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Scandalous plan to give away more of our oil and gas prospects — this time onshore

Colm Rapple - Irish Mail on Sunday

As Tony O’Reilly’s Providence Resources raised the hope of finding oil in Dublin Bay this week, green Minister Éamon Ryan is preparing to give away another large slice of our natural resources. And I mean, “giving away”. He has done it before, but his plans are even more scandalous this time. In the past the potential oil and gas reservoirs were in deep and inhospitable waters offshore. This time they are onshore. It’s true that the prospects are not thought to be great and any finds are likely to be small but exploration costs will be very low and the same very generous licensing terms that apply offshore will apply. The finders will effectively own whatever they discover and simply pay tax on their profits after writing off all their exploration and development costs.

Ireland’s first exploratory wells were drilled onshore back in 1959. Ambassador Irish Oil that was subsequently taken over by Marathon was granted rights to large areas both off and onshore. Wells were drilled in Cavan, Clare, Kilkenny, Cork, and Meath and some minor gas shows were reported in Cavan and across the border in Fermanagh where some drilling also took place.

Some of these areas were revisited in the 1980s and wells were also drilled in Leitrim. The last exploratory wells were drilled in Leitrim and Cavan in 2001.

Now Conor Lenihan, the junior minister in Éamon Ryan’s department has invited applications for licences that will give the holders the right to explore and exploit any hydrocarbons under about 8,000 square kilometres in what are know as the North West Carboniferous and the Clare Basins. Included are large areas of Counties Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon, Sligo, Clare, Cork, Limerick and Kerry.

According to the Minister “this presents an exciting opportunity for the petroleum industry to invest in exploration onshore Ireland”. That’s certainly true. But it would be far better if the opportunity was restricted to a State company like Bord Gais which undoubtedly has the expertise and the resources in co-operation with State agencies like the Geological Survey of Ireland to pinpoint and find any hydrocarbons that might be there.

It would require putting up some risk capital. But not a lot, and anything found wouldn’t have to be shared with the oil companies.

These new licences will be subject to the revised tax terms introduced in 2007 in response to the growing recognition that the old terms were far too generous. But in fact the old terms are likely to apply to any finds made. The new terms are not all that much onerous in any case. The only change was an additional sliding scale tax that will only hit really large and very profitable finds. Onshore finds are unlikely to fall into this category.

The terms will require the successful applicants to get their exploration work under way a lot quicker than it normally required with offshore licences. They’ll have an initial term of only two years. But with the low costs involved that should be no problem.

One of the arguments for maintaining the generous licensing terms made in the Indecon consultants’ report on which current policy is based, was that we are trying to promote a deepwater area in the Atlantic. It is pointed out that the Corrib gas field is at a depth of 300m and the Dooish gas condensate discovery is at a depth of 1,500m.

It was admitted in that report that oil companies the technology has improved significantly, and there are many examples of successfully exploited deepwater finds in the Gulf of Mexico, Brazil, and the Gulf of Guinea, among others but it was stressed that the costs are still relatively high.

That argument cannot be applied to onshore exploration. Even if the current terms were less generous than they are, it makes no sense to apply the same lax fiscal terms to such finds as apply to the offshore. Indeed it makes no sense to apply them to the Providence Resources prospect on the Kish Bank off Dublin Bay. The water is very shallow, sheltered and close to land.

It’s not the first time, of course, that hopes have been raised of an oil or gas find in Dublin Bay and it is still only a hope with no firm plans, as yet, to drill an exploratory well. Four wells have already been drilled on the Kish, the first in 1977 by Amoco. Two years later, Shell thought it had identified a prospect. Than in 1986 it was the turn of Charterhouse while the latest well in 1997 was drilled by Enterprise Oil.

We know that there is coal under the Bay and that the geological structure is similar to that under Morecambe Bay, on the other side of the Irish Sea, where a gas find is being exploited. Maybe Providence will be lucky. The trouble is that, if it is, the rest of us will gain little from its luck.