It looks like I have to take a completely opposing view to BostonorBerlin and Ms Harrington.
The deal the Irish State did with Shell is no different than what both ourselves and our neighbours in Holland, Norway and the UK have been doing for years. The only difference is that since the 1970s (Kinsale gas field) this is the first commercial gas discovery on the Irish Continental shelf.
The continental shelf of each country is divided up into blocks which are each given numbers. Oil companies then bid on the rights to drill in a block. The block will be leased to the oil company for a stated number of years and yes they will earn revenue for bringing any hydrocarbons found to market. The state will then tax the revenue in a number of ways but usually this is done by royalties of a fixed percentage of revenue for each BOE (barrel of oil equivalent) produced. The tax rate of the royalties is stated in the terms of conditions set by the government prior to any oil company taking out a lease on a block.
In Ireland we've one of the worst strike rates for finding hydrocarbons of anywhere in the planet. (3% but I need to find the link for this) Here is some useful comparisons with our neighbours in Norway and the UK
Quote:
The Irish offshore industry is repeatedly compared to its Norwegian and UK counterparts. More often than not, this comparison focuses on the fiscal terms offered to companies carrying out exploration and development in these countries. This comparison is wholly inappropriate.
Exploration in Norway commenced at about the same time as in Ireland. Since then the Norwegian industry has drilled 1,200 exploration and appraisal wells. The UK industry has drilled 4,211 exploration and appraisal wells and currently has 350 producing oil and gas fields.
At the same time, Ireland has drilled only 155 exploration and appraisal wells and only has three producing gas fields with the fourth, Corrib, under development.
Norway is also seen as particularly attractive for exploration given the large average size of the fields discovered, approximately three times the size of the average in Ireland. Norway’s production to date plus proven reserves is 114 times greater than Ireland’s. UK production to date and proven reserves is 99 times greater than Ireland’s.
These enormous natural advantages enable Norway and the United Kingdom to impose tough fiscal terms on offshore explorers and make any comparison between terms offered in Ireland and the other two countries entirely inappropriate. The attractiveness of Norway and the United Kingdom, despite their relatively onerous fiscal terms, is emphasised by the number of applicationsfor exploration licences. For instance, the 24th Licensing Round (2006) in the UK attracted 147 applications from 121 companies. A comparable round in Ireland resulted in the award of 4 licences.
The appropriate comparison would be with other countries of relatively low prospectivity, such as France, Spain and Portugal, which have similarly low levels of activity to Ireland.
Norway is the third largest exporter of crude oil in the world and currently has 49 producing oil and gas fields with a further five fields under development. Another 13 fields have ceased production. The UK has over 300 producing oil and gas fields with 18 fields under development. Ireland has only three producing gas fields, one gas field under development and no commercial oil discoveries to date. These stark differences make comparisons between Ireland and the other two countries, and the fiscal terms they impose on exploration companies, entirely inappropriate.
Source: UKOOA, the Petroleum Affairs Division and the Norwegian Petroleum Directorate (Faktaheftet om norsk petroleum verksemd for 2005).
http://www.iooa.ie/securing-the-future-page41390.htmlSo, if you have lots of oil and gas already discovered on your continental shelf you can impose higher taxes/tariffs on the Oil companies producing oil and gas.
Because of the low success rate on the Irish continental shelf we must be very generous on the low taxes that we would charge so as to attract oil companies to drill in our waters.
It would seem that just as Shell is about to make a return on their massive investment on the Corrib project we have people in this country deciding that they should not have it, almost that we always knew that it was there and our government still decided to "give it away". This is nonsense. Do these people realise the massive cost today for exploring for oil and gas. An average exploration well in deep water such as off the coast of Mayo and Donegal where Shell is drilling is now costing at least $100 million.
I'm all for our government setting up an Irish National oil company to explore for oil and gas off of Ireland but I do not think that the Irish tax payer is willing to stump up the cost of maybe $1 Billion to go on a 10 well drilling programme with a success rate of perhaps 5%. And that cost would only be for drilling the wells. Not for building the offshore platforms, pipelines, onshore refineries. So perhaps double that price again.
How many hospitals, schools and roads are the Irish people willing to forfeit so that we can explore for oil and gas.
It seems we want to go down the path of just confiscating it from the companies who are willing to take the chance of finding it. This is outrageous.
I have no beef with people campaigning on whether Shell are doing a safe and environmentally friendly job of bringing the Corrib gas to shore but nationalising our tiny offshore reserves is economic suicide. Welcome to Communist Ireland.
For the record I work for a major Oil and Gas company but not Shell. The company I work for has no commercial interest in Corrib or any other project on the Irish Continental shelf.
