Jerry Cowley (Mayo, Independent)

Our oil and gas reserves constitute an enormously valuable resource, particularly at a time when fossil fuel reserves are in decline. Managing them will be perhaps the greatest challenge of the coming half century. Their potential should not be squandered but should be exploited within a coherent policy led context that seeks to maximise benefit for the people rather than them being developed according to the timetable and interests of private multinationals. I call for the development of a long-term strategic plan for the oil and gas industry in Ireland.

A number of matters should be considered in developing such a policy. In the event of international supply disruption, the Government must have the power to divert Irish supplies to the domestic market and increase the supply of gas and oil from Irish fields during that period. The fiscal terms governing oil and gas finds must be revised to ensure an adequate return to the State. High taxation, royalties and equity shares are required to compensate the people for the pollution and global warming effects of the exploitation of fossil fuels. These revenues should be ring-fenced and used for investment in and development of renewable forms of energy. In other words, energy policy should be directed towards the development of renewable sources with oil and gas finds used only as transitional fuels and to finance the transition.

Communities affected by the exploitation of oil and gas finds require compensation and investment. The Grianán model, whereby 10% of gross profits are diverted to affected communities should be enforced in legislation. The Shetland Islands model, whereby the local community exercises considerable control over the industry, also offers possible options. The debacle of the Corrib gas project illustrates what happens when community concerns are ignored by the industry.

The Government should develop a State oil and gas company which could take shares in new finds and develop the processing capacity to manage them. Such a company could act in strategic partnerships with multinational oil and gas companies or with new and emerging indigenous exploration companies. This company could be a key instrument of public policy, ensuring benefits that would include health, safety and investment in new forms of energy.

On 8 May, I introduced a private motion on behalf of the Technical Group, which called on the Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey, to investigate Ireland's exploration regime. During the debate on the motion, the Minister stated that he would seek tenders for an expert review of proposed changes to the Irish exploration and production fiscal regime. I welcome his commitment as a major change of heart and a victory for those who seek a change in the regime to the benefit of this country. The motion received great support in the House and the Government's amendment was only passed by a narrow majority of 61 to 55 votes.

A review of the exploration licensing terms is sensible in light of the increase in oil prices from $26 per barrel to more than $70 per barrel, with a corresponding increase in the price of natural gas. The potential returns to oil companies have greatly increased, so it is only proper that the terms be revisited. The resistance to the Corrib gas pipeline project has focused attention on how little County Mayo and Ireland will earn from the find. When the people of County Mayo see an offshore terminal in Kinsale and the proposal for a similar facility for County Donegal, they wonder why they are being treated like lepers. With an offshore terminal, the Corrib gas field could produce hundreds of permanent jobs and its gas could flow to towns and villages in County Mayo. North County Mayo has a deep water port and a power station located in that area could generate electricity for the national grid. The local resistance from the Rossport five, the Shell to Sea campaign and Ireland's true Independent Deputies are helping to bring Ireland closer to a balanced regional development strategy and a better deal from the exploration of our natural resources. Since the resistance campaign began, attempts have been made to go beyond the election promises made by successive Fianna Fáil Deputies.

Yesterday's The Irish Times reported that the "State needs to find more oil and gas", according to Fergus Cahill of the Irish Offshore Operators Association. Round up the usual suspects — once again vested interests want us to provide for them. Another article in the same edition reported: "Irish exploration group Providence Resources and oil giant ExxonMobil have defined the location of the wells for the Dunquin prospect off the west coast, Providence chief executive Tony O'Reilly Jnr. told shareholders yesterday". Providence Resources claimed the Dunquin find "has the potential to produce enough oil and gas to power the whole of western Europe". Where will this wealth go, however? The article goes on to state:

Under the terms of the agreement, ExxonMobil will explore the site in return for 80 per cent of the prospect. Providence's existing 80 per cent stake will fall to 16 per cent, while its partner in the venture, Sosina Exploration, will see its stake fall from 16 per cent to 4 per cent.

In other words, the State is giving away natural resources to multinationals for nothing. Why should the State give the money away to private companies which merely sit back and reap the benefits? It is an absolute disgrace. In the article, Mr. O'Reilly stated:

I would describe 2006 as a year of transition...It's a year of getting all our ducks lined up, bringing in new partners and working together on a drilling programme for next year.

He is lining up the sitting ducks of Ireland who have already been treated badly by these Irish and multinational oil companies, which presume they can take our resources without giving us anything in return. Maybe we should follow the example of County Donegal, in which a different Irish company is willing to share a 10% stake in its operations.

We are getting very little out of these arrangements. Our 25% tax rate is the lowest in the world. No royalties or other production levies are demanded, oil companies are allowed 100% write-offs and we continue to issue frontier licences ad infinitum. In other words, we are being taken to the cleaners. Under Article 10 of the Constitution, the common good must be satisfied. Where is the common good when we are giving away our resources?

We should learn from the example of Norway. The value of these resources are continually increasing, even where they remain in the ground. We are all in favour of exploiting the Corrib gas field but let us do it safely and make it benefit our people. The Minister is preparing to issue further licences to potentially rich oil and gas prospects off the west coast. Oil companies are cherrypicking these prospects without any benefit for Irish people.

The full extent of the scandal is highlighted by the ExxonMobil saga. Exxon had Irish offshore interests in the 1970s and 1980s but had not applied for licences in recent years. Had Exxon been interested it undoubtedly would have been granted the licence that was instead issued in November 2004 to Sir Tony O'Reilly's companies, Providence Resources and Sosina Exploration. The US oil giant would have been given preference over Tony O'Reilly's company if it had applied at the time. However, because it did not, it is now paying a high price for coming in late. The fact that it is willing to pay that higher price confirms the ridiculousness of the Government's licensing policy.

Providence and Sosina were able to demand a continuing 20% stake in the licence, although ExxonMobil will pay all exploration costs, estimated to be more than €100 million. Had the Minister not issued the licence 16 months ago, he could have demanded a 20% stake for the people in any of ExxonMobil's finds. Instead, the 20% stake will be allocated to Providence and Sosina Exploration. In the meantime, it would be irresponsible for the Minister to issue any more offshore licences until the people are fully consulted and agree how much they wish to grant the oil companies. That is the people's prerogative but, under the current terms, they have no right to this. By the time 50% of Corrib gas has gone, the investors will begin, perhaps, to pay 1 cent in tax. Where is the logic in failing to reconsider the offshore licensing terms in light of spiralling energy prices and the recent Forfás report on Ireland's oil dependency that highlighted Ireland's vulnerability to a looming crisis in liquid energy supplies? Enough is enough and too much has been given to corporate interests. The 1992 Act should be scrapped and a realistic tax take introduced, including royalties and a 50% stake in any oil or gas discovery. It is time the people demanded what belongs to them.

This Irish company is run by people who do not have the interests of Ireland at heart. The company can approach the Government, receive permission to explore, sell that right to others who would carry out the work at a cost of €100 million and still make a profit. It is a disgrace that the resources of Ireland are being given to people who do not have the interests of Ireland at heart. In areas such as health and waste, the Government seeks to give everything to the private sector to make money to the detriment of the Irish people. People lie on hospital beds or die while on waiting lists. The Minister of State at the Department of Justice, Equality and Law Reform, Deputy Fahey, has played a major part in the shenanigans that result in the disgraceful surrender of our natural resources. We owe it to our children to exploit these resources for the benefit of the people. I ask the Government to urgently reconsider this prospect. The Minister for Communications, Marine and Natural Resources should attempt to recover what we had before.

We are all in favour of Corrib gas but we want it to come ashore safely from a deep water port in north Mayo. A proper tax return should be included in this. The Irish people have an opportunity to retrieve what is theirs. Our resources are becoming more valuable and the oil companies are now trying to extract whatever oil and gas they can. There is so much available but they would have us believe there is little available. There is great dependency on oil and natural gas.

The Economist recently published an article on whether the world was about to run out of oil. It questioned whether the crisis point is as near as people suggest. It states:

In 1894 Le Petit Journal of Paris organised the world's first endurance race for "vehicles without horses". The race was held on the 78-mile (125km) route from Paris to Rouen, and the purse was a juicy 5,000 francs. The rivals used all manner of fuels, ranging from steam to electricity to compressed air. The winner was a car powered by a strange new fuel that had previously been used chiefly in illumination, as a substitute for whale blubber: petrol derived from oil.

Despite the victory, petrol's future seemed uncertain back then. Internal-combustion vehicles were seen as noisy, smelly and dangerous. By 1900 the market was still split equally among steam, electricity and petrol — and even Henry Ford's Model T ran on both grain-alcohol and petrol. In the decades after that great race petrol came to dominate the world's transportation system. Oil left its rivals in the dust not only because internal-combustion engines proved more robust and powerful than their rivals, but also because oil reserves proved to be abundant.

Now comes what appears to be the most powerful threat to oil's supremacy in a century: growing fears that the black gold is running dry.

But is the world really starting to run out of oil? And would hitting a global peak of production necessarily spell economic ruin? Both questions are arguable. Despite today's obsession with the idea of "peak oil", what really matters to the world economy is not when conventional oil production peaks, but whether we have enough affordable and convenient fuel from any source to power our current fleet of cars, buses and aeroplanes. With that in mind, the global oil industry is on the verge of a dramatic transformation from a risky exploration business into a technology-intensive manufacturing business. And the product that big oil companies will soon be manufacturing, argues Shell's Mr. Van der Veer, is "greener fossil fuels".

The race is on to manufacture such fuels for blending into petrol and diesel today, thus extending the useful life of the world's remaining oil reserves. This shift in emphasis from discovery to manufacturing opens the door to firms outside the oil industry (such as America's General Electric, Britain's Virgin Fuels and South Africa's Sasol) that are keen on alternative energy. It may even result in a breakthrough that replaces oil altogether. [The peak that was expected late last year never arrived].

In fact, oil production capacity might actually grow sharply over the next few years (see chart 1). Cambridge Energy Research Associates (CERA), an energy consultancy, has scrutinised all of the oil projects now under way around the world. Though noting rising costs, the firm concludes that the world's oil-production capacity could increase by as much as 15m barrels per day (bpd) between 2005 and 2010 — equivalent to almost 18% of today's output and the biggest surge in history. Since most of these projects are already budgeted and in development, there is no geological reason why this wave of supply will not become available.

It is true that the big firms are struggling to replace reserves. But that does not mean the world is running out of oil, just that they do not have access to the vast deposits of cheap and easy oil that are left in Russia and members of the Organisation of Petroleum Exporting Countries (OPEC). And as the great fields of the North Sea and Alaska mature, non-OPEC oil production will probably peak by 2010 or 2015. That is soon — but it says nothing of what really matters, which is the global picture.

When the United States Geological Survey (USGS) studied the matter closely, it concluded that the world had around 3 trillion barrels of recoverable conventional oil in the ground. Of that, only one-third has been produced. That, argued the USGS, puts the global peak beyond 2025. And if "unconventional" hydrocarbons such as tar sands and shale oil (which can be converted with greater effort to petrol) are included, the resource base grows dramatically — and the peak recedes much further into the future.

We must consider who is pulling the strings and who benefits. The Irish people are not benefiting and we must take the comments of offshore exploration organisations with a pinch of salt. They have a vested interest and experience shows that the Department has let us down in supervising the oil companies. The interests of the Irish people must be upheld. That has not been the situation to date and it must change. Otherwise the Irish people will lose out.

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