Madam, - Fintan O'Toole's column of August 30th ("Giving our Resources to Norway") is absurd. It shows no understanding of the basic economics of oil and gas exploration and development, and a cavalier disregard for the historical facts of Irish hydrocarbon exploration.
His position is that the State should be taxing the development of offshore natural oil and gas resources at similar levels to the Norwegian state. This in fact was State policy in Ireland from 1975 until 1992. The high levels of royalty, taxation and state participation in our original 1975 Oil & Gas law, combined with the very low level of success in Irish exploration drilling, had led to our offshore waters being effectively unexplored.
The number of exploration wells drilled annually had fallen from a high point of 15 in 1978 to just one in 1991. The reason was that until the discovery of the Corrib gas field in 1996, only one economic discovery had been made off Ireland - Marathon's Kinsale Head gas field. At this time the statistics were one success in 125 exploration and appraisal wells drilled, probably the poorest drilling success rate in the world.
At the same point in Norwegian exploration history, over 2,000 wells had been drilled, with an average success rate of one in two. Not even the most inveterate gambler would continue to throw money away on 125/1 outsiders, no matter how favourably taxed, when one in two risk opportunities exist in the country next door. If the new exploration terms of 1992 had not been introduced, Enterprise Oil would not have been attracted to explore in Ireland, and we would not have the Corrib gas field today.
Enterprise Oil, Marathon, Statoil and, more recently, Shell have since invested hundreds of millions of euro in the appraisal and development of the Corrib gas field, with no revenue to show to date. The State's inability to keep its side of the bargain, and to deliver due process to the developers of this asset, allowing them to develop it in a timely fashion, augurs extremely badly for the future of Irish offshore oil and gas exploration.
I cannot imagine that Dell or Intel would be keen to invest in Ireland if approval process for a new factory was subject to the same degree of arbitrary process, ad-hoc policy making and the invention of additional hoops through which prospective developers have to jump - which has been the fate of the Corrib gas field's developers over the past few years.
Perhaps this is why, at a time of record oil and gas prices, and when competition rates for access to new exploration acreage have never been higher in areas such as Norway, Nigeria and Libya, there were effectively no new applicants for the recent 2005 offshore Ireland licencing round.
If our current oil and gas tax policies were really the fantastic giveaway of our national hydrocarbon resources implied by Fintan O'Toole's column, the Department of the Marine, Communications and Natural Resources should have been inundated with applications from the acreage-hungry oil and gas companies of the world. In fact we had almost no applications. The international oil and gas industry views Ireland as an exploration graveyard, rather than the bonanza implied by Mr O'Toole's argument.
We will not have an oil and gas industry unless we encourage investment. The State needs to encourage the development of an offshore oil and gas industry to effectively assess the levels of reserves which exist. With any degree of success it may well be possible to increase taxation on that success, but only for new licence agreements. To seek retrospectively to further tax an oil and gas investment which has been so far disastrous to the parties involved would certainly kill off whatever small chances remain for future exploration off our coasts.
The Irish State is not willing to bear the risks which the Norwegian state has by creating and funding a national oil company to explore for oil and gas. Without private sector investment, we would not have an offshore natural hydrocarbon resource.
If we wish to have even the possibility of diversity of supply in natural gas - which, as the cheapest and most efficient current source of electricity, will supply the vast majority of our future power - we must encourage new exploration. This implies, at least until some degree of economic success is proven, that the current fiscal policies should continue to be at least as attractive as they are, if not more so.
To suggest, as Mr O'Toole does, that we should implement Norwegian levels of taxation, without Norwegian levels of success and inward investment, is economic madness. - Yours, etc,
BRIAN Ó CATHÁIN, Former Managing Director, Enterprise Energy Ireland, Kenilworth Square, Rathgar, Dublin 6.