Shell to Sea

[muppet]

Muppet, no time. Very briefly -

"No tax from Kinsale and Corrib" - is there cheating going on or is it that they haven't yet reached the threshold? The current tax regime is clearly NOT GENEROUS ENOUGH to incentivise significant exploration. Making a few short term bob out of Shell and Kinsale would be a false economy if it delayed or even completely blocked the prospect of proper exploration of our fields - which may prove unviable anyway. It's popular Sinn Féinery to create headlines about fat cats paying little or no tax, but it's no more than populist nonsense.

"Will it ever happen" (getting a proper tax rate)? Why shouldn't it happen? I know it's popular (and populist again) to engage in taxi-driver analysis and assume that "that crowd" would sell our birthright for a few brown envelopes. Again it's nonsense. We can easily make sure they don't get the chance, whether we're cynical enough to think they'd try or naive enough to think they wouldn't.

"Form our own oil company" - and take all the risks onto the exchequer? Not only unrealistic but lunatic.

"Shell don't need a handout" - It's not that Shell are here because they need a handout. It's that they wouldn't be here if they didn't get the handout - or reasonable tax incentives, to be less pejorative. To view it the other way is more taxi driver analysis and Sinn Féinery, with respect. It ignores economics in favour of emotion. To cut the incentive to Shell and jeopardise the future prospects of commercialising our resources, just to be able to say "at least we didn't give handouts to international corporations" would be childishly reckless.

"Banks vs. oil industry" - no equivalence. Again you talk about "helping out" the oil industry. Sorry, but let me out of the taxi. (Take the smiley and the respect as read.)

Once again, for emphasis, my two main points:

1. Our oil and gas resources may amount to nothing and not be worth extracting. Taking a multi-billion risk to find that out is unacceptable by any possible economic analysis, when we can let others take the risk at an exponentially reduced cost and cash in if and when there's actually something to tax.

2. If this is such a bonanza for the international oil and gas companies, where are they?

I never said 'no tax from Kinsale or Corrib'. I highlighted your 70% tax rate and said it will never happen. We won't even tax bailed out banks profits at that rate and it is frankly naive to say it will happen. Dismissing my opinion as Sinn Féinery ignores my years of posting here. I am anything but a Sinn Féin fan.

Regardless you seem to assume that if we have oil or gas, we have to get it out of the ground now. Why would we do that if it means we give it away for nothing? Why would anyone genuinely acting in the interests of the taxpayer, give it away for nothing?

Now to your 2 points:

1. There will be no cashing in for us, ever. We will always take the risk as the banks demonstrated so clearly. 

2. Who said there was a bonanza? Oh and it seems there is at least some interest: http://www.irishtimes.com/business/sectors/energy-and-resources/oil-and-gas-drilling-off-west-to-intensify-as-about-10-firms-interested-1.1477793

[Hound]

I never said 'no tax from Kinsale or Corrib'. I highlighted your 70% tax rate and said it will never happen. We won't even tax bailed out banks profits at that rate and it is frankly naive to say it will happen. Dismissing my opinion as Sinn Féinery ignores my years of posting here. I am anything but a Sinn Féin fan.

Regardless you seem to assume that if we have oil or gas, we have to get it out of the ground now. Why would we do that if it means we give it away for nothing? Why would anyone genuinely acting in the interests of the taxpayer, give it away for nothing?

Now to your 2 points:

1. There will be no cashing in for us, ever. We will always take the risk as the banks demonstrated so clearly. 

2. Who said there was a bonanza? Oh and it seems there is at least some interest: http://www.irishtimes.com/business/sectors/energy-and-resources/oil-and-gas-drilling-off-west-to-intensify-as-about-10-firms-interested-1.1477793

I wonder do Shell think they're getting the resources for free when €3 billion has been spent so far on Corrib without a cent in revenue?

Providence have spent €600m so far. Hopeful of getting a big find in Barryroe, but we'll see.

Dunquin was supposed to be a big find, but Exxon pulled out after its exploration activity found nothing of value there and they said they don't expect to come back to Ireland. They didn't say how much they spent but the average cost for drilling an exploration well in Irish waters is €60M. In Norway the average cost is €40M, and if you find nothing the Norwegians give you back €31M (Norway's oil tax rate is actually 78%). Ireland of course will give Exxon nothing back for the money they spent.

So the carrot of 25% tax on profits in Ireland versus 78% tax on profits in Norway has to be set against risking €60M in Ireland for every well drilled (with an historic success rate of 1/32) compared to €9M at risk in Norway if unsuccessful (with an historic success rate of 1/7). Norway, like Ireland and the UK, do not charge a royalty on oil/gas found (or we all "give it away for free" to use muppet's analogy), but all three apply tax on profits after taking into account all expenses incurred.

 

[Hardy]

Muppet, no time. Very briefly -

"No tax from Kinsale and Corrib" - is there cheating going on or is it that they haven't yet reached the threshold? The current tax regime is clearly NOT GENEROUS ENOUGH to incentivise significant exploration. Making a few short term bob out of Shell and Kinsale would be a false economy if it delayed or even completely blocked the prospect of proper exploration of our fields - which may prove unviable anyway. It's popular Sinn Féinery to create headlines about fat cats paying little or no tax, but it's no more than populist nonsense.

"Will it ever happen" (getting a proper tax rate)? Why shouldn't it happen? I know it's popular (and populist again) to engage in taxi-driver analysis and assume that "that crowd" would sell our birthright for a few brown envelopes. Again it's nonsense. We can easily make sure they don't get the chance, whether we're cynical enough to think they'd try or naive enough to think they wouldn't.

"Form our own oil company" - and take all the risks onto the exchequer? Not only unrealistic but lunatic.

"Shell don't need a handout" - It's not that Shell are here because they need a handout. It's that they wouldn't be here if they didn't get the handout - or reasonable tax incentives, to be less pejorative. To view it the other way is more taxi driver analysis and Sinn Féinery, with respect. It ignores economics in favour of emotion. To cut the incentive to Shell and jeopardise the future prospects of commercialising our resources, just to be able to say "at least we didn't give handouts to international corporations" would be childishly reckless.

"Banks vs. oil industry" - no equivalence. Again you talk about "helping out" the oil industry. Sorry, but let me out of the taxi. (Take the smiley and the respect as read.)

Once again, for emphasis, my two main points:

1. Our oil and gas resources may amount to nothing and not be worth extracting. Taking a multi-billion risk to find that out is unacceptable by any possible economic analysis, when we can let others take the risk at an exponentially reduced cost and cash in if and when there's actually something to tax.

2. If this is such a bonanza for the international oil and gas companies, where are they?

I never said 'no tax from Kinsale or Corrib'. I highlighted your 70% tax rate and said it will never happen. We won't even tax bailed out banks profits at that rate and it is frankly naive to say it will happen. Dismissing my opinion as Sinn Féinery ignores my years of posting here. I am anything but a Sinn Féin fan.

Regardless you seem to assume that if we have oil or gas, we have to get it out of the ground now. Why would we do that if it means we give it away for nothing? Why would anyone genuinely acting in the interests of the taxpayer, give it away for nothing?

Now to your 2 points:

1. There will be no cashing in for us, ever. We will always take the risk as the banks demonstrated so clearly. 

2. Who said there was a bonanza? Oh and it seems there is at least some interest: http://www.irishtimes.com/business/sectors/energy-and-resources/oil-and-gas-drilling-off-west-to-intensify-as-about-10-firms-interested-1.1477793

Muppet, I misunderstood your Kinsale point.

I know you're anything but a Sinn Féiner - I was merely suggesting an analogy between the arguments and language you're using in this debate and the sort of populist, economically illiterate nonsense we hear from SF (which surprises me, coming from you).

I don't quite get your point about the timing of when we should extract the resources. What would be different in the future? If we we haven't been doing any exploration in the meantime, we still
- don't know whether there's anything there or not
- have to make the decision as to whether we fund it by tax incentives to exploration companies or by setting up a state oil company
- have to decide whether we farm out the risk or take it all upon ourselves.

There is no equivalence between the bank bailout and oil exploration policy. I don't see the point in inventing one. You might as well say our agricultural development policy simply can't work because the government hasn't a clue how to run the health service. If the point is that a history of incompetence and corruption predisposes us to either screwing up or sabotaging the chances of the people benefitting from the oil, then you'd have to explain how forming a national oil company protects us from the same outcome, given that it would be conceived, established and run by the same corrupt, incompetent establishment, who would now be exercising their incompetence and corruption directly.

You didn't say there was a "bonanza", but you keep on referring to "giving away" our oil and gas "for nothing". I suggest that would amount to a bonanza for any lucky beneficiary, so I have to wonder why the oil companies aren't jostling each other for room to fit their platforms in our teeming free oilfields. I'm encouraged we now have ten doing some exploration. (How many are exploring off Norway?) If they find substantial deposits, leading to the proof that we really do have commercially viable quantities of resources, I expect the cost for the next round of exploration licences and the tax on profits to increase very substantially.

[muppet]

I never said 'no tax from Kinsale or Corrib'. I highlighted your 70% tax rate and said it will never happen. We won't even tax bailed out banks profits at that rate and it is frankly naive to say it will happen. Dismissing my opinion as Sinn Féinery ignores my years of posting here. I am anything but a Sinn Féin fan.

Regardless you seem to assume that if we have oil or gas, we have to get it out of the ground now. Why would we do that if it means we give it away for nothing? Why would anyone genuinely acting in the interests of the taxpayer, give it away for nothing?

Now to your 2 points:

1. There will be no cashing in for us, ever. We will always take the risk as the banks demonstrated so clearly. 

2. Who said there was a bonanza? Oh and it seems there is at least some interest: http://www.irishtimes.com/business/sectors/energy-and-resources/oil-and-gas-drilling-off-west-to-intensify-as-about-10-firms-interested-1.1477793

I wonder do Shell think they're getting the resources for free when €3 billion has been spent so far on Corrib without a cent in revenue?

Providence have spent €600m so far. Hopeful of getting a big find in Barryroe, but we'll see.

Dunquin was supposed to be a big find, but Exxon pulled out after its exploration activity found nothing of value there and they said they don't expect to come back to Ireland. They didn't say how much they spent but the average cost for drilling an exploration well in Irish waters is €60M. In Norway the average cost is €40M, and if you find nothing the Norwegians give you back €31M (Norway's oil tax rate is actually 78%). Ireland of course will give Exxon nothing back for the money they spent.

So the carrot of 25% tax on profits in Ireland versus 78% tax on profits in Norway has to be set against risking €60M in Ireland for every well drilled (with an historic success rate of 1/32) compared to €9M at risk in Norway if unsuccessful (with an historic success rate of 1/7). Norway, like Ireland and the UK, do not charge a royalty on oil/gas found (or we all "give it away for free" to use muppet's analogy), but all three apply tax on profits after taking into account all expenses incurred.

As long as there is more than €3bn worth of gas there, Shell will get it all back. This kinda makes my point for me. They aren't doing it for the fun.

There are two key arguments here:

1) How do we deal with failed exploration.
2) How do we deal with successful exploration.

Hound and Hardy, correct me if I am wrong, seem to be suggesting that in order to attract 1), we need to be very generous on 2).

Hound points out, reasonably that Norway refunds 70% of the costs of 1). But he does this in defending our very attractive terms for 2). I am sure Norway has a far greater hands on approach to exploration, otherwise it could find itself with a massive bill on its hands. We on the other hand give out licenses to anyone who wants to look. We don't care where they look. Presumably this is because we are at an earlier stage of our industry. Norway has proven viable finds and thus the odds are better there at the moment.

In conclusion regarding Norway, they incentivise the exploration by underwriting some of the risk, but if you succeed they will tax you at 78%.

We incentivise the risk by giving away the oil or gas from the successful find.

This makes absolutely no sense as there is no benefit to the current owner of the resources, i.e. us the taxpayer.

Hardy, waiting does make a difference. Waiting until now has made oil reach a price that makes deepwater exploration more economical. That is why we are even discussing the subject. 20 years ago no one wanted to spend the money to go way off our west coast. Further  improvements in technology and higher energy prices could allow us to offer better terms.

And back to the bank analogy. The fiasco that has been the Corrib field will all be underwritten by the Irish taxpayer, just like what happened the banks. It doesn't matter if the bill for Shell goes up to €10bn, as long as there is enough gas to cover it, they won't pay a cent. Our gas pays for it as we gave it to them for nothing, or according to the lingo: zero royalties.

[Hardy]

Muppet, they are not getting the gas for nothing. They will pay 25% on their profits. The profit comes from the gas, not from fishing or running boat trips out to the rig. This rate of Corporation Tax is unique to exploitation of natural resources. Everyone else pays 12.5%, as you know.

If we were charging 70% tax, do you think Shell would have explored the Corrib field, given the fact that only one other viable gas field has ever been discovered in Irish waters? Your (2) doesn't happen without your (1) and your (1) won't happen in Irish waters without an attractive incentive, as is clear from the low level of exploration, even given the current incentives that you characterise as giving the stuff away.

Double the standard Corporation Tax has proven to be a sufficient incentive in the case of the Corrib field and Shell. I don't see the couple of billion it may deliver as a bad outcome for us, given the alternative if it wasn't exploited (i.e. nothing) or the downside risk if we'd explored it ourselves and found nothing, as has happened in all cases but one, (i.e. a huge bill and no revenue).

That is not to say that a 50% tax rate won't be appropriate if our resources prove to be viable; or that an 80% rate won't be appropriate if they prove to be massive. The trick is to get as much as we think we can and still make it worthwhile for the oil companies. So far, in my estimation, we seem to be getting it right, though some might say we need to make the deal more attractive as there's not a whole lot going on.

On the other hand, you may be right and oil may be $1,000 a barrel in 2050 and we should leave it there until then. We will never know; our grandchildren might.

[Hound]

And back to the bank analogy. The fiasco that has been the Corrib field will all be underwritten by the Irish taxpayer, just like what happened the banks. It doesn't matter if the bill for Shell goes up to €10bn, as long as there is enough gas to cover it, they won't pay a cent. Our gas pays for it as we gave it to them for nothing, or according to the lingo: zero royalties.

Your saying that if Shell get €3bn worth of gas out of Corrib, then their net profit will be zero, thus their tax bill will be zero, and the Irish taxpayer will have given away €3bn worth of gas for free.

But that logic is seriously flawed.
If it costs €3 billion to get €3 billion of gas out of the ground, then that gas is worth exactly nothing.
Shell would have made no money
The Irish taxpayer would have made no money
The Irish taxpayer would have given no subsidy
(Hopefully there would be economic benefits for the west coast in terms of job and infrastructrue during the period, but we can leave that aside).

If only €2 billion of gas comes, then Shell have lost a thousand million euro. The Irish taxpayer has lost nothing. It would have turned out that supposed gas asset was actually a liability.

If €7 billion of gas comes, then Shell have made a profit of €4 billion, and the Irish exchequer benefits to the tune of €1 billion. The Irish exchequer gets 25% of the net value of the gas (price less costs of getting it out of the ground). 

[muppet]

And back to the bank analogy. The fiasco that has been the Corrib field will all be underwritten by the Irish taxpayer, just like what happened the banks. It doesn't matter if the bill for Shell goes up to €10bn, as long as there is enough gas to cover it, they won't pay a cent. Our gas pays for it as we gave it to them for nothing, or according to the lingo: zero royalties.

Your saying that if Shell get €3bn worth of gas out of Corrib, then their net profit will be zero, thus their tax bill will be zero, and the Irish taxpayer will have given away €3bn worth of gas for free.

But that logic is seriously flawed.
If it costs €3 billion to get €3 billion of gas out of the ground, then that gas is worth exactly nothing.
Shell would have made no money
The Irish taxpayer would have made no money
The Irish taxpayer would have given no subsidy
(Hopefully there would be economic benefits for the west coast in terms of job and infrastructrue during the period, but we can leave that aside).

If only €2 billion of gas comes, then Shell have lost a thousand million euro. The Irish taxpayer has lost nothing. It would have turned out that supposed gas asset was actually a liability.

If €7 billion of gas comes, then Shell have made a profit of €4 billion, and the Irish exchequer benefits to the tune of €1 billion. The Irish exchequer gets 25% of the net value of the gas (price less costs of getting it out of the ground).

The difference between us is very simple.

Both of you refuse to see that they pay nothing, nada, not a single cent for the gas. They get the raw material free. FREE!

Why do you both ignore this?

Can I be first in line to buy anything either of you have to sell?

Norway used to have lower taxes, but they charged royalties on the raw material before they switched to the current set up.

[muppet]

Muppet, they are not getting the gas for nothing. They will pay 25% on their profits.

Hardy I pay 52% on my 'profits' and I don't get €50bn free raw material to start with.

[rosnarun]

Muppet, they are not getting the gas for nothing. They will pay 25% on their profits.

Hardy I pay 52% on my 'profits' and I don't get €50bn free raw material to start with.

does it cost you several billion to find out if you have a job to got to?
oil exploration is a gamble and many  biliion has been lost in empty/no commercial  wells off Ireland

[Mayo4Sam]

Muppet, why are you ignoring the tax on their profits?

This idea that we are giving away gas is ridiculous and is the in keeping with the anti-corrib propaganda that is spouted by various groups.

As I see it there are two alternatives to the current regime

1) Leave it in the ground, possibly a viable alternative, although it does ignore the fact that oil has only been around for 150 years in the format and could be overtaken by some other form of energy in the next 50 years, which isnt exactly pie in the sky. If oil gets much dearer then more money is pumped into research, technology develops etc. A bird in the hand and all that.

2) We have some form of profit sharing JV. As hound has said there is an historical rate of 1/32 hits per drill, versus 1/7 in Norway. Even if we hit the average, its a ridiculous risk which no prudent state could possibly take.


If there are more options I'd be glad to hear them.

As for the extra cost for Corrib, that is being caused by people listening to the propaganda about the gas been sold for nothing and the dangers of the pipeline. The extra cost is hitting both Shell and Ireland

[muppet]

Muppet, they are not getting the gas for nothing. They will pay 25% on their profits.

Hardy I pay 52% on my 'profits' and I don't get €50bn free raw material to start with.

does it cost you several billion to find out if you have a job to got to?
oil exploration is a gamble and many  biliion has been lost in empty/no commercial  wells off Ireland

Firstly my family has to educate me feed me etc until I become productive. It costs a lot of money to get me productive and we can't claim it back in any way. In fact we pay more than twice what Shell do on the 'profits', and we don't get to use taxpayers' gas to pay for the all of the costs.

I find it interesting how many people here are deeply concerned at the financial risks to the oil industry, and prioritise those risks above their own as taxpayers. Fascinating.

[muppet]

Muppet, why are you ignoring the tax on their profits?

This idea that we are giving away gas is ridiculous and is the in keeping with the anti-corrib propaganda that is spouted by various groups.

As I see it there are two alternatives to the current regime

1) Leave it in the ground, possibly a viable alternative, although it does ignore the fact that oil has only been around for 150 years in the format and could be overtaken by some other form of energy in the next 50 years, which isnt exactly pie in the sky. If oil gets much dearer then more money is pumped into research, technology develops etc. A bird in the hand and all that.

2) We have some form of profit sharing JV. As hound has said there is an historical rate of 1/32 hits per drill, versus 1/7 in Norway. Even if we hit the average, its a ridiculous risk which no prudent state could possibly take.


If there are more options I'd be glad to hear them.

As for the extra cost for Corrib, that is being caused by people listening to the propaganda about the gas been sold for nothing and the dangers of the pipeline. The extra cost is hitting both Shell and Ireland

This is utter bollix. The extra cost is caused by the complete mishandling of the whole thing by the state. Shell behaved poorly when they arrived, armed (they thought) with ludicrous weapons handed over by Fianna Fáil, such as the unconstitutional Compulsory Purchases Orders. This resulted in the 5 men going to jail until a very embarrassing climb down by Shell (but not the State notably - no shame there). The planning fiascos have continued to dog the project but of course it is easy to blame the handful of lunatics surrounded by 300 Gárdaí.

[Hardy]

Muppet, they are not getting the gas for nothing. They will pay 25% on their profits.

Hardy I pay 52% on my 'profits' and I don't get €50bn free raw material to start with.

Sorry, Muppet, but you'll have to explain to a simpleton like me how 25% tax on all profits made from the gas amounts to "nothing, nada, not a single cent for the gas".

I know you're suggesting that the gas should be treated as a raw material that they should buy from us, the owners, and that they should then pay corporation tax on the profits they make from processing this raw material into a product. There's no problem with that economic model, but we're not debating the model. We're talking about what's the maximum you can get from Shell  for extracting gas from our fields, before they'll feck off somewhere else.

All you're doing is putting different names on the moneys you charge. If €Z is the maximum amount you can get per cubic metre from Shell, you won't fool them by charging €X for the gas and €Y in tax if X+Y>Z.

I find it interesting how many people here are deeply concerned at the financial risks to the oil industry, and prioritise those risks above their own as taxpayers. Fascinating.

Ah come on. You're better than that.

[muppet]

Muppet, they are not getting the gas for nothing. They will pay 25% on their profits.

Hardy I pay 52% on my 'profits' and I don't get €50bn free raw material to start with.

Sorry, Muppet, but you'll have to explain to a simpleton like me how 25% tax on all profits made from the gas amounts to "nothing, nada, not a single cent for the gas".

I know you're suggesting that the gas should be treated as a raw material that they should buy from us, the owners, and that they should then pay corporation tax on the profits they make from processing this raw material into a product. There's no problem with that economic model, but we're not debating the model. We're talking about what's the maximum you can get from Shell  for extracting gas from our fields, before they'll feck off somewhere else.

All you're doing is putting different names on the moneys you charge. If €Z is the maximum amount you can get per cubic metre from Shell, you won't fool them by charging €X for the gas and €Y in tax if X+Y>Z.

I find it interesting how many people here are deeply concerned at the financial risks to the oil industry, and prioritise those risks above their own as taxpayers. Fascinating.

Ah come on. You're better than that.

Charging a tax on profits is what we do to all businesses and individuals. This is not charging them for the raw material, it is a tax on profits.

Norway charged royalties in the beginning and then changed to 78% tax on profits once they were established. Why do you continually ignore this?

It think the biggest difference between is is that I see the 'They will feck off somewhere else' argument as a straw man. I say 'so what?' you and the others here seem to think that is a very bad thing.

[Mayo4Sam]

As for the extra cost for Corrib, that is being caused by people listening to the propaganda about the gas been sold for nothing and the dangers of the pipeline. The extra cost is hitting both Shell and Ireland

This is utter bollix. The extra cost is caused by the complete mishandling of the whole thing by the state. Shell behaved poorly when they arrived, armed (they thought) with ludicrous weapons handed over by Fianna Fáil, such as the unconstitutional Compulsory Purchases Orders. This resulted in the 5 men going to jail until a very embarrassing climb down by Shell (but not the State notably - no shame there). The planning fiascos have continued to dog the project but of course it is easy to blame the handful of lunatics surrounded by 300 Gárdaí.

Ah Muppet, lets stick to the facts here.
There is no basis to say the CPOs are unconstitutional
Shell climbing down is your view, my view, is that they agreed to reroute the pipe in order to move things along, a move which has been a outright mistake as the original route was the optimal route.