There may be a bonanza, but it will be only for a small coterie of Irish banking, property and oil tycoons who continue to benefit from the state’s largesse while most of the population struggles in the fifth consecutive year of economic slump.
There is a long history of pillage of Ireland’s natural resources, beginning with England’s deforestation of the country for its navy. More recently, domestic politicians have continued that trend. The disgraced former energy minister Ray Burkewas in office when Fianna Fáil granted extraordinarily favourable oil exploration licences to oil companies. The former head of Enterprise Energy Ireland, Brian O’Cathain, is reported to have said that some oil developers, such as Shell, will pay no royalties at all for the lucrative Corrib field, worth up to €10bn, and elected representatives have called on the current Fine Gael/Labour party coalition government to reverse the deal, so far without success.
The troika of EU, IMF and European Central Bank have insisted that Irish taxpayers bail out bondholders in failed Irish banks even while the domestic economy continues to contract. The domestic troika, Fine Gael, Fianna Fáil and Labour, continue to insist there is no alternative.
Providence Resources, which made the recent announcement about the oil reserves, also benefits from exceptionally low tax rates and the facility to write any exploration costs against tax. It is like being reimbursed for buying lottery tickets until one or more is a winner. Except that finding oil in Ireland’s offshore has long been a certainty, and the elevated price of oil now makes exploration highly profitable.
The chief executive of Providence, Tony O’Reilly Jr, explicitly hopes to emulate the British experience. This seems unlikely for two reasons. The tax rates for North Sea oil at the time of commercial exploitation ranged from 50% to 75%, and the major oil companies in Britain, such as BP, also owned “downstream” businesses of refining and selling oil commercially, which protected them against fluctuations in the oil price. In contrast, without the necessary investment in refineries, the virtually untaxed developers in Irish waters may not even bring the oil onshore to Ireland.
But the North Sea oil boom under Thatcher is hardly a model of sustainable growth. Then, government oil revenues allowed an earlier version of austerity (then labelled “monetarism”) to be followed by tax cuts and the profligacy of the “Lawson boom“. Now that Britain is once more an oil importer, latter-day Thatcherites who imagine the Tory triumphs of the 1980s can be repeated are living in a fantasy. There is no positive legacy for Britain of the North Sea oil boom.
This week’s events show another model is possible. Hugo Chávez’s victory marks him as one of the few leaders anywhere to be re-elected since the global economic crisis began. Venezuela has had very large oil revenues for decades, but only since his government took control of the industry, away from foreign multinationals and local oligarchs, has the wealth it creates been distributed among the population. Unlike Ireland, and all the countries implementing “austerity”, poverty in Venezuela is declining, healthcare and education improving and the economy is growing. If Ireland is to benefit from an oil boom it needs to look to Chávez, not to Thatcher.
William Hederman writes:
While more and more people understand that it is private companies rather than Ireland that will get rich from oil and gas discoveries here, there is still a stunning level of ignorance around this topic. Much of this comes from politicians and journalists.
Providence is controlled by Tony O’Reilly Jnr whose family owned about half of our news media, so you might expect coverage of the Dalkey drill to be better informed.
When Providence applied for the foreshore licence last January, one newspaper quoted a Dún Laoghaire businessman saying the project “could be a good for morale and a boost for the business community”.
If Providence does find oil beside Dalkey, the only morale boost the business community will get is by admiring the rigs and tankers from the shore.
Last year Providence explained to me that they would load the oil into tankers at the rig and probably ship it directly to a refinery in Britain or Holland.
There would be no jobs or investment onshore. The workers on the rig will fly in from Scotland and elsewhere.
The fact that the oil is unlikely to be supplied to the Irish market nullifies the “security of supply” argument.
And of course, oil finds will not reduce the price of petrol here. So let’s desist with the Dallas analogies please, newsdesks.
The only guaranteed benefit to Ireland is the 25% corporation tax rate on profits. However – and this is where the industry’s lobbying of Ray Burke 25 years ago really paid off – when calculating profits from the sale of our oil, Providence can write off the costs of all exploration anywhere in Irish waters in the previous 25 years.
The likely result of such tax write-offs is illustrated by a private study conducted for Shell in 2003.
It projected that the Corrib project would pay just €340 million in tax over its lifetime, this from a field that is now valued at up to €13 billion. (At the time of the study, the field was worth considerably less, but I estimate that €340 represented around 7% of the revenue Shell would generate by selling Irish gas back to the Irish consumer).
Economically, our oil fields might as well be in the South Pacific, but environmentally, the Dalkey drill is frighteningly close to the shore – much closer than would be allowed in other European countries.
Providence’s own Oil Spill Contingency Plan shows that a spill could reach the shores of Dublin in one hour. This drilling is in shallow water, with fast currents, hundreds of marine and bird species, next to Dublin’s greatest amenity: Dublin Bay.
All being put at risk to show that Ireland is open for business, even though that business will hardly benefit us.
William Hederman is a freelance journalist. His website is IrishOilandGas
Pic via CiaranCuffe.ie
via Dalkey And Oil |.