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News release: Corrib 'will never pay tax', says project's former MD

News Release - Issued by Dublin Shell to Sea
Friday, March 4th, 2011

-- Varadkar ‘clueless’ over tax regime for gas & oil fields --

The Corrib Gas project will never pay tax, according to the former MD of the lead company in the project. This contradicts the claim made this week by Leo Varadkar TD that the State “stands to gain at least 25 per cent of profits from Corrib and the sooner the gas is brought ashore, the sooner that money can be used to fund essential services.”

Speaking at a panel discussion in Dublin last December, Brian O’Cathain, who was Managing Director of Enterprise Energy Ireland when that company was the developer of the Corrib project, predicted that the project would never pay tax: "The problem with Corrib is that, because of the very long delay ... the project will never go into profit. The impact of that is that Corrib will never pay tax."

(Audio clip: )

Dublin Shell to Sea spokesperson Caoimhe Kerins said today: “Leo Varadkar is either misleading the public or else he is clueless. It is important for people to understand that under Ireland’s bizarre licensing terms, the tax revenue from gas and oil fields will be much lower than 25% of its revenue, or even of its real profits.” 

“Corrib will probably pay little or no tax, for at least two reasons. Firstly, the licensing terms introduced by Ray Burke and Bertie Ahern mean that the developer can write off 100% of costs incurred over the past 25 years, including the cost of other unsuccessful wells, before declaring profits. 

“Secondly, the disastrous way in which the Government has handled the project, encouraging Shell to force through an experimental inland refinery against the wishes of the local community, has led to enormous delays. This has meant lower profits and thus lower tax revenue.” 

“Had the Corrib project been developed in a safe manner, according to international best practice, with the gas processed before passing through inhabited areas, the gas would have come ashore years ago, and then some of the tax Mr Varadkar speaks of would have been paid. But of course, even then this would have been far lower than 25% of the value of the gas which the company sells to Irish consumers.” 

Varadkar, who looks set to become Minister for Energy and Natural Resources in the new government, appears to misunderstand Ireland’s current tax arrangements for oil and gas fields. Speaking on Tuesday, he defended outgoing Minister Pat Carey’s decision to sign, on the day of the general election, key consents for the last section of the Corrib gas pipeline. Varadkar said: “The State stands to gain at least 25 per cent of profits from Corrib and the sooner the gas is brought ashore, the sooner that money can be used to fund essential services.” 


Short audio clip of Brian O’Cathain speaking at debate at IFI cinema on 4 December 2010:


* Caoimhe Kerins



Shell to Sea is a national campaign with active groups based across Ireland. The Shell to Sea campaign has three main aims. 1) To renegotiate the terms of the Great Oil and Gas Giveaway, which sees Ireland’s 10 billion barrels of oil equivalent* off the West Coast go directly to the oil companies, with the Irish State retaining a 0% share, no energy security of supply and only 25% tax on profits against which all costs can be deducted. 2) To have the Corrib gas field exploited in a safe way that will not expose the local community in Erris to unnecessary health and safety risks. 3) To seek justice for the human rights abuses suffered by Shell to Sea campaigners due to their opposition to Shell’s proposed inland refinery.  

*This figure is based on the estimate, issued by the Department of Communications, Energy & Natural Resources (DCENR) in 2006, that the amount of gas and oil in the Rockall and Porcupine basins, off Ireland’s west coast, is 10 BBOE (billion barrels of oil equivalent). Based on the average price of a barrel of oil for 2010 of $79, this works out at $790 billion, or €580 billion. This does not take account of further oil and gas reserves off Ireland’s south coast or inland. The total volume of oil and gas which rightfully belongs to Ireland could be significantly higher. Also, as the global price of oil rises in the coming years, the value of these Irish natural resources will rise further.