JOHN F HIGGINS,  INDEPENDENT EURO ELECTION CANDIDATE 2009,  NORTH WEST


The Irish and UK citizen gets the worst deal in the world from the exploitation of the hydrocarbon resources around their coastline.

John F Higgins

Article first published in the Mayo Association Yearbook 2003. 

Every time you see Mayo written, just mentally think North West Euro Constituency, we are all in this togeather!

 

Citizens of Great Britain (GB) loosing out on Gas windfall!

In the paper: The Windfall That Got Away: Profitability and Taxation in the North Sea Oil and Gas Industry, Dr I D Rutledge and Dr P.W. Wright, University of Sheffield call for a reassessment of the present tax regime. They argue that:

“Despite being in the midst of a second hydrocarbon boom and a relative recovery in prices, the Government's share of United Kingdom Continental Shelf (UKCS) profits continues to be low, both historically and by international standards. The Government's share of the Gross Trading Profits of UKCS oil and gas companies was only 25% in 1996 compared with 48.6% in 1987, and its share of Net Operating Surplus was only 33% in 1995 (the latest year for which Net Operating Surplus data is available) compared with 67.3% in 1987.


Although tax revenues have been recovering from their 1991 low, in 1996 they were still £1 billion less than in 1987 despite the fact that Gross Trading Profits were £4.8 billion greater.

The explanation for this resides in the fact that the UK has the weakest oil and gas taxation regime in the world, and there is no evidence that this has been or is justifiable in terms of the low profitability of company operations on the UKCS.

For a representative group of 12 companies, the average prospective profitability of their UKCS operations in 1993 and 1994 was twice that of their operations elsewhere in the world. In 1995, prospective UKCS profitability was still one-and-a-half times that offered by the rest of the world.”


You can see how the Scottish, Welsh and English taxpayers are loosing out on the deal that their Government made with the Multi-National Oil companies. The above quotes are taken from the University Website. There is continued great pressure on the U.K. Government to change its licensing and taxation policy.

State owned oil corporations get the boot!

It is now generally recognised that the ending of the UK government’s direct participation in the UKCS via the British National Oil Corporation/Britoil and British Gas was a strategic error. The Irish government was also persuaded to divest itself of the state owned National Petroleum Corporation a few years later in 2001; time enough for lessons to have been learned from the experience across the water see editorial in the Mayo Association Yearbook 2002.

 

Could Ireland be far behind?

The Irish for some reason have been unable to conjure up the confidence to exploit the hydrocarbon resources off its West Coast.  Our main advisors appear to be of the same persuasion as are operating in the British sector of the North Sea.  We seemed to hold the big Multi National Oil Companies in awe and not exert our natural given muscle to demand or ensure that we get a fair deal.  In the 1960’s and 1970’s we were told that there was no oil or gas deposits off the Irish coastline.  We now have two exploitable gas fields off the Southern coastline and another one off the Coast of Mayo.  We are still hearing the refrain that our waters are not hydrocarbon positive.  It appears that the Gas fields just arrived there despite the Irish lacklustre attempts at looking for resources.  We hand out licenses, but it is the decision of the Multi National Oil Companies when and where to explore!  The myth that there are no exploitable oil reserves off the West Coast is continually used as a stopper to any rational debate.

 

It is well known that the UK (and Ireland) fiscal regimes offer investors the most favourable terms in the world from oil and gas production in the Atlantic and North seas: Far more profitable than other deep-water areas such as the US Gulf of Mexico and the Congo.  Comic Books (Victor and Hopspur etc) in the 1960’s used to portray the North Sea as the most treacherous in the world and was the theatre for many stormy maritime adventures: nothing could survive in this sea. The Oil companies would probably wish that this accolade be now given to the Atlantic Margin!

 

The U.K deal may be the worst in the world, but Ireland’s is worse!

The deal that our Government has made with the oil companies more or less means that any tax take from Gas or Oil production will be from Corporation Tax, shortly to be 12 ½%.  This is not even ring-fenced to a particular field, but the Multi-Nationals have some sort of an agreement that all costs both here and abroad may be charged out before we get a penny tax.  This definitely has to be the most favourable term offered to Oil companies by any regime in the world.  Why, therefore is nothing being done to explore for oil bearing fields off our coasts?  Exploration Rigs can now bore down lots further than the half hearted attempts over the passed twenty years. The answer is simple!  The Irish or U.K. citizens are not calling the shots!

U.K downstream oil taxes: highest in the world

Ironically, the U.K. and Ireland have one of the highest petrol prices at the pumps in the world.  Our Governments choose to let their own citizens be ripped-off rather then applying upstream taxes. The Multi-nationals charge world prices and achieve the highest return for themselves (ROI, NPV or EMV) from our hydrocarbon resources than from anywhere else in the world!

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Emigration has stopped.  Young people of the West are beginning to call the shots!

 

Editorials/articles in previous editions of this yearbook have laid the blame for the neglect to provide employment for the youth in the West straight on the door of Leinster House.  Our young people were allowed emigrate, and Leinster House did not look after the resources in their absence.  However, there appears to be a sea change happening in Co Mayo, whether it is put down to the fact that emigration is becoming a thing of the past is open to question.

 

Ms Maura Harrington, a teacher and a small number of fellow stalwarts put forward objections to the proposed development plans of Enterprise Energy Ireland to build a Gas Terminal. They stood up to the edicts emanating from the centre of power, Dublin.  They held that enough planning or thought had not been undertaken to ensure the protection of the environment of Erris (previously so well guarded by both the State and County Council that it was felt that a disposition from the Pope was needed to build an outhouse!).

Watching from the safe distance of Dublin, Maura and the above protestors were held up to ridicule and whispering campaigns: ignored by politicians in power in Leinster House: threatened with the abandonment of the whole Corrib exploitation plans.  All the recognised tow-the-line opinion makers reiterated the line of the landlord –“if you don’t do as I say, you’ll be left with nothing and you will have to emigrate!” Fear once again threaded the Mayo landscape; the way that we have existed along side those that exploited us for centuries!  There were hearings, public discussions, when all Maura wanted was realistic debate and re-examination of the proposed project.  Bullies don’t listen!  Would Maura and Co suffer the same fate as yesterday year; banishment to Van Dieman’s land or take the mailboat?

 

Maura’s Concerns fully backed by an official body.

Then the bullies, the Multi-Nationals and their supporters had to take part in a discussion.  Their plans were shown to be amateurish, badly thought out etc. The objections of Maura and Co were upheld by on An Bord Pleanala, the Bord even added a list of objections of their own! Maura Harrington did the job of Leinster House and the County Council in ensuring the protection of our Environment. Protection of the environment was given as much importance by the Multi Nationals as to be on a par with the measly sum that they are to pay us in Corporation Tax i.e. 12½%.  The Norwegians get 75% Royalties plus other taxes, and Grade 1 Environmental Protection Policies.  A sure affirmation of the saying the bigger the fee, the more respect!’

Mayo and Irish people world-wide should recognise this display of determination by the stay at home people of Erris. This strength, assertiveness, sense of fair play was always there but in the past, generally only manifested itself after emigration: when all hang-ups, allegiance to landlordism, condescending Dublin dominance in regards to investment in Mayo etc was thrown off. Take for example, Paul O’Dwyer’s championing of rights of minorities in the U.S.A.  Now that we have discovered that at long last our voices may be heard at home, we should start demanding that Ireland get a better deal from the same Multi National Oil Companies that are exploiting our resources.

 

The principle of just reward.

It has been a recognised tenet that in addition to taxes, owners of land in the U.S.A. demanded and got 12.5% royalties from any oil revenues.  Multi National Oil exploration companies to this day do not argue against this expected demand! Remember this is a deduction straight off the top and not on profits, which is the case with corporation tax.  It should be a principle of Leinster House that Ireland be adequately compensated for the depletion of what is a nationally owned natural resource.  This is a principle that is accepted throughout the world.

Leinster House should listen to cries from the West and give it a long overdue hearing. By listening to British Oil Consultants etc they are diminishing the return from our future oilfields and the future welloffness of its citizens. Ireland not only the West of Ireland is a loser in this present scenario! The population of Co. Mayo is constantly falling, even when the rest of Ireland is booming: 3% fall in the last few years when the population in the rest of Ireland is increasing.  Leinster House, get rid of the voices that whisper to you that a major industry, which generates substantial taxes, and the West of Ireland seaboard doesn’t mix.  We may not have political clout but do not cut off your nose to spite your face!

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Other World Governments can grab the initiative!

 

Governments right around the world have taken the bull by the horns and set up their own National Petroleum companies and taken the lead in exploiting their natural resources.  They do this by forming joint venture partners with all the top World Oil Multi-Nationals.  Other Countries have been able to tax the private sector companies more rigorously because it is not solely depending on them, a general principle of bargaining strategy established by Penrose many years ago (Penrose, 1960). Leinster House, just use the head!

One example of this strategy is Malaysia's national petroleum corporation, the Petroliam Nasional Berhad PETRONAS) -PETRONAS, short for Petroliam Nasional Bhd.  The corporation is vested with the entire oil and gas resources in Malaysia and entrusted with the responsibility of developing and adding value to these resources.  They call the shots!

 

Norse grit is still alive

Norway formed Statoil. The embryo Oil establishment nearly bankrupted the country in the 70’s when they were looking for productive fields.  See article “Leinster House, calling Leinster House, can you hear?  This is Mayo calling!” by Mike Cunningham, Mayo Association Yearbook 2002 in Mayo County Libraries.  They stuck at it.  They knew that there was oil off their shore because Gas had been discovered under the wheat fields of Holland, where there was similar rock formation.  They found the oil and call the shots; they get up to 75% royalties plus other taxes and they now have c. €70,000,000,000 in a Retirement Sinking Fund for their people.

The Apathy in Leinster House

Ireland has discovered Gas, or should it be said that the Multi-Nationals have discovered Gas off the shores of Ireland. Yet, Leinster House is as excited as if it were told about a new moon flying round Jupiter!  We are still fed the line that our shores are wild, sterile, barren, denuded of possible oil fields and that undeveloped discoveries are uncommercial.  It is well known that Oil companies keep inventories of undeveloped discoveries.  Leinster House just doesn’t dig it!  It is possibly wondering why there is not more activity off our coast after giving out such generous oil exploration licenses. The reason is that it has abdicated all responsibility for extracting the liquid gold.  It is satisfied with the little ‘Divy’ from Corporation Tax!  The time has come when sleeves have to be rolled up, and “much more work to be done!”  Our Coastal communities demand a better deal!

 

Nigeria show how national clout can be exercised

There was a sharp disagreement on the 30th May 2002 between the Nigerian National Petroleum Corporation (NNPC) and its joint venture partners over execution of work-programme designed to substantially raise Nigeria's crude oil reserves. The joint Venture Partners which include all the top oil Multi-national were lax in keeping to their agreement in searching for new oil wells off Nigeria, so they were called to heel and told to pull their socks up and spend a few shillings.  The Nigerians invest a lot in their Oil exploration programme through its investment arm of NNPC, the National Petroleum Investment Management Services (NAPIMS).  Those who pay the Piper call the Tune!  It will be a while before the Multi-Nationals can bring the real effective exploration rigs back to Ireland!  Shell has more pressing problems than the Corrib field. Giving twenty-year licenses to the Multi National Oil Company’s suits them fine!

Other State owned companies that have similar hands-on policies and lead the operations of the Multi-Nationals are:

Abu Dhabi National Oil Company
operates in all sectors of the oil and gas industry with substantial business interests in upstream exploration, development, production and marketing of oil and gas, and downstream refining, distribution and marketing of petroleum products, as well as Liquefied Natural Gas (LNG) production and marketing.


China
National Offshore Oil Corporation (CNOOC)


China National Petroleum Corporation (CNPC)


Chinese Petroleum Corporation (CPC)
is a state-run enterprise responsible for the development and supply of petroleum and natural gas, and is the core of Taiwan's petrochemical industry.


DONG- Dansk Olie OG Natural Gas
is Denmark's national energy company.  DONG operates internationally with production and supply of energy and associated services, always with due regard for the environment, health and safety.


Empresa Colombiana de Petroleos
(ECOPETROL) -Ecopetrol is the Colombian state oil company, attached to the Ministry of Mines and Energy. It functions as a commercial company, engaged in the characteristic activities of the oil industry and its related products


Kuwait National Petroleum
has one of the largest oil complexes in the world.  It houses three major oil refineries.


Pertamina -PERTAMINA manages all oil and gas operations in Indonesia


Petróleo Brasileiro S.A
. (PETROBRAS) -Petrobras is Brazil's national energy company, and is now internationally acknowledged as one of the largest twenty major oil companies in the world today, leading the sector in the implementation of the most advanced deep-water technology, for oil production.


Petróleos de Venezuela S.A.
(PDVSA) is owned by the Republic of Venezuela, and is charged with the development of the petroleum, petrochemical and coal industry, and is responsible for planning, coordinating, supervising and controlling the operational activities of its divisions, both in Venezuela and abroad.


Petróleos Mexicanos
(PEMEX) is the largest company in Mexico and is responsible for the management of oil industry operations for the entire country.


Petroleum Authority of Thailand
is a state enterprise under the supervision of the Ministry of Industry.  Its main tenet is to conduct and support the petroleum business and other related business for the uttermost prosperity as well as promoting energy stability within country.


Qatar General Petroleum
is owned by the state of Qatar. QGPC is responsible for all phases of oil and gas industry in Qatar and abroad, including exploration and drilling for oil and natural gas, as well as the production, refining, transport, storage, distribution, sale and export of these substances.


Saudi Aramco
- The Saudi Arabian Oil Company is a global leader in the petroleum industry. A fully integrated, international oil company, Saudi Aramco is committed to providing the reliable energy supplies the world needs for continued prosperity and development.


Turkish Petroleum Corporation
(TPAO) is Turkey's national oil company responsible for exploration and production of hydrocarbons both in Turkey and abroad to meet Turkey's vast demand for oil and natural gas.

 

Mayo shows that a better deal can be got!

A better deal can be got from the Oil Multi Nationals.  Maura Harrington and Co. have already proved that.  People from North Mayo and the Coastal community in the Erris area have achieved this heroic milestone, showing that people from the West can have ‘a say’ on how their lives are influenced.   The question now is can Leinster House (The People) learn that no longer do they have to offer a carrot to the Multi Nationals? (That particular Donkey is well fed and well worked elsewhere and has little reaction to such inducements).  Let them take the bull by the horns, role up their sleeves, lead from the front and get digging!  Let them forget the silver spoon mentality!

 

20-Year licenses ensure that the Multi Nationals can hold the country to ransom.  They can sit on these licenses, prevaricate and try to frighten ‘the Irish people’ when something happens that does not suit them e.g. coming up with alternative plans to build a gas terminal in North Mayo.  Six-year licenses are the norm worldwide!

 

Mayo peoples fully aware of the untapped resources of their coastline.

Former contributors to the Mayo Association yearbook were Padraic Campbell from Galway via Swinford and Mike Cunningham from Castlebar. They consistently say that the greatest benefit to local communities is the work of servicing the Oil/Gas platforms.  Ireland could be a base to service a huge area off our north west coastline.  A full list of the billions of pounds worth of work that could be generated for Irish coastal communities was given in an Editorial Note in the Mayo Association Yearbook 2001, a copy off which can be got in Mayo Co. Libraries.  These range from building piers, improving harbours, building houses, hotels and B & B accommodation, construction of representative offices of International Companies experienced in this sort of work, deep sea diving, engineering, security, transportation, accountancy, legal experts, banking, information systems and technology, pipeline repairs etc.  All this work would be a by-product and could be captured by our coastal communities if the Dublin Government showed some initiative and led the exploration drive off our north western and western coastline!  You have Stavanger in Norway, Aberdeen in Scotland. Why not Ballina in Ireland?

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Value of the Nation’s Retirement fund sinks!

 

Now, we hardly have to tell them where to get the money! The Retirement Fund would be a good place to start. Dr Michael Somers, Chief Executive of the National Treasury Management Agency was astonished that so many companies’ shares lost value in the summer of 2002!  The dogs in the streets and any Telecom Eireann shareholders would have let him know that shares have being overvalued for the past five years.  You know, he could have been influenced if he read the editorials in past Mayo Association Yearbooks which constantly emphasized the precarious nature of investing in the stock market; all reasoning based on the falling birthrate. “Levi Strauss, for example, complains that the youth market is shrinking faster than the company’s jeans: shifting demographics caused it to shut down three European factories in 1999”-Newsweek Sept 16-23, 2002.  It doesn’t take a genius mind to recognise that all other products e.g. entertainment related, cars etc will eventually be substituted for jeans!  The big Multi-national Corporations have recognised this trend many years ago.  But national governments in the Western World, seemed to be stunned or stuck in the paramount importance of the individual (isn’t it great to have one billionaire in our company!) as opposed to increasing the overall welloffness of the whole community.   They are completely impervious to the effect of a policy that puts such an important status on companies achieving growth; when such a policy depends on consumers buying more.   All this is taking place while the birth rate among the premier First World countries has in fact collapsed over the last forty years. The birth rate is falling every year. The Multi Nationals of the First world are in business stagnation and will rip-off any unsuspecting booming area like the Irish Economy e.g. loading of the compliant Irish businessman/woman with 50% higher insurance costs, which in turn reduces the tax going into the national exchequer.   The fundamentals indicate that if society continues this blind liberal agenda, we will be heading for more business disruption, and cooking of the books to show growth!  Our young men and women who depend on their leaders to make wise decisions will loose out on pensions, and God forbid, will be sent to war to protect the current state of affairs!

Lack of religious values increases business fraud

Christianity and its associated business ethics are failing in the Western World.  Honesty and integrity will be very hard found in the international sphere.  Witness the riffling of wealth from retirement investments in the U.S.A; religion has not been thought in its State Schools for the past forty years and only few can afford the huge cost of education in religious schools.  Business operates most effectively when the workers have fundamental religious beliefs; no longer do many people have that inner mechanism fear of “eternal damnation”.  Now there are many more people and by extension corporations around, whose only restriction is that if they steal enough, they can hire top solicitors to get around man-made laws. Business only operates effectively where you can get workers with strong religious ethics.  For this reason, one should be extra careful when doing business in former anti-religious countries. Business needs sound fundamentals, and only a society with a background in religious values can provide this.  It is up to the leaders of any society to make sure that the religious community gets all the support it needs; otherwise the whole house of cards come tumbling down!  This is the main reason why Mayo and Irish emigrants were so welcomed abroad, they were trustworthy and it was their religious belief to put in a hard day’s work.  Mayo emigrants or migrants for that matter are a far different ‘kettle of fish’ than those immigrants who will come to Ireland if we pass the Nice Agreement.

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Harness the energy of our Coastal Communities!

 

The best investment is one that we can totally manage from the floor up: exploiting our own resources and selling to a willing market.  Demographics are changing the world, and not 9/11 as the Americans would like us to believe; the latter is just one incident along a troubled future.  The Western World can’t continue to uphold its honour and continue to buy oil from those who attack them!  President Bush and the U.S.A would love to have an alternative source of oil. Those countries that cotton on to this fact will gain handsomely in the future!  It is the satisfaction of the survival instinct that will be paramount inn future.  The correct reading of these new trends will be vital for any country to survive with any reasonable standard of living for its citizens.  The weakening of the economies of the First World countries will cause a fundamental shift in power, resulting in a lot of turmoil.  It will be important for Ireland to have control of its own Oil reserves.  So, Leinster House, get stuck in there and think laterally, and acquire a world-wide economic and historical vision to match your apparent welloffness in the modern world!  Get some of those North Mayo people to make things happen.  Think and use the latent energy and competitive strength of the footballing people of Knockmore, Ballina and recent All Ireland Champs, Crossmolina.  Their migrant relations are world-beaters in other fields of endeavour, whether it is property, building racing cars, baking/banking etc.

Use the retirement Fund and/or borrow.  The Irish Banks have loads of dough to match this investment. By the fact that they are so large, they will have to downsize or invest abroad to match the future Irish falling birth-rate and economy.  They have done well on the backs of the community and from our emigrants’ savings (the real non-resident accounts).  Now, it is time that our Government encouraged them to invest in our resources.  They will get even richer, but so will the ordinary Paddy from oil/gas royalties’ etc.  The Scottish Banks who got fat from financing North Sea Exploration will jump in like a light!  Give Mayo and the other coastal communities a chance to prove themselves in business activity at home!

The GOYA effect!

Get moving! Take the lead! Get Off You’re A…! Leinster House! Just take control of the harness, you will be surprised how much power you can weave! The world needs Irish Oil!  We have the world as our market. The Irish are known and loved throughout the globe for centuries; sure we built half of it!  Don’t wait until the Mexicans, the Nigerians or Venezuelans let us have outdated Exploration Rigs.  State of the Art Rigs can now go down much further than was ever the case in Irish waters.  Where you find Gas, there is oil and vice versa; it was this belief that drove the pioneers of the Norwegian Oil Industry.  Don’t wait for other people to come in and take it from under our noses; remember the plundering of our fishing industry in the 20th Century.  It is only the few that gain from Ireland’s current approach to Oil/Gas exploration.  The Norwegian Government speculated, all the Norwegian people gained; they can send their elderly to the South Seas over the winter on the National Health!

Community versus Individual!

This theme is not just exclusive to a number of concerned people from Mayo. The following quote is taken from Roger G H Downer, President of another great Western establishment, the University of Limerick “Let us celebrate our many privileges and ensure that they are shared with all members of society.  Let Ireland light a beacon for the world by demonstrating how a nation’s resources and competitive streak can be combined with a sharing and caring, co-operative ethos to achieve real and long-term impact for every human being.” Taken from the Irish Times, 27th August 2002.

Change of direction needed!

Use our resources intelligently and stop basing our so-called modern welloffness on a falling birth rate! Our Governments have been economically successful, but now need a little change of emphasis!  Our mineral deposits should be exploited instead of our current generation of young people i.e. at present all our young women are encouraged to take up full time jobs at the cost of having children.  This continued out of date and worn out policy in the Materialistic Western World is now causing Stock Markets to crash and is threatening the future pensions of the very young people who have been exploited.  Modern Western Governments are trying to wriggle out of providing State Pensions and are giving 100% tax allowances for private pension contributions.  Do they not know that the strength of a national currency depends on the productivity of its future workers?  Otherwise, to this writer the short-term vision displayed by western Governments including our own is completely baffling!  The devil you know is better than the devil you don’t know!  It would make better sense to create and educate our own workers in our own likeness, and hand down our culture etc!  No man is perfect.  But this is ridiculous.  We as a race do not have to commit hara-kiri so as to fulfil somebody’s expectation of a vibrant Celtic Tiger! 

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Public discussion is badly needed.

International Copyright laws prohibit this writer to come out with interesting tables and more relevant up to date information.  It is virtually impossible to find out anything on the Internet about our Democratic Government’s attitude to the exploitation of our Hydrocarbon Resources. Where is the transparency?  The only information relevant to Ireland at time of writing is gleaned from Websites of the International Oil and Gas Information providers, for a price.  This is the exact opposite for nearly every other country in the oil business.  There was a Government Department Website a number of years ago that looked promising, but somebody zapped it!  Where is the problem? Have the faceless bureaucrats in the EC put the Indian sign over Leinster House? What’s the story? A public debate is badly needed. For openers visit Website http://www.irishoil.net/  This website is defunct and has been replaced by Shell to Sea because of the stupid initial non negotiating tactics with the locals by Dublin politicians (against the advice of politicians on the ground) and Shell.