The August 2006 Licence Giveway

dublin | environment | opinion/analysis Friday November 17, 2006 00:13 by turoe - The Tara Foundation thetarafoundation at yahoo dot ie

In a press release on 19th August 2006, the Minister for Communications, Marine and Natural Resources, Noel Dempsey, announced the latest round of exploration licences for the Donegal, Slyne and Erris Basins. The future of Ireland's oil and gas resources is now being decided by the Irish Government in a process patently lacking in democratic legitmacy and accountability. These issues were debated at the “Exploring Atlantic Ireland 2006” conference sponsored by the Department and other interested parties. The conference discussed the so-called Irish Atlantic Margin Petroleum Province, the industry term for the Porcupine, Rockall, Slyne, Erris, and Donegal basins. The conference press statement stated that what it termed the “waters west of Ireland” contain several large sedimentary basins, broadly similar geologically to the basins of the Atlantic margins of Norway, the UK (the North Sea fields), and Canada (the Newfoundland fields).

In a comment about the “deal” the Minister stated: ‘The hydrocarbon potential of this area has been illustrated by the Corrib gas field, and this licensing round offers a new opportunity for exploration in an area that currently remains under-explored.'
http://www.dcmnr.gov.ie/Natural/Petroleum+Affairs+Divis...a.htm

There are 71 full blocks and 31 part blocks. The acreage on offer in this Licence Round covers approximately 25,000 square kilometers.
This move by the government is significant; as it is an attempt to copper fasten the 1992 revision of the original 1975 terms drafted by Minister Justin Keating who attempted to establish an Irish oil and gas industry at a time when huge oil and gas reserves were discovered in the North Sea. The manner in which the terms were changed has been investigated by the Centre for Public Inquiry (now defunct) and the Mahon Tribunal, but obviously merits further investigation.
Licensing Terms: The type of license issued is a frontier license; that is, a deepwater offshore licence. (p. 64. The Great Corrib Gas Controversy, Fiosru: Centre for Public Inquiry, 2005). The duration of the four phases of the licenses is fifteen years, from May 2006, to May 2021. The so-called “surrender of acreage” clauses in the 1991 terms, is a revision of the 1975 requirement for the surrender of 50% of the original licensed area back to the State within four years. The 1991 requirement merely obliges the licence holder to sink an exploratory well within three years, and if there is no proposal to sink a second exploratory well, then 50% of the area will be returned. Once a second well is sunk, the State cannot demand the return of the fields.
The current offshore licences are divided between international (for example, Shell), and Irish-controlled concerns (for example Providence Resources). Shell holds a large share of the frontier licences, including four blocks in the Rockall Basin, and five blocks in the Slyne/Erris basins, where the Corrib field is located. (p.72., The Great Corrib Gas Contaversy, CPI, ibid.) Statoil, which shares the Corrib lease with Shell and Marathon, is also a major licence holder, holding frontier licences in ten blocks along the Atlantic margin.
The Italian company ENI holds frontier licences in eight of the Atlantic margin blocks between the Donegal basin and the southern Slyne basin, along with six blocks in the south of the Porcupine Basin, due west of the Kinsale gas field.
OMV Ireland, the Irish subsidiary of the Austrian oil and gas company OMV, holds a 10% share in the Shell-operated licence in the Rockall Trough.
Providence Resources, and Island Oil and Gas, holds frontier licences in four blocks in the north Porcupine Basin, which holds the Connemara field explored by BP. (p.72, ibid).
Providence Resources has several prospects in the Porcupine Basin. It holds an 80% stake in the 16-year frontier licences for several blocks in the Porcupine Basin in the Atlantic Ocean.
Providence claim to have identified a possible 25 trillion cubic feet of gas and 4 billion barrels of oil in the Dunquin Prospect in the Porcupine Basin. Providence also holds licences for the Ardmore, Hook Head and Helvick prospects in the Celtic Sea.
Petroceltic holds production and exploration interests in seven blocks and part-blocks in the Kinsale field area.
Aberdeen-based Ramco Energy has interests in a number of blocks but has recently sold a number of its exploration blocks to Lundin Petroleum, a Swedish company, which has been granted licences in the August 2006 round.
In fact, these smaller companies seem to be carrying out the initial exploration work in some of the blocks, later handing over the bulk of the field to the major players. This has been the case with the huge Dunquin field, now effectively owned by Exxon-Mobil.
In July 2005, the Dept. of the Marine and Natural Resources issued further frontier licences to Shell and Island Oil & Gas in a 1,650 sq. kilometer block in the North East Rockall Basin. All these licences are valid for at least sixteen years and presumely can be renewed if the rudimentary terms are adhered to. (p.72, ibid).
The initial fees for the licences are 8,354 euro. Yearly rental fees after that amount to 27 euro per square km. for the first phase; for the second, third and fourth phases, 55 euro; and 111 euro per square km. if any surrender of acreage takes place. Added to these princely terms, there is an annual fee of 80,000 euro for an entity known as the Irish Shelf Petroleum Study Group (ISPSG), the successor to the joint industry Rockall and Porcupine study groups of the Petroleum Infrastructure Programme (PIP), undertaking geological, environmental and engineering studies. These will benefit the oil corporations, and as these are joint programmes, the State shares part of the costs. There is another annual fee of 18,000 euro for the so-called Expanded Offshore Support Group (EOSG), undertaking joint training, management, industry support, research, etc.
Again, the State shares costs, presumably including third-level research; in contrast, Exxon-Mobil’s profits for 2005 were $36.13 billion and Shell’s profits for 2005 were: $22.49 billion. http://news.bbc.co.uk/2/hi/business/4672716.stm

Role of PAD: One of the factors in this business is the Petroleum Affairs Division (PAD) in the Department of Communications, Marine and Natural Resources, which directly controls Ireland’s national exploration and resources policy. Established in 1977, under the Dept. of Industry and Commerce, it became the administrative centre for the oil / gas industry in Ireland.
The Irish National Petroleum Organisation (INPO) established in 1979, was specifically prevented by the Fianna Fail government from engaging in drilling and exploration, and was effectively abolished in 2001. (p.55. cpi report, ibid). Acting through the National Oil Reserves Agency, the state held 10% of all oil stock in the country. The National Oil reserves Agency Bill (2006) transfers the functions of the agency to the Minister, and completes the effective abolition of the INPO. http://www.dailyireland.com/home.tvt?_ticket=4CHDALOLO9...psv=1
http://historical-debates.oireachtas.ie/S/0167/S.0167.200106280006.html
As with the National Monuments Act (2004), national resources are under the control of the current Minister, Noel Dempsey, and can be signed away under the cloak of strategic necessity.
The Petroleum Affairs Division (PAD) is now the real actor, working closely with the real beneficiaries of this process, Exxon-Mobil, Shell, BP and so forth.
From the late 1970s onwards, successive governments employed petroleum consultants instead of developing a specialist sector in Ireland. According to the CPI, government departments began displaying the “secretive characteristics of the oil industry.” (The Great Corrib Gas Contraversy, CPI, p.56),
PAD and its related committees ISPSG and EOSG work directly with the oil and gas industry. In this respect it is interesting to note the Irish submission to the International Convention on the Limits of the Continental Shelf in 2005. http://www.dcmnr.gov.ie/Natural/Petroleum+Affairs+Divis...ject/ The stated objective is to maximize the area of Continental Shelf under Irish jurisdiction beyond the 200 mile limit. This effort would seem to be pointless (in that Ireland - under the 1992 terms - will derive little benefit) if the primary interests of the global oil corporations, Exxon-Mobil, Shell, Marathon, BP, etc. are being promoted here. (p.71: CPI Report) The actual potential for Ireland to control large areas of the Atlantic continental shelf is of great interest to these actors, currently restricted in their ability to control the US Atlantic shelf. The USA has refused to ratify the UN Convention on the law of the sea (UNCLOS), stating that this is a violation of US sovereighty. As a result, the Atlantic Ocean may be the last frontier of global oil and gas exploration as new technology enables deepwater drilling (i.e. in more than 10,000 feet of water).
The vast bulk of US offshore territory (in excess of 80%) is under government moratorium until 2012. In effect, the US state is directing the oil industry to explore elsewhere, in the Middle East, Africa and Europe.
Ireland can be attractive territory for the oil principals if the Irish Government succeeds in its bid to extend the Exclusive Economic Zone (EEZ). In June 2005, the Minister for Foreign Affairs (Dermot Ahern) announced the government’s intention to extend Irish frontiers 350 nautical miles offshore. The technology to drill for oil and gas resources already exists: the drillship West Navian has drilled in depths of 1,435 metres (4,000ft), 125km off the Donegal coast. (p.71. ibid).
These issues were debated at the “Exploring Atlantic Ireland 2006” conference sponsored by the Department and other interested parties. The conference discussed the so-called Irish Atlantic Margin Petroleum Province, the industry term for the Porcupine, Rockall, Slyne, Erris, and Donegal basins. The conference press statement stated that what it termed the “waters west of Ireland” contain several large sedimentary basins, broadly similar geologically to the basins of the Atlantic margins of Norway, the UK (the North Sea fields), and Canada (the Newfoundland fields).
The conference took place on the 8-9 November, 2006 at the Burlington Hotel, Dublin. It is clear that the future of Ireland’s national resources is now being decided by the Government.
http://www.energyireland.ie/atlantic/index.htm The legality in constitutional terms of this process is another question and this must come under intensive examination.