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Let's make Norway joint owner of our oil and gas

By: 
Fintan O'Toole - Irish Times

The State is about to sign away almost all our resources on terms by far the worst in the developed world

SOMETIMES, YOU have to consider extraordinary things. I want to suggest two of them at one go. The first is that the State is simply incapable of dealing with one of the key challenges and opportunities facing Irish people: getting the best for the Irish people from the potentially huge resources of oil and gas off our shores. The second is that we should therefore split those resources with a state that has proven its ability to manage this challenge for the maximum public benefit. That state is Norway. I am suggesting, in all seriousness, that we should give joint ownership of our oil and gas to the Norwegian state.

The first part of this proposition is the easiest to grasp. The official estimate of the Department of Communications, Energy and Natural Resources is that there are reserves of 6.5 billion barrels of oil and 20 trillion cubic feet of gas off the western seaboard – enough to meet our energy needs for a century. (This does not include southern waters, where significant gas fields already exist, or onshore resources.)

Right now, nobody knows how much of this oil and gas can be tapped at a cost that’s commercially viable. What we do know is that long-term energy prices are going in only one direction – upwards. And that the technologies for recovering oil and gas from deep waters are getting better all the time. The combination of these factors makes the recovery of a significant portion of these reserves a much more realistic prospect.

We need to be sober and sensible: there’s no immediate bonanza that’s going to save us. Getting at the stuff that’s there will be a long, laborious and extremely expensive process. It would be crazy to risk large amounts of the money we don’t have on trying to find the next big field. The scale of the investment and expertise required means that the giant oil corporations will have to be involved. Deals will have to be done.

But there are two kinds of folly here. One is the delusion that all we have to do is declare our full control of all the oil and gas and our problems are over. The other is the idiocy of simply giving away all of this potentially vast wealth for next to nothing. And that’s what we’re currently doing. There’s no public stake in any field, no royalty to be paid on the gas and oil, and no control over the sale of the resources when they do flow. All we get is a tax on profits of between 25 and 40 per cent – after all the costs of prospecting and development have been written off. A US government study in 2007 found these to be the most generous terms in the world, except for Cameroon.

The current licensing round is due to result in rights of pretty much all the remaining territory – a quarter of a million square kilometres – being given away. The Minister in charge is Pat Rabbitte, once a critic of this regime. He was on RTÉ One television’s Prime Time recently, responding to a thoughtful and balanced report on the issue compiled by an independent group for Siptu. The report is utterly sober – it simply calls for a thorough public review of the terms by an Oireachtas committee before these long-term licences are issued. Rabbitte, though, has morphed into Frank Fahey. He was contemptuously dismissive of the call for a review, declared himself perfectly happy with the current regime and made it clear that he will go ahead and issue licences whatever the Oireachtas committee decides to do.

This complete dismissal of any notion that we might just pause for thought before giving away what could be a historic opportunity is evidence, surely, that we have an official mindset that is simply incapable of dealing with this issue. My guess would be that the entire official apparatus is geared towards seducing multinational companies and giving them what they want. It can’t cope with a reversal of the situation in which we have what they want.

Whatever the reason, the outcome is obvious: the State is on the brink of signing away almost all of the resources we have left on terms that are by far the worst in the developed world. The election has done nothing to change this.

Hence my second proposal. The State lacks the psychological, financial and political strength to make a decent deal. We need to get that strength from somewhere. As it happens, there’s a small, friendly state that knows how to do this stuff: Norway.

The Norwegians, led by tough politicians who had risked their lives fighting the Nazis, stood up to the multinationals. They got great deals for their own people. They ended up with a €400 billion public pension fund, 200,000 good jobs and decent safety and environmental standards. Norway actually offered Ireland a deal for direct assistance in developing our resources in the 1970s. Why not go back to them now, offering a half share of ownership in return for their money, expertise and, above all, their guts?

 

Posted Date: 
16 August 2011