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An Taisce calls on ESRI to focus more on Research printable version

28 Apr 2011: posted by the editor - Ireland

Charles Stanley-Smith Chair of An Taisce, the National Trust for Ireland asys he is deeply critical of calls by the ESRI's John FitzGerald for Corrib gas to come on-stream in order to address energy security for Ireland. He indicated that the ESRI's John FitzGerald acknowledged lack of familiarity with the Corrib gas controversy (as stated on an interview this morning on RTE radio's Morning Ireland) was evidenced in the naivety of his 'research' paper's proposition that Corrib gas would contribute to Ireland's energy security. The ESRI paper propounds that price rises abroad were the most probable supply issue and Corrib gas would supposedly enable Ireland hedge against this!

However, the terms of the contract and licensing arrangements place the Corrib Gas Partners under no obligation to sell this gas to Ireland or specify any price range for the gas. This was clearly thrashed out in one of the first hearings by An Bord Pleanála for the Corrib Gas Infrastructure, under Inspector Kevin Moore. Mr Stanley-Smith said: "In other words, the Licence that the Irish government awarded to Shell does not compel them to sell the Gas to Ireland and sets no maximum price on the gas when they do decide to sell it to Ireland."

The only thing Stanley-Smith says that is certain, is that if the pipeline is developed in contrav ention of EU environmental law, Irish taxpayers will have to foot the bill for fines amounting to tens of millions of Euro for non-compliance with EU directives. This will be in addition to seeing their resource squandered through the short-sightedness of previous Governments and decisions by the like of former Minister Ray Burke. The end of Europe's leniency with Ireland's bottom of the class track-record1 on compliance and implementation with EU law is a reality and was signalled earlier this year when the Commission applied to the European Court of Justice to initiate the process of fines for specific non-compliance issues.

Mr Stanley-Smith however welcomed John FitzG erald's call for a solution to the Corrib Gas controversy and he stated that An Taisce calls for three major actions to be undertaken by the Irish Government right now,

* to renegotiate the licence terms -the licence agreement allows changes to 'money terms' in light of changed economic circumstances;
* to see Corrib gas harvested correctly in full compliance with the law - so no taxpayer liability is incurred;
* to ensure future finds are not compromised at the expense of the citizens of this state.

Stanley-Smith added that Minister Pat Rabbitte's responses to Dáil questions as recently as April 5th 2011 were disappointing in relation to his lack of focus on the extent of remit the existing Corrib licence allows him to re-stipulate monetary terms and conditions which would be more favourable to the benefit of the Irish citizens .

The environmental Non-Government charity, An Taisce, is pursuing a Judicial Review in the High Court of An Bord Pleanála's latest permission for the onshore pipeline in January of this year.

An Taisce simply wants to see development done correctly, Corrib is no different, and details of its undertaking and associated fund-raising efforts are available on the charities website at: www.AnTaisce.ie.

Notes
1 Ireland ranks last of the EU 15 for State of progress by Member States in reaching sufficiency for implementation of the Habitat Directive. There are 35 cases currently open against Ireland for failure to transpose or implement EU environmental law, including numerous cases for our failure to protect species and habitats under both the Birds and Habitats Directives

2 LICENSING TERMS for OFFSHORE OIL and GAS EXPLORATION and DEVELOPMENT, 1992; DEPARTMENT OF THE MARINE AND NATURAL RESOURCES ( note emphasis added below )
"44. Increase of money terms
The Minister shall have the right, from time to time, to increase all money amounts mentioned herein having regard to relevant economic factors and shall notify the authorisation holder accordingly. The increases shall have effect from the date of such notice."

3 Dail Debates referenced:
http://debates.oireachtas.ie/dail/2011/04/05/00169.asp
220. Deputy Martin Ferris asked the Minister for Communications, Energy and Natural Resources if he will ensure that the royalty regime imposed on oil and gas companies is extended to the Corrib gas project and that a wider review of the revenue and licensing terms for the Corrib field and for the sector in general is proceeded with immediately in line with his party's manifesto commitment; and if he will make a statement on the matter.

Minister for Communications, Energy and Natural Resources (Deputy Pat Rabbitte):There is no royalty regime in Ireland applying to petroleum production. In 1987, Ireland followed the lead of other countries such as the UK and Norway in moving away from a royalty based payments system to a tax based system. Under a tax based system the return to the State is linked directly to the profitability of the individual oil or gas field, as compared to a royalty system where payments would be linked to the actual volume of production, without taking account of differences in development cost or actual profitability.

The Corrib Gas field was discovered in 1996 under Frontier Exploration Licence 3/94 which was granted in March 1994. Profits from petroleum production arising from exploration licences granted prior to 2007 are taxed at a rate of 25% and this is the rate that applies in the case of profits from the Corrib Gas Field. As regard an early review of the fiscal licensing terms governing petroleum production, I refer the Deputy to Priority Questions Nos. 24 and 25 today.
Note: For questions Nos. 24 and 25 - see below
http://debates.oireachtas.ie/dail/2011/04/05/00006.asp

24. Deputy Martin Ferris asked the Minister for Communications, Energy and Natural Resources when the promised review of the licensing and revenue terms governing oil and gas exploration will take place.

25. Deputy Richard Boyd Barrett asked the Minister for Communications, Energy and Natural Resources his plans to review the system of licensing for oil and gas exploration, development and production on Irish territory and waters, with a view to ensuring greater benefits for the Irish State; and if he will make a statement on the matter.

Minister for Communications, Energy and Natural Resources (Deputy Pat Rabbitte): I propose to take Questions Nos. 24 and 25 together.
While Ireland has recognised potential as a petroleum producing area, the Irish offshore is relatively underexplored. As a result, Ireland's petroleum potential is largely unproven. This is likely to continue to be the case until there is an increase in the level of Irish offshore exploration, exploration drilling in particular. Ireland competes with other countries in Europe and much farther afield to attract mobile international exploration investment. To this end, it is important that Ireland maintains a licensing regime that appropriately reflects the risks and rewards of investing in petroleum exploration in the Irish offshore relative to investing in exploration in other jurisdictions.

Regarding periodic publicity about Ireland's oil and gas resources, recent assessments of yet-to-find potential based on petroleum systems studies indicate a total reserve potential in the order of 10 billion barrels of oil equivalent for the offshore frontier basins west of Ireland. This divides approximately into 6.5 billion barrels of oil and 20 trillion cubic feet of gas. It should be understood that these figures only represent potential reserves, namely, the reserves that might be present based on geological criteria and regional comparisons, and that they have not been discovered. Actual reserve figures are likely to vary widely from these estimates and will not be known without a dramatic increase in the level of exploration activity.

A comprehensive review of Ireland's fiscal terms was carried out in 2007. This review, which was underpinned by independent economic analysis, considered the appropriateness of Ireland's licensing terms in comparison with other European countries with which Ireland competes for exploration investment. The review concluded that there might be potential to capture a higher share for the State on more profitable finds, but that the potential for this should not be overestimated. The outcome of the review was the introduction of a supplementary tax, known as a profit resource rent tax, of between 5% and 15% that will apply in the case of more profitable fields. The supplementary tax would be payable in addition to the standard petroleum corporate tax of 25%, which is double the standard corporation tax rate of 12.5%.

Since the review concluded in 2007, there has been no significant change in terms of the level of exploration activity and no new commercial discoveries have been made. The level of exploration activity will continue to be the critical factor in Ireland obtaining a benefit from our indigenous oil and gas resources. We need to get drilling levels above the recent levels of one or two wells per year if more commercial discoveries are to be made.

As part of an ongoing strategy to attract new companies and new investment, my Department is running a licensing round that is deliberately structured to attract new exploration companies. This licensing round, which closes at the end of May, also aims to encourage companies to look at areas of the Irish offshore where few data currently exist and, as a consequence, little is known of their potential prospectivity.

While I will keep the licensing terms, both fiscal and non-fiscal, under review in light of relevant future developments, at this juncture the focus should be on attracting a larger share of mobile international exploration investment to Ireland to increase the chances of new commercial discoveries being made.

Tags: Corrib, gas

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