Ireland, the next Saudi Arabia?

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Ireland – The Next Saudi Arabia?

Could Ireland, the land of rolling hills, green fields, leprechauns, rain and more rain could be the next Saudi Arabia?With the gloom of peak oil arriving on Saudi Arabian shores, possibly in 2012, along with the recent leak, from wikileaks, stating that Saudi Arabia has overstated it’s oil reserves by 40%; Saudi Arabia could soon be placed in a very precarious situation in relation to oil extraction along with the rest of the world.

The World is demanding more and more oil, with an average increase in demand of 1.76% per annum from 1994 to 2006. This increase with the worrying predicted demand exceeding the actual supply by 2015, means that either a new source of surplus energy must be discovered or, more conveniently, a new mass oil reserve must be discovered and exploited.

Ireland may be sitting on enough black gold to fulfil the world’s oil demands, which could leave the country beyond financially secure for decades to come, effectively transforming it into the new Saudi Arabia.

Proposed Value of Ireland’s Offshore Oil and Gas Reserves

A report by the Petroleum Affairs Division of the Department of Communications, Marine and Natural Resources stated that volumetric assessment and expulsion modelling determined that volumes of oil exceeding 130 billion barrels exist off the coast of Ireland.

A barrel of oil currently trades at about US $100 per barrel in 2011, that’s €70 per barrel.

This means that 130 billion barrels of oil off the coast of Ireland can calculate up to €9.1 trillion worth of oil (US $12.9 trillion).

This is just oil alone, with gas deposits estimated at 50 trillion cubic feet of gas and with the current price of gas at about US $4.52 per 1000 cubic feet, this could bring in another huge sum of €158 billion (US $226 billion).

According to the volumetric figures proposed for Ireland’s coastal oil and gas potential, the prices of oil and gas and the current exchange rates, the total value of these offshore resources would reach a wopping €9.258 trillion in 2011.

Ireland’s national debt exceeds 100 billion euro, in 2011, but this €9.258 trillion would pay off these debts over 92 times! This would ensure financial security for Ireland for multiple decades to come and would inevitably turn Ireland into the Saudi Arabia of Europe.

Now, the 130 billion barrels of oil off the coast of Ireland, mentioned above, is a best case scenario and would be an extremely lucky find, even though data suggests this may be the case. It is still suggested in the report, that at least 10 billion barrels of oil lies of the west coast of Ireland.

Even with a minimum of 10 billion barrels of oil of the coast of Ireland, this would still value Ireland’s oil reserves at €700 billion, which would pay off our country’s debts nearly 7 times over. It would also leave us financially secure for a very long time.

Problems Faced

Unfortunately, obtaining this oil and gas is very difficult in Ireland, especially at present with the financial crisis.

Ireland lacks the infrastructure for such oil extraction, plus the funds necessary to send out expeditions to drill for the oil can range from €50 to €70 million euro each. Many of these drillings have to done per annum.

Ireland cannot afford these expeditions, so private investors and multinational companies have to be targeted to fund the expeditions. An issue with this is that many companies do not want to gamble such high amounts of money on the expeditions due to the fact that, on average, only 1 in 25 wells drilled in Ireland is commercial, compared to the 1 in 7 wells of other waters, such as those in Norwegian and British waters.

Also the drilling investors in Ireland do not receive compensation if their drilling is unsuccessful, compared to the 78% refund compensation that drillers in Norway receive if they well is unsuccessful.

Another issue with issuing licences for multinationals to drill for oil is that if they do actually find a commercially viable amount of oil, they will gain most of the profits from this oil, recently up to 75% of the profits. All oil fields off the coats of Ireland discovered over 3 years ago get to keep 75% of the profits with only 25% going to the government. A problem with this 25% is that most of it can be written off with exploration and operating costs, so the government actually can gain a lot less of the profit.

Only recently has a new 40% tax been imposed on oilfields, but this tax is only enforced with high yielding oil fields.

Other Issues

Along with issues of taxation and ownership, multinationals have caused major issues in Ireland in relation to safety, as can be seen with the Corrib gas project off the west coast of Ireland, run by Shell E&P Ireland (operator 45%), Statoil Exploration (Ireland) Limited (36.5%), and Marathon International Petroleum Hibernia Limited (18.5%).

With this project, Shell want to process the natural gas inland, instead of the usual at sea processing. This puts fear in my locals due to the increased danger and pollution of an onshore processing plant right in on of Ireland’s most notably pristine and safe locations.

The Irish people have also accused the government of handing away billions to trillions euro worth of Irish resources.

The Corrib site has been a place of constant protest for years now, with people even been jailed and abused by the gardai. Everyday protesters line the site to prevent onshore work being conducted and in a poll conducted, most people object to the pipeline being brought onshore.

    Shell to Sea

Possible Solution

Do as Norway did and allow private investors to initially fund the oil seeking expeditions. Make sure some sort of compensation is given if well drillings are not viable, but make sure that the taxation of successful wells is dramatically increased well over 40%, like in Norway, if the prospects of finding oil increase.

While revenue accumulates from taxation of the multinational oil fields, Ireland’s government should invest in its own oil and gas expeditions off the coast of Ireland to gain full profits of any findings. Ireland’s own oil expedition/extraction company could be eventually established, like Norway’s Statoil, and if we’re lucky a huge supply of oil and/or gas could be found which would give Ireland its financial freedom and potential riches.