State losing billions in natural gas giveaway

OPINION: We are not getting a fair deal from the Corrib gas field, writes ANDY STOREY.

OPINION:We are not getting a fair deal from the Corrib gas field, writes ANDY STOREY.

IRELAND IS virtually giving away its natural gas. An international study in 2002 found that the vast majority of multinational oil and gas companies pay other countries proportionately twice the amount that the Government is extracting from the Shell-led consortium that is exploiting the Corrib gas field. Ghana, for example, insists that the state-owned Ghanaian National Petroleum Corporation has a 10 per cent ownership stake in any resource find and the multinationals are also liable to a 50 per cent profits tax.

Ireland, by contrast, demands no State shareholding in any resource finds, nor does it demand royalty payments. A tax rate of only 25 per cent applies (compared to 50 per cent in the UK and 78 per cent in Norway) and even that low tax rate only kicks in after a company’s exploration and development costs have been recovered. The Corrib gas field will probably be half depleted before any tax is paid at all. Under previous terms, the Irish State would have held a 50 per cent shareholding in any oil or gas discovery, and the extracting company would have had to pay royalties of at least 8 per cent as well as tax at 50 per cent. Those terms were progressively relaxed during the 1980s and 1990s (most notably when Ray Burke was minister for energy) to the extent that economist and journalist Colm Rapple now describes them as “decidedly soft by international standards”.

The Government claims that the favourable terms are worth it to ensure energy security, but there is no necessity for Shell to sell the gas to Irish consumers – in fact, if they do us the favour of selling our own resources back to us we will be paying the full market price for them.

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Credible estimates suggest that the Corrib and other sites currently being explored could, taken together, yield some €50 billion. If the Government were to take only a modest 10 per cent stake in these discoveries then the exchequer would stand to gain a staggering €5 billion. Taking a 10 per cent stake in the Corrib gas field alone should gain the exchequer at least €1 billion.

Reclaiming even a portion of these revenues would obviate the need for the severe cutbacks now occurring and would allow us stimulate the economy to relieve the impact of the recession. If we simply invested the €1 billion that would arise from a 10 per cent stake in the Corrib field alone, then there would be no need for such measures as the closure of three wards in Crumlin children’s hospital because of a €9.6 million deficit. The out-of-hours social service helpline recommended in the recent Monageer report, which the Government tells us we cannot afford, could easily be financed – its estimated cost is only €15 million.

Other governments are showing the way. For example, new regulations in Bolivia stipulate that gas fields over a certain size return 82 per cent of revenues to the state and that foreign companies pay for exploration and operation costs out of their share. Foreign companies, including Shell, agreed to the new terms. In Russia, environmental violations by Shell and its project partners also led to the renegotiation of terms. Shell took the blow well, realising that even a lesser stake in a large field is better than no stake at all: it now has a 27.5 per cent stake in Russia, down from 55 per cent. (Shell’s profits were $31 billion in 2008).

The Corrib gas deal could be renegotiated on the basis of breaches of environmental law, and abuses of human rights perpetrated by Shell and its partners. For example, in 2007 Shell engaged in unauthorised drilling on a protected habitat in north Mayo, breaching the European Communities (Natural Habitats) Regulations. Shell’s private security agents have been accused of assaulting Willie Corduff, a middle-aged local farmer, and of sinking the boat of a local fisherman. (The company has denied both accusations.)

The Government should immediately suspend the Corrib project and it should only be allowed resume if local people do not have to live with a high-pressure pipeline carrying unrefined gas through their community and if the Irish people receive a substantially larger share of the revenues. The licensing terms already state that “The Minister may . . . require that specified exploration, exploitation, production or processing activities should cease . . . in any case where the Minister is satisfied that it is desirable to do so in order to reduce the risk of injury to the person . . . or damage to property or the environment. No claim for compensation may be made against the Minister on foot of any such requirement.” This clause needs to be invoked now so that people’s human rights can be protected, the environment preserved, and resources redirected to serve the needs of the Irish people.


Andy Storey lectures on political economy and international development at University College Dublin. He is chairman of the justice and peace organisation Afri (Action From Ireland). This article is based on a recent Afri pamphlet The Great Gas Giveaway: How the Elites have Gambled with our Health and Wealth.