Wednesday 16 October 2019

Richard Curran: 'Leo's oil ban looks more like energy PR than energy policy'

Action: Taoiseach Leo Varadkar is seeking to curb fossil fuel exploration
Action: Taoiseach Leo Varadkar is seeking to curb fossil fuel exploration
Richard Curran

Richard Curran

Twenty-three years ago, I interviewed the chief executive of an Irish exploration company. It was 1996 and he told me how his company had sunk a lot of money into finding oil off the Irish coast already.

Given the results of seismic studies and the scale and location of his licences, he said: "We know the oil is out there. All we have to do is find it." Quite.

Twenty-three years on and the company has still not managed to extract a single barrel of oil from Irish waters.

Hundreds of millions of euro have been spent by Irish and international companies on oil and gas exploration.

With the exception of the Corrib and Kinsale gas finds, nothing much has been brought ashore.

So it is relatively easy for the Taoiseach to 'virtue-signal' at the United Nations during the week that he plans to phase out oil and gas exploration from Ireland. It is an easy, and relatively cost-free, way of generating headlines.

The new initiative will not affect existing licences. Some of these run up to 2030. Gas is not yet included. The proposed ban does not include the Celtic or Irish seas but refers to the Atlantic.

It is full of caveats. When you put it together, it won't really amount to very much in real terms.

However, the policy U-turn is relatively easy to do. It is in line with the recommendations of a climate change report and it sends out a particular PR message both at home and around the world. It is good for the image.

Given that so many companies have failed to deliver commercial finds off Ireland's coast, it probably seems like an easy way to present the country as leading the way. In truth, we are leading from behind.

The Government is saying it won't let anybody find nothing any more.

There are real contradictions in the new stance. Oil and gas are often found together.

It also sends out an international signal that Ireland is not open for business when it comes to oil and gas exploration, even if in fact we kind of still are - if you have an existing licence.

Imagine if one of these companies did actually make a significant commercial oil find off the Irish coast.

We definitely wouldn't be telling them to leave the oil where it is. We would grab it.

The chances of making a find of that kind are now a lot slimmer because of the announcement. Yet, it doesn't cost the Irish Exchequer money to allow international companies to spend their shareholders' millions on the punt of looking for oil.

Why not let them at it if they want to spend their money?

The exemption of gas is because it is seen as a transitional fuel to a more sustainable energy future.

It is also the only thing we have found in commercially viable quantities.

In Ireland, we are laggards when it comes to the environment and tackling climate change.

If you think there is something hypocritical about our stance on energy and climate change, you don't have to look too far to find much bigger examples.

Take Norway, for example. It is seen as a leader in the introduction of electric vehicles (EVs). Around 10pc of the car fleet in Norway is now electric. This is about 230,000 cars. If you buy an electric car there, you don't have to pay VAT, compared with 25pc on a petrol or diesel car.

You don't have to pay registration tax, annual ownership tax or fuel tax. You get discounts on ferries. You can access bus lanes and many tolls are also free.

Higher taxes on diesel and petrol cars are used to fund the subsidies offered to EVs.

So is Norway using subsidies to do a lot for climate change and saving the planet? Yes, it is.

But it is also the second-biggest exporter of fossil fuels per capita in the world.

Over 20pc of the money collected by the exchequer comes from oil and gas exports.

It has a population of just 5.2 million and exports 95pc of its fossil fuel output - €27bn worth of oil and €28bn worth of gas each year.

Its sovereign wealth fund, built up from oil and gas revenues, is one of the largest in the world and is valued at around €900bn.

The fund took a decision earlier this year to sell out of oil stocks in its investment portfolio. But it only decided to sell out of exploration stocks, which are about the future, and not out of existing, vertically integrated oil giants like BP and Exxon.

It generated headlines around the world earlier this year when it said it would sell out of oil stocks, but it only held about €7bn worth of shares in the category for divestment.

I am not having a pop at the climate-change-conscious Norwegians.

At least they are doing something, and doing nothing might be a lot worse.

But we should not get carried away with announcements around climate change when bigger realities exist.

Norway supplies about 25pc of the EU's gas demand, mainly to Germany. Reducing that dependence would increase the EU's reliance on places like Russia.

So they are good for energy security in Europe. Are they good for climate change?

In the debate about climate change and policy initiatives, we have to follow the money to see who is paying for what.

In Ireland's case, the Taoiseach said the revenues earned from new carbon taxes would be ring-fenced specifically for climate change initiatives, such as retrofitting homes, etc.

This seems reasonable and ensures new taxes are not simply used to shore up the black hole of health financing or over-budget hospital projects.

But it does mean Irish citizens will be paying directly for those initiatives.

And if anything, those with less money in society will end up paying proportionately more.

In Norway, the state subsidises climate change initiatives and uses taxes collected from other areas to fund this.

But, in reality, the massive earnings it gets from its fossil fuel industry are what makes these subsidies affordable for the Norwegian state.

So citizens in Germany and France, etc are buying Norwegian gas and they are paying for Norway's EV take-up.

The problem with the Taoiseach's exploration announcement is that it is neither one thing nor the other.

There was an interesting debate on Newstalk Radio shortly after Leo Varadkar made the announcement.

Petrel Resources chief executive and oil man David Horgan hated the plan because he said it was impractical, and dismissed it as "virtue-signalling".

Richard Boyd Barrett TD, who is vehemently opposed to the oil and gas industry, hated the plan because he said it was "disingenuous".

The oil men see it as unnecessary and unhelpful, the anti-oil industry people see it as not going nearly far enough.

The discussion turned to how we are going ahead with building a liquid gas facility to store imported gas which may be generated from fracking in the US.

For Horgan, the Government's policy was like giving up red meat on environmental grounds and then flying avocados in from Mexico.

Indo Business

Also in Business