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The biggest scandal of all?


Following on from reports in relation to the Corrib North gas field off the shores of County Mayo , as representatives of Irish based oil rig workers who have worked for many years on oil rigs we wish to draw attention to a potential loss of unimaginable proportions in relation to our potentially huge amounts of oil and gas reserves. Since the first offshore exploration licenses were granted by an Irish Government in the late 1960`s, the balance has been in favour of the oil companies. The license that effectively handed over control of the whole of Ireland`s south coast was granted to Marathon Oil (USA) for a mere £500. Marathon discovered natural gas in large quantities in the Celtic Sea. The number of experienced Irish based rig workers grew with the sustained drilling that preceded gas production and there were many economic and commercial spin - off`s to the Cork region.

Ireland, while containing hundreds, if not thousands of oil and gas bearing zones in her 650,000 square kilometers of water, stands to gain practically nothing from any exploration, development and production of our natural resources as legislation is presently constituted. Since 1992 an oil tax regime has been put in place that effectively ends any hope of Ireland benefiting from what Nature has provided for her. An oil tax rate of 25%, the lowest in the world------with all costs writtable off against this percentage ( Norway has a 78% oil tax ); ABOLITION of royalties and all other production- related levies ; and------the fatal flaw----no commitment by the oil companies to use ANY Irish jobs, goods or services, means that this vital national resources only benefits the oil companies who will sell back our own oil and gas to us and Ireland will get little if any of the economic spin - off``s in terms of services , manufacturing , ship and rig construction , infrastructural development of service ports , refineries , petro - chemical industries and many thousands of offshore and onshore jobs. The State was hoodwinked into this deal in a time when there was little or no deepwater drilling and deepwater production technology was not yet developed. After confirming the commerciality of their Corrib North find , Enterprise Oil started the process of lobbying for a 12.5% tax rate and the oil industry in Ireland, the I.O.O.A …Irish Offshore Operators Association ( oil companies)..have proposed a $5 subsidy per barrel from the Irish State on any oil found in Irish waters!! The oil companies now see the west coast of Scotland as the main base of operations for the Atlantic Margin..........the new oil and gas frontier , with the North Sea oil and gas fields having a finite lifespan into the early part of this century . This makes sense to the oil industry because they have an established infrastructure in Scotland for the last twenty five years. The Atlantic Margin stretches from west of the Shetlands, west of Scotland and right down along the western seaboard of Ireland.

Serious questions must be asked of our politicians and civil servants as to how the oil companies got such a good deal and why this country`s interests were not adequately protected . This tax deal was meant to be an 'incentive' to encourage oil and gas exploration in Irish waters . But , since 1992 only a small number of wells have been drilled. The vast bulk of licenses and drilling options / leases are so-called 'Frontier Licenses' that the oil companies can sit on for up to twenty years. Deepwater production techniques have already been developed suitable for the deep waters of the western Atlantic but the proper exploitation of OUR natural resources has been delayed until the oil companies decide when to drill and produce. Significantly Enterprise Oil UK , the oil company, who along with Statoil , that intends to develop the Mayo gas field , has made a massive gas discovery...a discovery that the industry feels could be one of the biggest in European waters.. thirty five miles of our shores. Enterprise Oil( a company that allows some of it`s North Sea drilling contractors pay Filipino and Mauritian workers 81p an hour ) refused point blank to hire any Irish based oil rig workers on the drilling rig that they had hired to drill appraisal wells at the location of this massive gas field . This is , despite the fact that there has been an agreed involvement of highly skilled Irish oil rig workers on rigs operating in Irish waters since drilling began in 1969. Many spurious reasons were given by Enterprise as to why they would hire no Irish , while Statoil 'washed their hands' on the issue claiming that Enterprise were the operator ( although the combined Norwegian and American involvement in that well is 55%....Statoil 36.5%, Marathon Oil 18.5%..... while Enterprise has a 45% stake ). However , Irish rig workers believe it is an effort to remove the only people in Ireland who would know what the oil companies are REALLY finding in Irish waters. To add insult to injury, Enterprise Oil and Statoil want An Bord Irish taxpayers expense...... to build a gas pipeline from Mayo to Dublin via Galway to sell the gas to the E.S.B for their new gas fired power station. Then they want an interconnector gas pipeline laid to the UK to export surplus Irish gas that is really Enterprise`s into Britain and then onto Europe after that . All this is after Ireland has bought it`s domestic gas needs off Enterprise Oil ! Already the compulsory purchase orders are being issued to land owners along the route of the Mayo / Galway route so as to ensure that the framework of the network is in place for the 2002 general election !The recent 'offer' from the American Keyspan pipeline construction company to fund the development cost of a North - South interconnector at 'no cost' to An Bord Gais , supposedly to pool ALL of the State`s existing gas infrastructure with Keyspan , allied to the impending plans to privatize An Bord Gais , will conceivably spell the end of ANY Irish involvement in the distribution of her own natural resources .

Electricty generation from gas by gas power is another area subject to offers of 'joint ventures' with Statoil 'contributing' towards the construction of power stations such as Ringsend. The E.S.B will then buy back Irish gas from Statoil`s Alliance Gas company . Irish natural resources are all to play for ! Mayo gas wil be piped across country underground, by-passing most of the county although politicans are promising 'great things for Mayo' ! In late 2000 the State undertook to 'co- fund'(pay for) the pipeline. Also, political promises have been made to provide spurs into every town along the proposed route , no doubt again at Irish taxpayers expense thus creating a double subsidy for the oil companies. At a net commercial worth of at least £ 3,000,000,000 (three billion) to the consortium , not a bad deal at all for them. ( 1.5 tcf ..{trillion cubic feet} at least with a potential of up to 5.5 tcf …[Wood Mackenzie `98] making the whole Corrib and surrounding prospects worth up to £11,000,000,000 to the oil companies with licenses for the bigger area including and surrounding Corrib ).

Local politicians in the West will be delighted to announce the arrival of gas into the market towns of Mayo and Galway so that advance factories can be built in the hope that grant aided multinational companies can set up industries and buy gas ( subsidized by the Irish taxpayers ) that little or no tax was paid on; no royalties paid ; no political will to insist on a significant Irish involvement in all stages of the development of the Corrib North gas field. In the end there will be great boasts about who 'brought the gas ashore' but no realization or awareness of what real wealth creating opportunities are being lost to the West and the rest of Ireland. Token usage of ports such as Killybegs by oil rig supply boats , on occasion , for offshore work is mere 'window dressing' by the oil companies , in an attempt to play down the fact that the oil industry intend to use their long established Scottish oil and gas industrial infrastructure as the base for their Irish operations via the Port of Ayr.

Allied to this denial of hundreds of Irish rig workers the right to work in their own waters , is the fact that the precedent has been set in for the first time in twenty nine years to allow the Mayo drilling operation be serviced out of Ayr in Scotland , while prior to this Irish ports were used to service these operations in Irish waters . Astonishingly Enterprise were allowed operate in Irish waters while using another jurisdiction as a base. This will have the effect of denying the development of an indigenous oil industry in industry that has massive economic spin- off`s to a country , and the £1,000,000,000(one billion) that it will take to develop the Mayo operation will be spent in Scotland. The people of the west of Ireland in particular will never properly benefit from this major gas discovery , as things stand unless the political will is there to demand that ALL the benefits of this precious natural resource goes to the west and to the country as a whole. Enterprise appear confident that they can do as they please and seem safe in the knowledge that there would be little if any State pressure on them. This is not surprising when it emerged that Enterprise Oil UK hosted a major fund - raising event for Fianna Fail during the Galway Races in 1998 ,1999 2000 and 2001 !

In July 1999 , Marathon Oil in Cork seem to have followed the Enterprise Oil policy of non Irish involvement by over-ruling their drilling contracters Global Marine from hiring Irish based rig workers from their offshore programme for 1999. This is after thirty years involvement by Cork based rig workers off Ireland`s south coast. Informed sources in the oil industry affirm that far from the Kinsale gasfield 'running out' that there is at least twelve years gas left to exploit. Providence Resources …a so-called 'Irish' company hired no Irish rig workers for their Helvick Head operations in 2000 and outsourced 85% of their goods and services from the U.K.

Countless billions of pounds will be lost to this country if this allowed to continue. The mininalist position of this State appears to be to secure a gas supply in Irish waters to replace Kinsale Head without any real interest in securing significant spin- off``s from development operations offshore. Ireland should adopt the Norwegian example of how to develop a natural resource correctly and extend the role of the state-owned Irish National Petroleum Corporation into an oil exploration and development role ( like the Norwegian state - owned Statoil ) to harness the wealth of our own natural resources for this country and it`s future generations. However, the State company was nearly sold to the American company Tossco , then to Phillips Oil ( who took over Tossco) in 2001. The oil industry now has the raw material ; the means of production and distribution ; and the markets under their control in Ireland and this country is out of the equation. The speed with which Philips has won the contract for the oil needs of the ESB shows the potential that was lost by the state when they 'sold' INPC for $100 million just after completing re-furbishing work worth £60 million , a debt which the State has agreed to carry ! The State argues that the 1992 tax deal is 'a done deal' and nothing can now be done to change existing arrangements with the oil companies. The urgent reality is that it is IMPERATIVE that existing licenses are changed to protect Ireland`s interests. The State also argues that the oil companies are not 'queuing –up' to drill in Irish waters. Why should they queue when they have all the geoligacally significant zones acquired through licensing rounds years ago and they can themselves decide when and where to drill when it suits THEIR criteria. When significant commercial discoveries of oil are found in Irish waters , under new deep-water oil production technology the oil will be pumped directly into oil tankers to be shipped away out of the jurisdiction leaving little or no benefits in terms of the value – added downstream aspects of oil production. The declared intention by the cons- ortium to develop Corrib ( Feburary 2001) after three years stalling on a declaration of commerciality again highlights who 'calls the shots'. Little or no PROPER information is being given to the North Mayo residents around where the pipeline is to come ashore ; the real route of the line or information relating to the 90 acre terminal site. The downstream benefits to the local economy in Erris will be token although Corrib North and surrounding gas and oil prospects are practically on their geographical doorstep , as it were , with many billions in practically tax free profits going to the oil companies concerned. The recent ( April 2001) commitment to review the 1992 tax deal by Minister Fahey is welcome. This has since been ruled out in a subsequent interview on RTE`s Prime Time programme. However current drilling options must also be reviewed. A windfall tax is now imperative on current licenses , particularly Corrib North which is much bigger than had first been intimated by the consortium developing this massive gas field. Statoil`s use of Fenit as service base for their Sarsfield Prospect one hundred miles off the Kerry Coast with Irish companies being involved in supplies and services is welcome. So also are the twenty one jobs also on offer on the Sovereign Explorer oil rig although these are mainly low paid , low skilled jobs while many high skilled Irish offshore workers are left 'on the beach'. Irish- based oil rig workers demand full and fair opportunities on ALL rigs operating in Irish waters and calls for a with-holding of drilling on companies who refuse to hire Irish based oil rig workers.

The April 2002 news that Shell Oil is set to take over Enterprise Oil hopefully will herald a change in regards the hiring of Irish based oil rig workers and the use of Irish jobs , goods and services. But the underlying fact remains the same in that the real benefits to Ireland will be minimal.

The same future generations will never forgive those who gave away this precious resource. The time to rectify it is now so as to avoid the biggest scandal of all.

Posted Date: 
10 April 2005 - 1:08pm