Dublin Shell to Sea

The gas in the controversial Corrib field was valued at €8 billion by Minister for Communications, Energy and Natural Resources Eamon Ryan in 2008.

However, the scale of Ireland’s other, less well-known, offshore hydrocarbon deposits spectacularly dwarfs this sum. According to estimates published by the Department of Communications, Energy and Natural Resources (DCENR), the Rockall and Porcupine Basins alone are likely to yield 10 billion barrels of oil equivalent (BBOE). This is worth the staggering sum of €420 billion, or more than 50 times the value of the Corrib Gas.⁴

DCENR’s figure of €420 billion is likely to be an underestimate, because the Government relies on figures supplied
by the oil and gas industry from their exploratory surveys. It is in the industry’s interests to underestimate these figures at the prospecting stage, and the record from Norway and elsewhere shows that they have done so unless there was rigorous government scrutiny, with officials present on the oil and gas platforms,⁶ which is not the case in Ireland. The figure of €420 billion is also conservative in that it only refers to the west coastal waters of Ireland. It does not account for oil and gas reserves off the south and east coasts (or for the inland oil and gas fields such as the large gas find at Lough Allen, estimated alone to be more than nine times the size of the Corrib gas field⁷).

Opposition to the Corrib Gas Project in its present form is driven not only by safety, health and environmental concerns in the locality of the pipeline and refinery, but also by the fact that people in Ireland will not benefit substantially from the natural resource thus extracted. Local residents feel they are being asked to shoulder an unquantifiable burden of risk, not for the public good, but in order to facilitate the gifting of public resources to powerful multinational oil and gas corporations. Under current licensing terms, the Irish State retains a 0% royalty share in any oil or gas found. According to a 2007 study commissioned by the DCENR, Ireland offers one of the lowest government takes in the world.⁸

In 1975 the position was very different. Back then, senior civil servants – under pressure from the Resources Protection Campaign of the day – devised licensing and fiscal terms which ensured substantial State participation in any oil or gas production, significant royalties on production, and a vigorous tax regime.⁹ New terms were introduced by successive ministers in the late 1980s and the 1990s to stimulate exploration and drilling, although the record shows they had little effect in this regard – oil companies only drilled 26 exploration wells between 1993 and 2004, compared to 100 wells between 1975 and 1992.¹⁰ These changes reduced the State’s share in all offshore oil and gas from 50% to zero, and abolished royalties. Their net effect is that, today, multinational oil companies:
• Own 100% of the oil and gas they find under Irish waters;
• pay no royalties to the Irish State;
• can write off 100% of their costs against tax;
• have profits taxed at 25% (the international average is 68% for oil-producing countries);
• can export the oil and gas outside Ireland;
• can choose whether or not to sell the gas back to Bord Gáis at full market rates.

Supporters of the project sometimes argue that Ireland gains security of supply in an increasingly uncertain world; the recent shutting off of Russia’s gas pipelines into Ukraine is pointed to. However, the licenses given to Shell and other companies give them the right to export the oil or gas to other countries if they choose to – it will be wholly owned by them. The Irish State will have to bid on the international market to buy back its oil and gas resources from the oil and gas companies at full market price. There is no guarantee that the oil or gas will be sold back to the Irish State.

In addition, almost all of Ireland’s current gas imports come from the North Sea¹² via two interconnector pipes, and there is no medium term threat to the continuity of those supplies.¹³ In the longer term it is true that the North Sea will run out and thereafter Ireland will be increasingly dependent on gas from further afield, but by then much of the indigenous Irish oil and gas may have been extracted and sold by Shell and other multinational giants.

“There are now three interconnectors between Ireland and the UK, so if you do hit a gush, there’s plenty of market out there” ¹¹
Martin Brennan, Asst Sec, Dept of Communications, Marine and Natural Resources, addressing the Exploring Atlantic Ireland conference, 8th Nov 2006

Thus the only apparent benefit to the Irish State from its phenomenal reserves of oil and gas is a 25% corporation tax once all the corporations’ exploration and development costs are paid, including anticipated costs of closing down their operations (it is estimated that more than half of the gas from the Corrib field will be extracted before any tax is paid)¹⁴. Minister Eamon Ryan introduced a new ‘profit resource rent tax’ in 2007, which will add a maximum of 15% more tax on a graded basis of profitability¹⁵. However, this will not apply to any but the most profitable fields and crucially – as it will not be applied retrospectively – it will not in any way increase the potential takes on existing licenses, such as the Corrib Gas, and the much larger Dunquin and Lough Allen finds.

While the prospects of jobs is often pointed to, in reality in the case of the Corrib Gas Project, there will only be 30 -70 permanent jobs on site once the refinery has been completed, while the local tourist industry workers and fishermen have lost significant business. High levels of pollution will only increase hardship in local sustainable indigenous businesses; however these job and profit losses have tended to be ignored when equating the economic ‘benefits’ of the Corrib Gas Project.

Even the most ardent supporters of the Corrib Gas project seldom turn out to defend the terms of the giveaway deal in public, instead relying on the perception that the deal, once done, cannot now be revisited. Nothing could be further from the truth. There is in fact a worldwide trend for governments to re-take control of privatised energy assets. In 2006, State-owned Russian energy giant Gazprom took back control from Shell of the largest integrated oil and gas field in the world, Sakhalin-2, after Shell was accused of violating environmental laws. Bolivia, one of the poorest countries on the planet and with a lot less international clout than Ireland, nationalised its entire gas industry in 2006. The industry, and international markets, reacted with fury in both cases, and the process of nationalisation has not been without problems for Bolivia, but in the end the oil giants accommodated these changes when they realised there was still money to be made.

The framework exists for Ireland to do the same with the Corrib Gas field. The licensing terms state that ‘The Minister may . . . require that specified exploration, exploitation, production or processing activities should cease . . . in any case where the Minister is satisfied that it is desirable to do so in order to reduce the risk of injury to the person, waste of petroleum or damage to property or the environment.’

The fact that the government has done almost nothing to challenge the terms of the giveaway deal, despite the deep recession the State is in and the unresolved conflict which has delayed the Corrib Gas project by years – according to initial estimates the gas was projected to be flowing by 2003 – raises serious questions about why Ireland’s significant natural resources are not being utilised to benefit the people of Ireland.

 From the Dublin Shell to Sea information pack - Download a PDF file (46mb) of the information pack.

“The giveaway deals for exploration licences were comparable, in historic terms, with the Act of Union of 1800, in the way a dodgy deal can be made to look legitimate”
Trevor Sargent, then Green Party leader, Shell to Sea press conference, 21st November 2006

4 The DCENR has, since 2006, consistently put this figure at 10 BBOE. The Energy Information Administration of the US Government projects the barrel of oil to average out at 60 US dollars over 2009. Using international exchange rates in September 2009, this equates to €420 billion.
5 Quoted in the Sunday Independent, Ireland on the verge of an oil and gas bonanza, 20th May 2007
6 Michael McCaughan, The Price of our Souls, AFrI, 2008, p.69
7 Lough Allen gas field is 100% owned by Finerva Ltd; http://finaveragas.com/projects/lough
8 Indecon International Economic Consultants in association with London Economics, Expert Advice on Review of Irish Petroleum E&P Licensing Terms, report prepared for the Department of Communications, Marine and Natural Resources, 2007.
9 Centre for Public Inquiry, The Great Corrib Gas Controversy, 2005, p.8 10 Centre for Public Inquiry, The Great Corrib Gas Controversy, 2005, p.63
11 Martin Brennan, Assistant Secretary of then Department of Marine and Natural Resources, speaking to potential interna- tional investors in Ireland’s offshore oil and gas at Exploring Atlantic Ireland Conference, Dublin, 8th November, 2006.
12 European Commission, IRELAND – Energy Mix Fact Sheet, January 2007
13 Hayley Millar, Oil Reserves will last Decades, BBC, 4th June , 2008
14 Andy Storey, State losing billions in natural gas giveaway, The Irish Times, 19th June , 2009
15 for more details on new tax see http://www.dcenr.gov.ie/Press+Releases/2007/Home.htm
16 Storey, Andy, The Corrib Gas Dispute: Background and Current Status, 2009