Budget 2011

How about...

'A Fair Deal For Ireland'?

This December (Budget 2011) Ireland will learn the outcome of one of the most important budgets in decades.

The talk will be about €3,4,5,6,7 billion? of cuts and €90+ billion of national debt, so what about the €420+ billion worth of natural resources off the west coast of Ireland – isn’t that worth another look.

Why?

Because those resources are going to an oil company in what’s described as one of the biggest giveaways in history…

  • There are a series of gas and oil fields extending along the west coast of Ireland
  • These include the Dunquin, Porcupine and Corrib fields
  • The combined value is somewhere between €420 – €540 billion
  • The value of the Corrib is somewhere between €10 – €50 billion

Shell to Sea have been campaigning on this issue for years, and regardless of perceptions (or portrayal) they have a point. Shell hope to be pumping Corrib gas in 2011. Ireland will still be suffering from the recession and seeking ways out of debt.

Ireland’s purse will not see a fair reward, so where has it gone wrong?

1967 – Ireland gave the rights for gas and oil in shallow waters to Marathon Oil.
1971 – the licenses to develop the Kinsale field were sub-let to the same company.
1975 – Ireland agreed a 50% tax on profits, a 50% shareholding, and royalties of 6 to 7%.

So far so good, but…

1984 - Minister for Energy Ray Burke renegotiates the agreement with Enterprise Oil (a British company headquartered in London), and against Department advice drops the 50% right to shareholding and discards the right to royalties.

1992 - Minister for Finance Bertie Ahern reduces the tax levy from 50% to 25% – the worlds lowest at the time, builds in a 100% write off for capital investment costs, and backdates the scheme for 25 years arguing that the changes will encourage exploration. However international experience shows that oil companies will pursue exploration anyway if the potential for profit exists.

The Corrib field then gets sold to Marathon Oil who enter into a consortium arrangement with Enterprise Oil. The rights for other fields are disposed of, and in 2002 Shell successfully exercise a hostile takeover of Enterprise Oil.

And what does this mean for Irelands Corrib resources now?

The Shell-led consortium will…

  • Own 100% of the gas
  • 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)
  • Be able to export the gas outside Ireland
  • Can choose whether or not to sell the gas back to Ireland at full market rates

Thus the only apparent benefit to the Irish State is a 25% corporation tax once all the corporations’ exploration and development costs are paid, including the anticipated costs of closing down their operations.

In 2007 Minister Eamon Ryan introduced a new ‘profit resource rent tax’ which will add a maximum of 15% tax on a graded basis of profitability. However this will only apply to the most profitable fields and crucially, as it’s not retrospective, will not in any way increase the potential takes on existing licenses, such as Corrib Gas and the much larger Dunquin and Lough Allen finds.

“No country in the world gives as favourable terms to the oil companies as Ireland”
Mike Cunningham, former director, Statoil E&P Ireland – source: the World Bank.

So it’s fair to say that as it stands, 100s of €billions worth of Irelands natural resources will be inflating energy companies private bank accounts over the next 20-30 years, with very little for Ireland in return.

Can Ireland really afford to be so generous?

Most governments would be upbeat about the benefits of natural resources to their country, but in Ireland this arrangement has turned it into ‘one of those things we don’t like to talk about’.

The government is concerned that any alteration would damage our reputation abroad, however it has been done before. Yep there’d be a big row, but right now we look like a soft touch, and if we want to convince the international community that we’re sorting out our finances then surely getting a fair deal for our natural resources makes sense.

Here’s the Shell to Sea website.

Now focus on the economics for a moment and put the reporting of Rossport to one side. We’re in recession, making cuts, emigration is on the up, and giving away resources so cheaply doesn’t seem right. Shell made approx €37 billion in profits over the last couple of years, Ireland didn’t. The Minister of Finance has warned of a possible €160bn of debt by 2013.

Shell expect the Corrib gas plant to employ approximately 55 workers when operational – any jobs are welcome but this is hardly a dent in our current employment problems.

We should be looking at a renegotiation, or at least a change in the tax levy, well so it seems to me anyway.

Mick (diaspora.ie)

(Note: this article was originally published in reference to the 2010 budget. Cuts at the time were approx €4 billion, and national debt was approx €80 billion).

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Comments

Budget 2011 — 11 Comments

    • If we can prove that Ray got another brown envelope full of cash from them then we can cancel the deal. Where are the fraud squad on this?

  1. Thank you for this brilliant clear article exposing this scandal and the sheer gobshiteness of previous Irish administrations. How well wined and dined were they for this disposal of the country's assets?

  2. Well done for writing this. An area that keeps getting marginalised yet it affects everyone. We're in for a hard ride over the coming years and it'd be great if we all sat up and just started asking questions.
    If we don't ask now then how can we explain it later? (hope that makes sense).

    Marie.

  3. Learn from Gaddafi, Hugo Chavez and a number of other leaders who, whether we like them or not, have had the guts to stand up for their people and cut fair deals with multinationals. Is that so difficult? Or would it mean that certain families in this country would not be able to afford the best of everything any more?

    Mike

  4. Absolutely nothing wrong with Hugo Chavez except that he's looking after the have-nots, even sending subsidised and cheap heating oil to new Yorkers if I remember correctly.

    Incidentally, a Labour cabinet member started that rollback process, way before Ray Burke's time. Only he drove the nails in big time.

    This info was initially 'packaged' on http://www.Indymedia.ie, and of course its 100% true, including being the reason that Norway's prime minister insist that Statoil pull out, but because it approximates a tax on wealth, its seen as anathema to how we do business in Ireland. Despite the fact that the USA itself has a wealth tax. As does Britain.

    NO, asking questions is not enough. We need to start actively resisting those who do not assist our freedom. Ask your TD how this oil asset anomaly can have laws rolled back and yet how Revenue cannot apparently 'roll back' wealth taxes on property gains in the Celtic Tiger. How, as above states, Eamonn Ryan has not 'rolled back' some changes to better suit the Irish people.

    We should be daring, brave and pioneering and say the deal is off to all current oilcos. But we won't !!!!!!! Because the HAVEs are in fine fettle, thank you very much! Landlords are alive and well in ireland, they never left. And their agents are called FF.

    • Any deal the Fanna Failers are, or were, or will be involved in will always be suspect. Where do Sinn Fein stand on this? They voted with the government yesterday! There was an opportunity to bring them down….. have they not supported the west coast objectors?
      We have a President : a lawyer by training, we hear from her about the loneliness of rural communities and a lot of other rubbish but she does nothing about major matters like this : she should be the one to sue the b******s by using the Council of State. My taxi driver was right last month :'' if you have never lived outside Ireland , you don't know what life is about '' !
      The Diaspora ( capital '' D '' ) ARE THE ONLY HOPE FOR DEAR AULD iRELAND and there are about 60 million of you. I am back home now, playing at home. Will ye no come back again and help me ?

  5. I work in Ireland but live north of the border and I have to say what the Irsih people have and are putting up with in terms of their own Government making the ordinary mass of people pay big time for the greed and incompetence of the big bankers, developers and big business just would not be tolerated by those in the North or UK. For a start the Government would have to fall and massive penalty taxes would have to be extracted from the banks etc. Don’t fall for this nonsense about not wanting to frighten the banks away…let them go if thats what they want because national banks can be set up and run by the tax payer and the profits should then go back to the taxpayer not welathy individuals. This Fianna fail Government must pay the price for its part in letting this happen on its own watch. If the public servants were being hammered the same way in the North the country would be brought to a standstill until the Government seen sense. The UK Government does not play off the public sector against the private one the way the Dublin one does despite the fact that the UK private sector has also been hard hit…if you drastically cut back public funding in a recession then the economy loses even more disposable income to stimulate businesses.

  6. Oh my God! That's so sad. Ireland has fought so hard for freedom for so long and to have to give up even more is heart wrenching. America may not be that far behind if we don't make some critical changes in leadership.

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