Ireland: Corrib gas – Fianna Fail’s rotten deal with Shell

Not one cent for the people!

The history leading up to the imprisonment of five Co. Mayo residents at the behest of oil multinational Shell is one of successive governments bending over backwards to facilitate the pillage of this country’s oil and gas wealth by big business.

In 1975, a tax rate of 50% was fixed for successful oil and gas projects. The state was also to have an automatic 50% stake in any commercial wells, in addition to royalties of 6%. All this changed in 1987, when the corrupt Fianna Fáil Minister for Energy Ray Burke struck a deal behind closed doors with oil company executives. Against the advice of officials in his own Department, Burke scrapped the state’s right to a 50% stake in any commercial oil and gas operations as well as abolishing royalties.

As if this deal wasn’t sweet enough for the oil companies, in 1992 Bertie Ahern as Minister for Finance cut the corporation tax rate on oil and gas profits to 25%, one of the lowest in the world (Norway in contrast has a 78% tax on oil and gas profits). The oil companies were also allowed to write off all costs against tax, not merely from their Irish operations but from operations anywhere in the world, going back 25 years.

Furthermore, the government introduced frontier licences, which allowed oil companies to sit on potential drilling locations for up to 20 years in anticipation of rising prices. Shell leads the consortium including Statoil and Marathon Oil which proposes to build the high pressure pipeline, running 9 km from the Co. Mayo shore, in places through unstable bog land, to a recovery terminal on land.

Profit maximisation is of course the reason why Shell wants to build such a pipeline, unprecedented anywhere else in the world, rather than the more costly alternative of an offshore processing facility. Shell plans to exploit the gas reserve off the Mayo coast as cheaply as possible and then sell it back to the Irish people for as high a price as if it were coming from Russia or anywhere else in the world.

Thanks to its friends in government, the consortium doesn’t have to pay any royalties and will be able to offset all of its projected €800 million investment against its tax liability. Not a cent from the enormous gas wealth (estimated to be in the region of €12 billion to €21 billion) that lies off our coast will accrue to the Irish people.

Years of intensive lobbying by the oil companies, which always had an open door at the highest levels of government, paid off handsomely for them. Marathon Oil has donated large amounts of money to Fianna Fáil and Enterprise Oil (subsequently taken over by Shell) was no stranger to the annual Fianna Fáil hospitality tent at the Galway races.

In order to facilitate the consortium, Fianna Fáil Minister for the Marine Frank Fahey imposed compulsory acquisition of land for the pipeline. Fahey also arranged the sale of the 500-acre site owned by the state company Coillte for an undisclosed sum to Shell on which to build its recovery facility. When asked by Socialist Party T.D. Joe Higgins in the Dáil in 2001 what value should be placed on the gas in the Corrib field, Fahey admitted he had no idea how much this resource was worth! Not only did the government give away an important natural resource, it did not even bother to have the value of this resource independently assessed.

Following in Fahey’s footsteps as unofficial PR man for the oil companies, the current Minister for the Marine and Natural Resources Noel Dempsey initially commissioned a health and safety report on the proposed pipeline- from a company part owned by Shell! If Shell believes it can ride roughshod over the rights of residents living in close proximity to its proposed pipeline, it is because it believes that the government in keeping with its policy of privatising assets properly belonging to the Irish people will back it to the hilt as always.

See Joe Higgins column for comment on the Rossport Five.

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August 2005