Why don’t we just use Ireland’s $1 trillion of oil and gas? The trouble with trillions

Good points. On the face of it, the, er, welcome extended to Shell’s Corrib efforts might also put off Big Oil– but in fact the Corrib is a cakewalk compared to E&P in the Niger delta or Sakhalin island. In the latter case (as with BP in Russia) the assests were largely expropriated by the State, but the operators dusted themselves off and stayed in the game. It’s also worth noting that the tax regimes on both new and mature fields tend to be negotiated per-field and per-annum and reflect the shared interest of the operators and the governments of incentivising production of marginal barrels of oil, taking account of market price, technology, recovery cost etc. It has been thus in the North Sea for many years.

Solid post. I love posts like these that flesh out in very simple terms exactly why ideas such as the “cash in our oil” claim are bogus. Well put.

Yes, there is little public evidence that oil and gas exist in our offshore areas in quantities such that it is technically possible, operationally feasible and commercially viable to exploit them – at present or foreseeable prices.

However, I do wonder what is actually known – by whoever – about offshore geological structures as a result of the 130 wells that have been drilled.

Can anyone confirm to what extent, if any, the terms of licenses issued compel drilling companies to supply detailed and complete data to the Geological Survey of Ireland?
While it may not be data that can be put in the public domain, surely government could use such data (assessed by experienced professionals) to draw up the terms and conditions for further rounds of exploration licenses.

It is worth noting that most of us were brought with the idea that Ireland has no natural resources – something that the current ESB CEO asserted twice in a radio interview with Pat Kenny last Thursday morning.

However, in 1922, the Geological Survey of Ireland published a summary of known indications of the presence of base metals in the state ie Grenville A.J. Cole “Memoir of Localities of Minerals of Economic Importance and Metalliferous Mines in Ireland” which was republished by the Mining Heritage Society of Ireland in 1998.

Outside a very small circle, little or no attention was paid to this documented evidence.

It is arguable that most of the orebodies “discovered” and exploited since 1922 have been in places that this booklet indicated.

Just as the 1970s oil supply gave rise to the development of North Sea oil/gas (based, if I remember correctly, on onshore gas discoveries in the Nederlands during the 1960s), it may be that current developments in energy markets may spur further work offshore.

Not that we can use that possibility (which is all I consider it to be) to work our way out of our current situation.

Good points there Ronan,

I read that there was an oil/gas find off the coast of Dalkey, and another large one beneath Cavan/Leitrim/Roscommon/Longford, as well as one in Kerry.. It was the Irish times who reported these.

If this is true, then we have a few more wells than just those off the west coast, but i agree extracting them is not always easy, and there isnt a huge rush from foreign countries to pillage our shores.

We tax on these oil companies on profits, but surely they could manipulate profits so that we don’t get the best value from the tax return?

Hi Conor,
In terms of what’s been successful so far, I think this may come down to the definition of “offshore” but all finds anywhere in Irish territory would boost perceived probabilities offshore.
On taxation, as I understand it, we have recently introduced a tax called the Petroleum Resources Rent Tax, which would make it harder for tax avoidance as for established wells, profitability at a lower price is proven and thus an increase in the price translates directly into increased revenues. I’m open to correction on this one.

@Donal
I agree – it seems generally people swing between “Ireland has none” to “Ireland is overflowing”, a bit like in other aspects of public debate where, thanks to the press, we can either only be top or bottom of the unemployment/economic growth league tables. The sheer weight of statistical logic would suggest that it is likely we are somewhere in the middle, boring and all as that may be!

R

Well things are looking up, San Leon got granted a licence for exploration 🙂

I can add to that. There were once about 10 working wells off the coast of Cork – this is down to about one. The projected output of the Seven Heads field which was originally a RAMCO project delivered just 10% of the output (due to water).

Natural gas is also more price volatile than oil – as anybody who worked in ENRON learned in their many badly thought out take-or-pay deals which went bad. Its very expensive to drill for a very price risky (due to fluctuating costs and difficulties associated) product and make a profit.

Lastly, if ESBi and EirGrid are losing millions every year in legal expenses caused by (often illegal) and misinformed objections and obstructions to projects, consider how much projects like Rossport have cost the taxpayer – bearing in mind that ultimately Rossport is a Bord Gais project.

The reason taxes are high on fossil fuels in areas of plenty is beacuse they are usually not hard to extract and very profitable. In Ireland billions have been lost in pointless exploration projects that went nowhere. Not an easy industry to make money in unless you are based in a very profitable existing deposit area with extensive rights.

PS there is actually quite a few good deposits (as I learned in my days working in an exploration dept of an oilfield giant) around Ireland but in extremely difficult to extract regions with poor supporting infrastructure.

Donal – you don’t have to drill anymore to find potential deposits. Most of the exploration companies now probe the sea floor using technology which measures seismic activity. The key technology for this kind of exploration is actually acoustics. Test wells would only be drilled after positve results come up in this kind of survey.

I know the porcupine field was being analysed by the marine geophysicists around 2004 so I think we would have heard by now if the field was both “rich” AND extractable. From what I recall the deposits were good but the sense was that technology would have to move forward and become cheaper in order to take advantage of the deposits. The Rossport problems would probably send anybody trying to put infrastructure in place for this but I always felt that a long view of Rossport would have been that it could have been a good landing point for fields futher north as well as west.

This article is horseshit, there are potentially 10 billion BOE in the Dunquin field alone. The Irish exchequer are being taken for a ride and the Shinners are dead right for fighting for our cut.

E Lannoye if you need everything written in ladybird book language for you it’s no wonder this country is in the state it’s in.

Well, with an argument that coherent, well-sourced and politely put, Charles…
Why don’t you raise some capital and profit from Dunquin?

and as far as I can see Ronan, you have two sources the DCENR and the Simpsons both equally reliable.

OK Charles,
You know where this gas is. I hopefully can bring something to the table with my economic skills. Let’s put together a consortium and become millionaires.
R

Ronan, you can be polite if you wish as you promote your media career, I’m content being impolite in the national interest.

A non-sequitur if ever I heard one. But let’s give you that bizarre point about you having some rights to impoliteness that I don’t have, even though you’re a guest on my blog.

Two questions for you:
(1) What are your sources? I’m happy to learn.
(2) Our taxes are in line with other countries that have, to be honest, better proven resources than we do. We’ve recently introduced a Petroleum Resources Rent Tax. What else would you add and how would it affect exploration?

You have every right to be impolite young man as do I – however I think we have this a little backwards. You published the article, not I, so the burden of proof rests with you. You tell us there are 10 billion barrels of oil in Irish waters and base your calculations and subsequent conclusions on this. Please now show us how you arrived at this initial figure. Thank you.

@Ronan

Thank you for this excellent article, and also to (most of)the commentary it attracted. I, myself, am trying to get a better understanding of the offshore O&G sector, and the policies applied to it.

I am confused by Charles Bancroft’s remark, however. He writes: “You tell us there are 10 billion barrels of oil in Irish waters and base your calculations and subsequent conclusions on this. Please now show us how you arrived at this initial figure.”

My reading is that you simply took the DCENR and then performed a thought experiment. You weren’t commenting on the validity or lack thereof of the estimate.

Conor’s question is pertinent all over the world: “We tax on these oil companies on profits, but surely they could manipulate profits so that we don’t get the best value from the tax return?”

It seems to me, looking across countries, that most are in the same dilemma as jurisdictions trying to attract investment capital generally: they are stuck where they are, whereas multinational corporations are mobile and have much more information about options elsewhere than the governments with which they are negotiating at any particular time.

@ Ronald Ronan Lyons’ very definitive conclusions are not supported up by the data he presents. His argument has not been presented as a though experiment rather as an analysis. As far as I can see however this is an opinion piece with little other merit.

@Ronald
Thank you for your comment – I think you have summed up my point better than I could.

@Charles
Frankly, I’m baffled by your position. I have written a piece that does not contain any definitive conclusions. In fact, the main point was precisely about the uncertainty in relation to Ireland’s gas and oil prospects, an uncertainty borne out by the consistently small number of applications for Irish licences compared to other countries. You have come on to this blog, angry that I haven’t mentioned 10 billion BOE in Dunquin, for you which are unwilling to provide a source, and then demanding proof of my claims!

Ironically enough, my piece did not rule out such a find and indeed tried to spell out the value of such a find, should it occur, to the Irish taxpayer. However, the burden of proof must always rest on the person claiming something exists, which in this case is you. As an Irish taxpayer, I would be only too happy to write a new article (or opinion piece or what you might like to call it) in the event of proof of major reserves.

When challenged by someone else, your response is to call my thoughts on the matter an opinion piece! If you believe in a conspiracy that is costing Irish taxpayers, please do say so. If not, perhaps you could explain your position.

Ronan I don’t deal in conspiracies I deal in factual information. As I have already stated they burden of proof rests with you the author to support your data. If this is a fun piece, a thought experiment, based on a speculative figures as the commenter above suggests, then your ought to be clear about this in your conclusions.

With regard to the deep water prospect in Dunquin field, seismic studies conducted on behalf of Providence, widely reported in 2006 have indicated a recoverable volume of up to 25 trillion square cubic feet of gas and about 4 billion barrels of oil. That would potentially put it among the 20 biggest fields in the world.

Exxon-Mobil have a “carried interest” in the licence, meaning that it bears all the costs in return for the 80% stake. However, under the current (1992) licensing arrangements, the oil companies have effective ownership of any oil and gas that they locate. The State gives up its ownership rights with the oil corporations paying 25% tax on their profits as you suggest. However, before they pay a cent in tax the oil companies can write off all exploration and development costs, and the estimated costs of closing down the wells themselves, when that is done at some unspecified point in the future. It has been estimated that many finds will be at least half depleted before the State can claim any tax revenue. Neither is there any obligation upon oil/gas corporations to land Irish resources in Ireland. The oil/gas can be directly piped into tankers and shipped to the UK or US. Exxon-Mobil, therefore, are effectively acquiring a potentially huge block of gas and oil resources at a knock-down price. Providence Resources have simply acted as a facilitator for Exxon-Mobil, playing the role of the entrepreneur, and gaining the vital concession from the Irish government, while the large US corporations waited in the wings.

http://www.independent.ie/business/irish/providence-up-there-with-the-big-boys-as-exxon-returns-113917.html

“This article is horseshit, there are potentially 10 billion BOE in the Dunquin field alone. The Irish exchequer are being taken for a ride and the Shinners are dead right” C. Bancroft.

Ignorance is a poor excuse for abusiveness, and much rubbish is sprouted, both by commentators and the media. To contribute to the same high standards in my field (petroleum geology) as Ronan does in his (economics) consider the following:

1). not all hydrocarbons are extractable – yields can be as low as 10-15%.

2). Taken over a 20 year field life on a DCF basis such a discovery is not always as lucrative as it might first seem.

3). There is a preponderance of eroneous statements (e.g. mirror.ie, independent.ie) in the public domain which state various Irish fields (e.g. Dunquin) have 24tcf gas “AND” 4130mbb oil, in fact it is usually one or the other – 24tcf “IS” 4130mbbl OIL EQUIVALENT (BOE), amazing how otherwise just about every quoted Irish field has almost exactly 1bbl oil present for every 6000cf gas (Spanish Point 1.25tcf “AND” 208mbbl; Lough Allen 9.4tcf “AND” 1500mbbl etc.).

4). A 24tcf gas field is nothing exceptional by internatioal standards, the Slochteren field in Holland was four times the size (100tcf) and whilst a nice little earner, did nor propel the Netherlands into the Arab Leauge or OPEC. They still grow tulips as a day job! Similarly Norways Troll field (48tcf) is just one small string in the bow of that oil-rich nation, yet they still live frugally and work hard in a high-tax (and generous social welfare) state. Would Ireland use its “oil wealth” as wisely?

“I deal in factual information”;
“25 trillion square cubic feet of gas and [sic] about 4 billion barrels of oil. That would potentially put it among the 20 biggest fields in the world.”

C. Bancroft.

Even if the oil “AND” gas were correct (25tcf + 4000mbbl = 48tcf) it would still rank level with Troll’s 47tcf which is in 37th place for gas fields.

Thank you S. Grimmer, someone who clearly understands the field, weighing in with actual facts to dispute the “facts” pedalled by those who clearly have no real clue.

Wow charles bancroft comes up with the goods and Mr Lyons is no where to be heard.

He should stick to being pretentious with his obsolete Latin paraphrases.

The quantity of oil and gas identified by a government sponsored report, “Ireland an exciting petroleum province 2006” is actually 130 Billion Barrels of oil and 50 Trillion cubic ft of Natural gas. Most of which is found in shallow wates in the porcupine basin, north celtic sea (near kinsale) and the eastern Kish basin (off the Dublin coast)
See http://www.democratic-reform.ie for details of ALL our natural resources.
Frank Chaney

And from that website, the following:
“The resurgence of European Fascism is well advanced. After defeat in two world wars, there are still those trying to build a Fascist Superstate. Attempts to create a single European Finance Agency, are another step on the road to European Intergation. What Hitler could not achieve by military conquest, Germany (Merkel) and France (Sarkozy) seek to achieve by economic warfare.”
A stunningly poor understanding of European history and Franco-German relations, to say nothing of the analysis of current events!

in proven fields around the world governments take up to 80% of the profits from the oil companies.
now that the field of cork has been estimated to have 280 million barrels extractable should we not be raising the tax take,which is at present between 25% and 40%

The oil and gas that has been discovered off the coast of Ireland is rightfully owned by the Irish people who as citizens are shareholders in this State. No short term government has the right to sign this away without consulting with the people first (including yourself). If we manage our resources properly like Norway has done (for the benefit of its people) we can invest some of the revenue raised in developing our offshore and onshore renewable energy technologies that will truly bring Ireland to the forefront of sustainable global development.

Mainstream Renewable Power and Eddie O’Connor are Irish leaders in renewable power recently announced a privately funded Energy Bridge to the UK which will see Ireland export over 2 billion euro in electricity to the UK per annum. In Ireland we have enough wind energy potential to supply 19 times our annual needs. We have enough wave and tidal energy potential to supply our neighbours in the UK and Europe with a large amount of their energy too. So in the future Ireland will be a major renewable power producer for Europe. We are trying to get off to a good start and the oil and gas debate is very healthy for our democracy.

We have been cheated by bankers and bondholders recently and people have had enough of the corporation thievery that we have witnessed. The fact that ‘our’ oil and gas resources have been discovered is a Godsend, a miracle that will get us out of the mess that previous governments have created with their poor management of our economy. The fact that Tony O’Reilly Jnr and Providence Resources are to the forefront of our oil and gas developments is good when Tony Jnr realises that we live in a new conscious age where people understand ethics and what is morally right and wrong. Tony O’Reilly can be seen in the eyes of the nation as a modern heroe if he does the right thing. All drilling should cease until proper agreements are in place to share the oil and gas wealth of the nation with her people. Providence Resources are entitled to an equitable share of the revenue but should be willing to accept a similar deal to that which Statoil ‘Sate Oil’ has in Norway (78% revenue goes to the State). If providence are not willing to accept this then we should bank our oil until a suitable ethical partner is found (it will increase in value as the years advance and will become more marketable as a development prospect).

Providence Resources are investing 500million in their drilling programme in the near future which involves rigs from their partners Exxon, Petronas, or other oil exploration partners carrying out research at a cost. There is no reason why our government cannot secure 500million by offering the correct deal to the correct people. We have one field Barrrymore (discovered by Esso in the 1970s, not Providence) that has an estimated 1.6 billion barrels. Of this Providence estimates 280million barrels are recoverable in the short term. That is equivalent to over 21billion euro at current market prices for oil. This figure in itself is leverage to entice ethical drilling partners or hire a team of professionals at very competitive salaries to hire a rig and manage the project. One rig at a time will do. There is no rush! Let’s do it right. This revenue can then be invested in the State and evolving Ireland to become a European leader in renewable energy production and power us as a nation into a sustainable future and at the same time retaining our green Emerald Isle image for ecotourism purposes. Who knows with this investment we may realise after a while our renewable energies are more profitable than oil and gas.

More info can be found at http://www.EcoHomesandGardens.ie under The Great Irish Oil and Gas Swindle section on main menu including a Dail statement that oil companies have revealed we have potentially over 160 billion barrels in oil and gas reserves around our coast.
micheal
http://www.EcoHomesandGardens.ie
http://www.IrelandEcotourism.ie
http://www.iEco.ie
(all not for profit websites)

Latest News Oil and Gas News:

On 16th of January 2013 Europa Oil and Gas announce they have discovered 1.62 billion barrels of oil at the Kiernan Oil Prospect.

Details on:
http://www.Trillions.ie and http://www.EcoHomesandGardens.ie

Enegi Oil who are trying to Frack for Shale Gas in Clare also revealed they had discovered over 3 trillion cubic feet of hydrocarbons in Clare Basin (South County Clare). They have discovered 3.86 trillion cubic feet of shale gas and the Clare Basin is within the same fault system trend as the Company’s prospect/leads and discovery in Newfoundland. So there are potentially vast amounts offshore Ireland.

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