We pay the bill for the great oil and gas grab

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Saturday May 27, 2006 11:19

by Frank Connolly - Daily Ireland May 26 2006

Frank Connolly's first (Friday) column for Daily Ireland

In recent weeks, there has been a veritable tsunami of establishment media drivel against those who demand that the Irish government halt the give away of the country's oil and gas reserves and stop pandering to the multi-nationals, much of it from the O’Reilly controlled press.

First Frank Connolly column hits the usual suspects... hard

Last week it was reported that Ireland had made a joint claim with Britain, France and Spain over an 80,000 sq km area of the continental shelf some 200 miles off the south coast. The submission under the UN Law of the Sea Convention would, if successful, secure claims to oil and gas resources, as well as mineral and biological resources, on the sea bed in the Celtic Sea and the Bay of Biscay over an area equivalent in size to the island of Ireland. So far so good.

The Minister for Foreign Affairs, Dermot Ahern, who served the claim, said that if successful it may be seen as “tremendously significant” in future years given “soaring energy prices and improving capabilities to tap mineral resources in deeper waters.”

“We are effectively locking up control of thousands of square kilometres of unexplored seabed deep into the mid and south Atlantic for our children and their children,” he said. Comforting, because for years we have been told that there were no such potential riches off shore Ireland and only for the good grace of the oil and gas majors would anybody bother to look. Indeed, such were the costs and technical obstacles that every enticement had to be given to the multi-nationals to send out a few rigs to explore under the hostile Atlantic waters.

Is this the same Dermot Ahern who sat in cabinet with Charles Haughey, Ray Burke and still does with Bertie Ahern all of whom ensured through legislation they introduced in the 1980s and early ‘90s that the same multinationals do not pay any royalties and enjoy tax write offs so generous on exploration, production and even close down costs that our children and their children will never see a red cent in revenue from these vital national resources? Perhaps we should ask to whose children he is referring.

In recent weeks, there has been a veritable tsunami of establishment media drivel against those who demand that the Irish government halt the give away of the country's oil and gas reserves and stop pandering to the multinationals, much of it from the O’Reilly controlled press.

This followed the decision by the Minister for Communications, Marine and Natural Resources, Noel Dempsey to push ahead with the planned route through Rossport, County Mayo, of the controversial Corrib gas pipeline. His decision followed the publication of a report by government commissioned consultants, Advantica. The Advantica report contained within its several hundred pages a clear endorsement of an earlier report by US consultants, Accufacts, commissioned by the Centre for Public Inquiry late last year.

That report stated clearly that the route through Rossport threatened the safety of local residents due to the high pressure, up to 345 bar, at which the unprocessed gas could travel from the seabed offshore to the proposed gas terminal at Bellanaboy. Advantica proposed that a valve be constructed at the shoreline where the pipeline hits land which could ensure that pressures never exceed 145 bar.

However, Accufacts stated clearly that even such a valve could not be guaranteed to prevent a rise in pressure and a possible rupture of the pipeline causing fatalities across a wide area. It was not failsafe. So either Mr Dempsey did not read the report he commissioned or has chosen to ignore its implications for the north Mayo community.

It has also emerged since the CPI report was published that a deal for the exploration and development of the Dunquin prospect off the south west coast has been hammered out between the world's largest oil company Exxon Mobil and the Irish company, Providence Resources, in which, surprise surprise, Tony O'Reilly personally holds a 45 per cent stake. Providence acquired the exploration licence for the prospect less than two years ago for the princely sum of €11,000 (£7,700).

Under the farm out agreement announced early this year Exxon has agreed to invest €100 million (£70 million) to explore and develop any find from a field which is estimated to be worth €20 billion (£14 billion). If these figures are correct, or anywhere near it, O'Reilly stands to make a personal profit of €1.4 billion without adding any value whatsoever to the licence he obtained.

So how did Mr O’Reilly get such a lucrative hold over the country’s oil and gas wealth? He told Forbes magazine, in an unusually unguarded interview, in September 1983, that his geologist had chosen six blocks of seabed for exploration.
“Since I own 35 per cent of the newspapers in Ireland I have close contact with the politicians. I got the blocks he wanted.” That’s how.

His son, Tony O’Reilly junior, chief executive of Providence Resources, recently likened the oil and gas business to property development: “I view it as a type of offshore property company. Our focus is to create more value tomorrow than we have today. There is no doubt that this is the best time to be in the oil and gas industry,” he told his father’s newspaper, the Irish Independent, last October.

It is an extraordinary situation that the government hands a licence to a company for almost nothing. It is worth noting that the Irish taxpayer paid for the seismic research that identified the potential find. The company reaps a huge profit without adding any value while the taxpayer, who funded the original investigation, gets no return in terms of royalties, taxation or even control over the availability or price of any gas or oil brought ashore. Extraordinary but true. As is the fact that a spokesperson for the Taoiseach recently told a prominent Dublin journalist that he was “terrified” of O’Reilly’s other newspaper, the Sunday Independent. In the coming weeks the government will announce the winning tenders for a fresh raft of exploration licenses in the Slyne, Erris and Donegal Basins off the north-west.

Among those competing are Shell and Statoil, Island Oil and Gas and Grianan Energy Ltd, a consortium of businessmen from Donegal that has promised to construct an electricity generating station in Donegal powered by any gas find and to re-invest significant profits in the community.

Watch this space.

Frank Connolly is Senior Reporter with Village magazine

Daily Ireland May 26 2006