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Will consumers miss out on potential oil and gas bonanza?
HOUSEHOLDERS face forking out top prices for oil and gas in the future while at the same time key supplies off our coasts are exported directly from the rigs to other countries.
Analysis by Ann O’Loughlin
The taxpayer also stands to lose out in a multimillion-euro oil and gas spin-off bonanza as more gas and oil fields off our shores strike gold. This is the nightmare scenario painted in a new study of our oil and gas resources if the Government does not step in to change old licensing agreements which appear to be weighted heavily in favour of the exploration companies.
The warning comes as it is believed there could be the equivalent in gas and oil of over 20bn barrels of oil under Irish waters as all sides now believe large reserves lie under the seabed.
Ireland’s system of managing its oil and gas resources is dysfunctional, out of step with the rest of the world, and heavily skewed in favour of private companies, the new study claims.
Far from providing the country with a new source of wealth, it says the financial spin-off for Ireland could be small, and nil in jobs and employment stakes if the key licensing agreements are not redrafted radically.
Domestic consumers also face decades of high prices with no security of supply as there are no guarantees that the oil and gas will even be brought ashore.
The report, entitled Liquid Assets and published yesterday by the Dublin Shell to Sea campaign, brings together all the information on exploration and prospects of discovery in Irish territory and examines government policy in the area.
Oil companies estimate there are a total of 69 different discoveries, ‘prospects’, and other areas licensed for oil and gas exploration off the Irish coast. The report argues that if Ireland is to enjoy any real benefit from its potentially vast oil and gas reserves, serious changes are required before any other petroleum leases are awarded or additional acreage is opened up for licensing.
“Ireland’s licensing terms for oil and gas exploration, which remain largely unchanged since they were introduced two decades ago, serve to weaken Ireland’s security of gas and oil supply, not strengthen it,” the report concluded.
Under existing agreements, negotiated in the Haughey era, a company which finds oil or gas in Irish territory does not have to pay royalties to the State, Also, ownership and control of the oil or gas is transferred in full to the company, which can choose to export the oil or gas directly without landing the resource in this country. Even if companies decide to sell in Ireland, the consumer will have to pay the full, current, international price.
The only spin-off for Ireland under the deal brokered by the then energy minister Ray Burke in 1987 and finance minister Bertie Ahern in 1992, is a 25% corporation tax on the profits declared from the sale of the oil or gas. But the report points out that before declaring profits, the company can write off 100% of costs against this tax, including the cost of previous, unsuccessful wells drilled anywhere in Irish waters. In exceptional cases after 2007, a very large field could incur an additional tax up to 15% on post-tax profits.
Financial returns to the State from extraction of Irish oil and gas are extremely low and are among the lowest government take in the world, the report said.
It is estimated that the exchequer could earn as little as 7% of the revenue generated from the sale of the gas from an Irish field.
Caoimhe Kerins of Dublin Shell to Sea said there is no security of supply at the moment.
“There is no guarantee any of the oil and gas reserves will go to us. Oil can be exported directly from oil wells. The gas interconnectors are built for export as well as import. Liquid gas can be exported directly from the well head. We are talking about the next decades. We have to change the terms of the licence agreements,” she said.
“Customers will be faced with paying the full prices with no discounts for our own natural resources. There has to be a public debate and the Government has to look at different options.”
Ireland, the report states, can learn from Norway, where in one year alone it took in more than €50bn with a 78% tax rate on corporations.
The Irish Government, the report says, could also impose a moratorium on exploration licences and leases already granted before the country gives away any more of its resources.
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