Gemma O'Doherty: The speech you never heard. I wonder why? 05:28 Jan 15 0 comments
A Decade of Evidence Demonstrates The Dramatic Failure Of Globalisation 15:39 Aug 23 1 comments
Thatcher's " blind eye" to paedophilia 15:27 Mar 12 0 comments
Total Revolution. A new philosophy for the 21st century. 15:55 Nov 17 0 comments
The recent Ebola outbreak 19:28 Jul 03 1 commentsmore >>
Interested in maladministration. Estd. 2005
A bird's eye view of the vineyard
Moveable Feast Cafe 2019/08/17 ? Open Thread Sat Aug 17, 2019 01:30 | Herb Swanson
Excuses From NATO! Command Claims They Had No Idea Shoygu Was Flying From Kaliningrad! Fri Aug 16, 2019 19:04 | The Saker
Shoigu?s Ships Will Be Sent to Venezuela! Moscow Signs Warship Treaty With Caracas! Fri Aug 16, 2019 19:03 | The Saker
Upside down or right side up? Comparing Chinese vs. Western civilizational hierarchies. Thu Aug 15, 2019 03:02 | The Saker
Ukie nationalism vs Otto von Bismarck Thu Aug 15, 2019 02:25 | The Saker
A Blog About Human Rights
Saudi Human Rights Violation Fri Aug 09, 2019 20:41 | Human Rights
China?s LGBT Community Mon Apr 15, 2019 19:19 | Human Rights
Declaration of Human Rights at Sea Mon Apr 08, 2019 07:31 | Human Rights
NZ Watchdog On Limits Of Free Speech Thu Mar 28, 2019 11:44 | Human Rights
US Abortion Restrictions Violating The Human Rights Of Women Thu Mar 14, 2019 15:33 | Human Rights
For lefties too stubborn to quit
This Weekend I?ll Mostly Be Listening to? 1970s US Science Fiction TV Themes 08:58 Sat Aug 17, 2019 | WorldbyStorm
Open racism as a political strategy? 12:04 Fri Aug 16, 2019 | WorldbyStorm
A curious sort of leftist? 11:03 Fri Aug 16, 2019 | WorldbyStorm
No great triumph: Redmond?s Home Rule 09:47 Fri Aug 16, 2019 | WorldbyStorm
No other game in town 22:37 Thu Aug 15, 2019 | WorldbyStorm
Legalised Robbery - Multinationals and Ireland's Natural Resources
national | miscellaneous | feature Saturday March 31, 2007 16:58 by Fin Dwyer - (WSM pers cap) findwyer at gmail dot com
Why Ireland stands to lose €400 billion in natural gas and oil deposits
Concerns about the safety of Shell’s pipeline in Rossport are well known. But that’s not all that’s at stake. Not by 400 billion euro. The oil companies exploiting Ireland’s west coast have got some of the sweetest deals in the world and that doesn’t happen by accident.
Kinsale and the original terms
Gas and oil exploration began in Ireland In the 1960’s and in 1973 Marathon Oil found the first field off the coast of Cork. This became known as the Kinsale field. The Fianna Fail government of the time gave Marathon a once off deal in which Bord Gais bought the field at a reduced rate. Gas and oil exploration continued throughput the 1970’s but little was found.
This exploration was coupled with a change in the political landscape. In 1973 the “National Coalition” government was elected. This compromised Fine Gael and Labour. Fine Gael’s Liam Cosgrave became Taoiseach and Labour got seven ministerial posts. Labour’s Justin Keating, a former lecturer in UCD, became minister for industry and commerce.
Keating, ideologically a social democrat, was critical of the terms granted to Marathon Oil. The social democratic model being applied in Norway which was taxing the oil majors up to 90% tax heavily influenced Keating. The initial find occurred in1973 which coincided with the first major oil crisis. This made oil a very valuable commodity and also should have made the Irish fields more lucrative and exploitable.
Keating introduced new terms for exploitation based on three principles what became known as the Keating principles:
1.The State, acting for the people as owners of the resource, should be paid for the resources.
2. Companies engaging in offshore development on the Irish continental shelf should be subject to Irish taxation.
3.Since the resources are public property, the State must have the right to participate in their exploitation.
The main points of the terms were:
(A.) Up to 50% stake find in any commercial field
(B.) 8-16% royalties would be taken.
(C.) 50% Corporation tax.
(D.) The drilling must take place within three years.
(E.) The companies give up to 50% of the field to the State in 4 years.
They also laboured all costs of exploration on the companies.
A Rosy Irish Future?
So by 1974 oil had just rocketed to $12 a barrel (cheap it seems but this was a 400% increase than) and it seemed Ireland with its new terms was in for a windfall, but the oil companies were not so easily beaten. In his own words to Primetime in 2001 Keating had brought in the legislation because “I remember being terrified because I thought they [the companies] held all the cards” (CPI report, the great Corrib gas controversy, 55). This was quite understandable as the oil companies had just formed the Irish off shore operators group (later to become association) to lobby in their interests.
Fianna Fail take over
Before Keating could push forward with his ideas and set up a state oil company the so called national coalition was voted out in 1977 and the boys were back in town, that is Fianna Fail were in government again. Jack Lynch was Taoiseach and Dessie O Malley (later founder of the Progressive Democrats) became minister for Industry and Commerce. Ironically O’Malley’s main act in relation to natural resources was to set up the Irish national petroleum company- a State oil company. The company’s articles of association are interesting as they limit the company from exploring or exploiting oil or gas. (The INPC was later privatised and bought by Conocco-Phillips.)
Although this may seem insignificant, O’Malley by preventing the company from exploring or exploiting, severely limited Keating’s original idea; by setting up the INPC it almost made certain the Irish State would never have a National oil company along the lines of Statoil. It seems O’Malley free market ideology was very influential in this move.
Indeed the very idea of setting a national oil company didn’t sit well with O’Malley and he later said to the Dail the only he reason he did so was because Iraq would only sell oil to a State oil company (CPI report, the great Corrib gas controversy, 13).
Throughout the 1980’s the Irish state had little idea of what was the results of the exploration in Irish waters were as there were no independent tests carried out. The oil companies continued to say that finds were minimal. By the mid 1980’s 96 oil gas wells had been drilled and amazingly knowing what we know now about what lies off the west coast little was found. The oil companies moved into action and started to push that the terms instituted in 1973 be altered so they were more favourable toward the companies.
Dick Spring's true colours
In 1985 Dick Spring as minister for Energy in Garret Fitzgerald’s coalition government began to cede ground to the oil companies. He granted special terms to fields that were under 75million barrels. This included a reduced royalty rate and a sliding scale for state participation rights. In 1986 Spring removed all state participation rights on what were termed marginal fields.
Enter Fianna Fail stage right
By 1987 the government had nominally changed. Fianna Fail were back at the helm. Charles Haughey had entered his third term as Taoiseach of a country plunging further and further into crisis. Ray Burke was made Minister for Energy.
The oil companies through their Irish Offshore Operators Association were seriously lobbying for change arguing that the Irish terms were too harsh. Burke acquiesced and started to dismantle the basis of Keating’s ideas. He allowed the companies to write 100% of tax off against all exploration and construction costs over the past 25 years.
Even Ray Burke felt it would be over generous to reduce the 50% corporation tax (something Bertie Ahern would disagree with 5 years later, see below) so it remained. This was a good start for the oil companies as all costs of exploration were effectively transferred onto the people of Ireland as the companies were paying less tax on something that belonged to the people of the country. The reasons stated by Bertie Ahern (then Finance minister was to improve Ireland’s “competitive position in attracting oil and gas exploration” (CPI report, the great Corrib gas controversy, 13. Ahern went on to express concern for the “intense pressure on oil companies' exploration budgets” on the 22nd of October 1987 in reference to the new terms (www.oireachtas-debates.gov.ie) Seamus Brannan articulated the state’s position well:
“In the area of oil exploration, it is quite clear that it is too muddled, too complex, too protective, too timid, too cautious and, in effect, useless, because courage is not being taken in one's hands with the idea of getting the oil, the gas, out of the ground, and improving the intensity of the search” Dail Eireann 28th of June 1985 www.oireachtas-debates.gov.ie).
It is clear that by the mid eighties the government wanted more exploration and hoped success rates would then increase. To do this the costs of exploration were written off against tax. It appears the logic was if we drill more holes something would eventually be found. This is clear from Burke and Ahern’s statements.
Effects of the change in terms
Amazingly, after 1987 success rates rocketed by 99%. This was really odd as actual exploration rate fell by 41%. The formula worked but in a very illogical way. Something wasn’t right. This rate is obviously unbelievable and wasn’t just co-incidence. After drilling for years and finding nothing suddenly the companies struck gold at a time when they cut back on exploration. The most plausible reason is that the oil companies were sitting on information and waiting for the better terms to come along and from 1987 the government was beginning to answer their prayers. When these new and disimproved terms were brought in to legislation by Burke they then selectively drilled in places they knew they would be successful.
Things manage to get worse!
In 1992 Bertie Ahern (current Taoiseach) was the Minister for Finance. Ahern totally dismantled the 1975 terms introduced by Keating. There was to be no state involvement and royalties were abolished. In the 1992 terms, gas and oil were to be sold to the highest bidder (whereas at Kinsale they were sold at a reduced rate to Bord Gais). Licensing agreements were extended from three to sixteen years. At this point Ahern disagreed with Burke as he reduced to the corporation tax to 25%. He had widespread support for these measures. His Taoiseach of the time, Albert Reynolds, bemoaned the fact that there was not “a clear recognition by the Government that risks must be rewarded and enterprise encouraged in relation to the oil and gas industry”. (Dail Eireann 30th October 1985, www.oireachtas-debates.gov.ie)
This created what are widely felt as the best conditions for oil companies in the world, but that in effect means the worst terms for people of Ireland. This is astounding as the finds had dramatically increased since Burkes 1987 deal.
Who is to blame?
The point of this article is not to let the politicians off the hook but rather to point out that it wasn’t just one bad egg or corrupt party who got us in this dire situation. It is highly unlikely that Dick Spring or Dessie O Malley were corrupt. Rather they followed the rules of capitalism – they facilitated those trying to accrue capital. Neither is it written to lump all the blame Shell totally. As one Shell to Sea campaigner commented on the Shell/ Corrib scenario“if you put a lion in a cage with a sheep you can’t give out to the lion when it tries to eat the sheep”.
What the terms throughout the years seem to indicate is that the much used analysis of blaming corrupt politicians is wrong. To say no corruption was involved may be excessive but it seems unlikely that it wasn’t the prime factor. There are three possibly more influential reasons as to why the people of Ireland now find themselves with their in resources in the hands of multinational corporations.
The first is right wing ideology is and has been hegemonic over the Irish political spectrum. Keating seems to have been one of the few in favour of a State oil company. Dessie O’Malley was fervently against it and effectively stopped any future moves by establishing a very limited oil company the INPC. Future moves to maintain the resources oil Ireland for the people of Ireland were absent. The political will to do so didn’t exist in any of the main political parties. It was Labour through the auspices of Dick Spring got the ball rolling on the issue in 1985.
The second reason seems to have been a genuine fear of the oil companies. This seems to have been real and if we look at Keating’s comments to primetime (cited above) there was a genuine fear that the companies would leave altogether. Strangely at the time no one seems to have asked the question “what were they contributing”? Courage seems to have been lacking, but also while Keating may have had some progressive ideas he was in a coalition with Fine Gael and the idea of standing up to international capital which is what was needed would obviously be horrifying. Politics for public interest in Ireland is treated like a nice idea but not something politicians are really interested in.
The third and possibly most important reason was we had no control over our national resources. We were and are looking from crumbs off our own table. This was fuelled by the fear of the companies and international capital by the few in favour of nationalisation even in a limited whilst there was a willingness to support private capital by the vast majority . They held all the cards and the politicians would not or more accurately did not want to stand up and tell them to pay up or get out. Unfortunately they stayed and now we must fight them for fields about to go into production.
The fourth and final reason supplements the first two is that the state was not carrying out any independent test the drilling by the multinationals. This then led the state to be in a position that all its information was coming from oil companies. It was obviously in the oil multinationals’ interest to down play what they found and in fact Dick Spring’s terms (introduced in 1985) must have only encouraged it where the smaller the field, the better terms the companies received .
What we can see is that the Irish state allowed itself to be hoodwinked. This situation must have been obvious to successive energy and finance ministers since 1988 at the latest. Since then as free market ideology dominates there was no political will to challenge it.
The blame for this situation lies with the entire political establishment and system. All the major parties have been in power (except Sinn Fein and The Socialist Party and the Greens) since 1988. They facilitated this as they allowed it to continue. The past politicians allowed themselves to be hoodwinked in some cases (did they honestly think they could believe be the likes of Shell, Marathon and Exxon?), as it appears they didn’t have the will to rock the boat. They sold our resources in some cases for ideological reasons. The current politicians are possibly more to blame. They are aware of exactly what happened. They can see the unbelievable surge in productivity in exploration in 1987. They are probably muted by the fact that very prominent politicians took bribes at some point or were facilitated or thanked for introducing legislation. Why Bertie Ahern introduced more favourable legislation in 1992 is quite strange.
The nominal parties of the left, Labour and the Greens are equally compliant. Pat Rabitte is desperate to prove to big business that Labour can be trusted with the economy of the rich so will never challenge Exxon or Shell even to the extent Justin Keating was willing to. The Greens still have to state their policy which means they’ll blow with the wind and in Ireland it’s blustering right towards continued privatisation.
However this is changing rapidly. The Corrib Field is between 6-11TCF (trillion cubic feet the equivalent of well 1.4 billion barrels of oil). In the average scenario the field is worth in the region of €50 - €60billion. The Dunquin field is probably worth at least around €400 billion. Opposition has a very limited time to rectify the legalised theft of our resources. Exxon and Providence will attempt to pump the gas and oil in Dunquin in the next ten years, Shell will pump Corrib once they realise an inland refinery is not a runner. In thirty years they will potentially have pumped 500 billion euros out of the country. And there are other potentially valuable fields off Donegal, Wexford and in Cavan/Leitrim. The question for the next twenty years is whether the people of Ireland will act or do our usual moaning when it’s too late to act.