Inside the world of business
A big gamble with big rewards
11/4 is a number that has grabbed a lot of headlines recently. It could be a bookie’s odds, but it’s a gamble far riskier than anything you’ll find on the racing pages.
Licence option (LO) 11/4 is the Republic’s latest oil find. It is the location of a 1,400km sq block on the Porcupine Basin, about 200km off the southwest coast, where Petrel Resources, founded by John Teeling (right), says it has identified a reservoir with the potential to hold one billion barrels of oil.
This is very much about potential. Petrel’s calculations are based on analyses of existing data and mapping of the area’s geology. There is nothing wrong with this, in fact it is the first serious step that any exploration company takes in the search for oil and gas.
But a lot more steps have to be taken before anyone can say for certain that the area identified by Petrel contains large quantities of oil. Drilling is the most crucial of these steps, because it will finally determine what, if anything, these geological structures hold.
The exercise recently completed by Petrel is really designed to establish if it is worth going out there and drilling – and “worth” is the operative word. Drilling one exploratory well in an area 200km from the nearest landfall, beneath 1km of ocean and 3km of rock is expensive.
Drilling a number of them, getting to and from the place and then analysing whatever is found will set you back hundreds of millions of euros. There is a strong probability that nothing will be found there, or at least, nothing capable of delivering a return.
Petrel won’t ever have the resources to do this on its own, so a partner is needed. That is going to require all of Teeling’s considerable sales skills as it will have to be someone who is willing to take bigger risks than Petrel itself. Whoever it is will be looking for a better return than 11/4.
Pension plans sparks more controversy
It was manna to ministers looking for arguments for their drive to reduce tax relief for private pensions. A report published by the ESRI yesterday put figures on the disparity treatment between executive directors and ordinary employees at 48 listed Irish companies.
The figures were stark and assume a greater credibility through the association with the ESRI – although the report, just one of three on the issue of pensions published by the ESRI, was actually penned by Prof Gerry Hughes of Trinity College’s pension policy research centre.
The centre is effectively a think-tank but not one that can boast the same “independent” stamp that is conferred on the ESRI. It has a particular view of pension policy, on which, to be fair, it is transparent.
There are other caveats on the figures in the report. First, they are historic; much has changed in both the corporate world and in the pensions sector in the few years since the figures used in the report.
In addition, the report, of necessity, had to draw conclusions from figures that were not strictly comparable. While listed companies must disclose details of pension payments to executive directors, no such requirement exists in relation to other staff. As such, the report had to turn to other sources and extrapolate.
Despite all the qualifiers, however, there was little dissent yesterday from the general thrust of its findings – the better off get a better deal on pensions. The task for Joan Burton is to change that without creating an exodus from pensions that will create a financial nightmare for the Government in the long run.
Dalkey drilling prospect angers locals
National issues are at stake, local resident Stephen Vard (below) told a public meeting in Dalkey this week to oppose the plan by Providence Resources to test drill for oil or gas six miles off the eastern coast.
He was reported as drawing loud applause when he scolded media for taking “cheap shots” by linking objections to Dalkey drilling and talk about a “gold coast”.
The problem for Mr Vard and the group Dublin Bay Concern, of which he is reported to be a prime mover, is that a search of the archives finds that his name – and that of his organisation – have not cropped up in the never-ending dispute over drilling for oil off the west coast at Corrib.
Right or wrong, a large number of people have protested vociferously over the Corrib project for many years - citing the very same arguments that Mr Vard and others were using this week in Dublin. The uncomfortable truth is that it is precisely because of its location and relative wealth that the Dalkey dispute has attracted such attention over recent weeks.
That is not to dismiss the validity of all that those in attendance this week had to say. Much was made of the Government’s licensing regime under which oil companies can drill and produce oil, provided they secure the appropriate licences without paying royalties. Yes, they are liable for corporation tax at 25 per cent, rising possibly to 40 per cent, but as the meeting heard, this is only after costs involved in the project are offset.
Of course, the reason for that is that when the licensing regime was laid down, exploration companies were not clamouring at the door for permission to drill in Irish waters. In fact, the track record of exploration off the Irish coast was notable only for its paucity.
Following Corrib, and Providence’s strong test results from Barryroe off the south coast, this now appears to be changing.
Improved technology facilitating deep water drilling and fewer easy targets for oil companies have also helped.
It may indeed be time to look again at the licensing regulations.
Dublin’s Science Gallery at Trinity College publishes a report on the state of the gaming industry in Ireland as it opens a new exhibition to Game – The Future of Play
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