In the early 1960s, Norway was a poor agrarian society. Corporations offered to buy exclusive rights to any potential oil find in a tempting but terrible deal for the country. But the politicians refused and asserted sovereign rights over natural resources in the Norwegian sector of the North Sea, with high taxes and energy prices in line with world markets.
In the early morning of 30th August 1969, Norway struck oil. The Ocean Viking rig had found the enormous, and much speculated upon, Ekofisk field. The government moved quickly to establish a national energy policy and ensured Norwegian’s sovereignty over its rich offshore resources. The Storting (parliament) adopted the 10 oil commandments, a set of principles for oil policy, which specified that all operations on the Norwegian continental shelf should be conducted under national control. The government established Statoil in 1972 and it was decided that all revenue generated by the oil would go into the sovereign wealth fund. Over 40 years of operations later the industry has generated profits in excess of a trillion euro in current terms. Today, Norway enjoys one of the highest living standards in the world and has a state pension fund worth over $650 billion.
Oil has completely transformed Norway and according to Eddie Hobbs, financial advisor and co-founder of Own Our Oil, a group advocating for a radical overhaul of Ireland’s oil and gas tax regulation, it has the potential to do the same for us. “When we look at the map of Ireland, we see it as a particular shape, which is not the actual Irish territory. The actual Irish territory is 6-7 times bigger than the landmass. There’s a big shoulder of ancient rock that runs from Norway across the North Atlantic over to Newfoundland, it is an enormous oil and gas area. As the Norwegians are now approaching peak oil in 2014 its quite clear that that we are one of the frontier locations of the future of European hydro-carbon.” This is not empty conjecture.The Irish Offshore Operators estimate Ireland to have 10 billion barrels of oil equivalent (boe).”Earlier this year, Reuters reported that analysts at Oriel Securities said ‘We believe that offshore Ireland is emerging as an exploration hotspot for oil and gas companies.’”
According to Own Our Oil, Ireland has the prospect for oil in a space nine times the size of the country itself, an area which could possibly hold ten billion barrels of oil. Today’s Brent crude oil price hovers around $108 per barrel. In 2008 it was $133 but in 1998 it was below $10. If oil was discovered, drilling would take years, but as energy resources grow scarcer prices are only getting higher. If a viable Irish oil field was discovered it would be worth up to, if not over, one trillion euros. If Ireland hit oil we could solve our economic debt and see unparalleled prosperity for generations to come. This is the type of economic discovery that a nation state could only dream about and yet according to the experts, it is potentially within the grasp of the Irish people.
However, this is where Own Our Oil sees the problem. According to Hobbs, “although these oil and gas deposits are owned by the citizens of the Republic of Ireland, essentially we are giving them away for nothing.” While the average world tax on oil and gas is 70 to 80% (Norway is 87%), Ireland allows for a 25% tax rate on the profits energy giants make on offshore oil and gas discoveries in Ireland. Though this is one of the lowest rates in the world, Ireland also writes off the cost of exploration incurred by the companies. When it comes to generous tax breaks for oil and gas companies, Ireland is second only to Cameroon, which is ranked as 144th in the world for corruption according to the Corruption Perceptions Index 2012 by Transparency International. Own Our Oil pinpoints the cause of these shockingly low tax rates to 1987, when Fianna Fáil elected Ray Burke to the position of Minister for Energy.“What happens is he goes to a number of meetings unaccompanied by senior civil servants and he comes out of those meetings and the citizens of Ireland no longer own any production rights on their own oil and gas. That taxation then was cut in 1992 when Bertie Ahern was Minister for Finance to 25%. Its quite clear from any neutral reading of what occurred that the actual taxation policy was written by industry over the shoulders of the Department.”
While Bertie Ahern has fallen from grace since the Mahon Tribunal and since Ray Burke was jailed for tax evasion, no efforts have been made to put oil and tax rates back in line with the world’s average rate, even in light of recent estimates over Ireland’s oil and gas potential. Hobbs argues that “the industry and the Department are singing off the same hymn sheet which is deeply worrying. The Department is so captive it set up a joint venture company with industry participants, so you have the regulator actually in business with the regulated. Outside of being flawed, it’s wrong because these oil and gas deposits are owned by the citizens of the Republic of Ireland and essentially are being given away for nothing.” Hobbs explains, “There is a figure of the Department’s own estimate that the potential oil and gas reserves are between 750 billion and a trillion euro. The point we’re making is we’re better off going after it ourselves in a unilateral agreement with Norway or leaving it in the ground for future generations, rather than doing what we’re doing at the moment, which is giving it away.”
Own Our Oil have made efforts to appeal to the government to change their tax rates. They prepared a report looking into how Ireland could profit from its resources, put together by experts from Ireland and other oil-producing countries. They also made a pre-Budget submission to the Minister of Finance, however they received neither an acknowledgment nor a response. Separately, there is a review of the oil and gas rates by the Department of Communications, Energy and Natural Resources. But Eddie isn’t getting his hopes up. “What they’re going to do is pick the consultants that will give them the answer they want.” Hobbs warns of their apathy to the cause. “By the time the oil is extracted it’ll be too late, we’ll have lost control of it. The Irish government is assuming that they can somehow be cute hoors and if the oil comes out then they can change the pricing.Then we can do a radical overhaul. But we won’t be able to, it’ll be too late. The license regimes in place are protective of the constitutional rights to property. We’d have no control over the pipe lines to bring in the oil which are the only way you could control it anyway. We’d have no national oil company. We’d have no strategy. We’d have nothing other than a bunch of gobshites in the Dáil thinking that low taxation and nothing else is the way you develop the industry. It’s not.” Disillusioned by any feasible change coming from government, Own Our Oil is turning to the public with the slogan “If not me, then who?” As part of a conscious-raising strategy, they will be releasing a 300 page book in January 2014 which will also be available free online as an e-book. It details a national oil strategy, including Ireland’s relationship with the EU and the rest of the world. The book will also cover planning issues, taxation, the political history of what has occurred, as well as a section dealing with the cultural and historical relationship we’ve had with our natural resources since the time of Parnell. As Hobbs explains, “We’re waiting until we are ready with our voice and then we’ll come out in the spring of 2014.
When we do, we will be looking towards students in university. If it strikes a chord with them we’ll be giving them the material and the help and we’ll be asking them to take it on as an issue that students can rally round.” Own Our Oil is operating out of principle, founded on a pragmatic optimism about the potential of Ireland’s oil and gas reserves. While not offering the oil as an answer to all of Ireland’s current problems, Hobbs does point out the fact that Norway’s sovereign wealth fund is three times the size of the Irish national debt. He concludes, “It’s quite clear that if the oil and gas is there, and we get this right, that Ireland could go from one of poorest countries in Europe, in terms of its finances, to the wealthiest.”