Our Oil and Gas

Strongbow10

Why do articles that discuss Ireland’s poverty conceal Ireland’s riches?

Ireland has at least € 5.4 trillion euros ($7.38 trillion) worth of oil and gas reserves off its western coast – which is enough to pay off Ireland’s national debt of € 60 billion nearly a hundred times over.

A report by Petroleum Affairs Division of the Department of Communications, Marine and Natural Resources stated: “Volumetric assessment and expulsion modeling shows volumes of over 130 billion barrels of oil, plus 50 trillion cubic feet of gas off Ireland. At minimum, the potential is at least 10 billion barrels of oil, most of it in an underwater ridge known as the Atlantic Margin, which runs parallel to Ireland’s western shore.”

The Dunquin gas field, 125 miles off the coast of Kerry, contains 25 trillion cubic feet of natural gas, plus 4,130 million barrels of oil. This alone would meet Ireland’s gas needs (at present consumption levels) for the next 62 years.

The Spanish Point field, 125 miles off the coast of Clare, has known reserves of 1.25 trillion cubic feet of gas, plus 206 million barrels of oil.

Further north lies the Corrib field, with an estimated value of between € 6 and € 50 billion euros ($8.2 billion - $68.4 billion).

The Lough Allen basin (an inland field) has 9.4 trillion cubic feet of gas, plus 1.5 billion barrels of oil valued at € 75 billion euros ($102.6 billion).

Ireland has so much oil and gas that the masses need not submit to the IMF. So what’s the problem?

The problem is that Irish politicians intentionally locked up this oil and gas wealth by selling contracts to foreign oil companies, which take 95% of the profits, and give kickbacks to the politicians that wrote the contracts.

For example, Exxon Mobil is developing the Dunquin field, while Shell, Marathon and Statoil are developing the Corrib field.

These companies get all the money. Corporations harvesting the Corrib gas fields need pay only 25 percent of the profit to Ireland, and most of that 25% is withheld as exploration and operating costs.

Result: Ireland collects only 5% of the profits from its own oil and gas.

Oil companies whine that they must pay about € 70 million euros each time they do an exploration drill. But if they must drill – say -- 1,000 exploration wells to exploit all of Ireland’s oil and gas reserves, then for € 70 billion they get a 71-fold profit of € 5 trillion. This is like getting $3,550 from an investment of fifty bucks. Not bad.

The Irish masses want the government to re-negotiate its contracts with foreign oil companies – but that would mean less kickbacks to Irish politicians. Hence the politicians (especially those of the ruling Green - Fianna Fáil coalition) insist on taking IMF debt, since politicians will not have to pay for it. The masses will.

Investors see all this, and are buying oil futures, knowing that IMF debt (which taxpayers, not investors must repay) will backstop the investors’ gambles. Consequently the price for West Texas Intermediate crude futures has hit $83 a barrel, and continues to climb.

The Irish masses could demand more money from corporations that are extracting Ireland’s trillions in oil and gas. The masses could also reign in the speculators, and have a genuinely public bank. They could all share in prosperity.

But for that to happen, Ireland would need honest politicians.

Kristopherus

Don't be too worried about all that. The Gov will get plenty back from you and me in duties, VAT, Carbon tax. Thats more than enough for my liking:mad::mad::mad:

Its Shell's oil and gas now..

edanto

Strongbow10, I think you're right. I mean, maybe on a couple of points you might be overstretching it (e.g kickbacks going to current politicians), but on the whole I agree with you that it's a disgrace.

I joined a party to try and make a difference in this kind of thing. Would you be interested in doing the same kind of thing? Just go to a few meetings, Labour/FG/SF, try one each and see which you identify the most with.

For me, I agree most with the Labour party, so I've joined that. But that's just what suits me. From the research you've put into that post, you're certainly interested enough to find out lots about the 3 opposition parties.

Obviously you have to look a bit deeper than what they say on their website - even Fianna Fail have an agreeable looking set of policies on their website, you have to try and get to know the people involved in each and see what motivates them and how they see the world.

Oh, and if you can find any proof of corrupt payments to Ray Burke when he signed over all of our oil and gas reserves during the 80s, that would be a great help! If evidence of that was found, then in theory, it might be possible to have those contracts declared void.

professore

The taxes on the big oil companies are very low. However, if the OP is correct, why has so little of it been exploited to date ? It's either not there or very hard and expensive to mine. So it's a nonsense IMHO.

Spacedog

Concerning Shell and the Corrib field, and using wikileaks documents on Nigeria as a reference. it appears that shell are not afraid to infiltrate a government to secure access to natural resources.

People talk about re-negoating the bad deal with the IMF, but not this deal whith shell which is nothing less than a giveaway. Ray Burke was either paid off, blackmailed, or was not mentally fit when he made this agreement.

Ireland needs to pass law by referendum to restore soverignty over natural resources, land ownership, retroactive financial culpability for failings of banking and property industries, and end the limited liability insurance policy on child sex abuse extended to the catholic church.

...or we can abolish the Seanad... that'll solve everything too. :rolleyes:

Sulmac

At the moment barely any of this (supposed) oil and gas is being exploited because it is either not there or is very difficult to discover and extract (especially in the Atlantic). The process of either discovering or extracting in this location is very expensive at the moment and we do not know if it is 'worth it' yet.

Norway is the best known 'oil-rich' country in Europe and have their state-owned company Statoil, with profits produced being placed in the state pension fund, valued at just over $500 billion in 2010.

Norway didn't establish Statoil until they knew that there was enough oil and gas to justify doing so, and followed a policy not unlike our own until then, by giving exploration rights to private companies to go out and actually 'find' the oil.

North Sea oil

In May 1963, Norway asserted sovereign rights over natural resources in its sector of the North Sea. Exploration started on July 19, 1966, when Ocean Traveller drilled its first hole. Initial exploration was fruitless, until Ocean Viking found oil on August 21, 1969. By the end of 1969, it was clear that there were large oil and gas reserves in the North Sea. The first oil field was Ekofisk, produced 427,442 barrels of crude in 1980. Since then, large natural gas reserves have also been discovered.

Against the backdrop of the 1972 Norwegian referendum to not join the European Union, the Norwegian Ministry of Industry, headed by Ola Skjåk Bræk moved quickly to establish a national energy policy. Norway decided to stay out of OPEC, keep its own energy prices in line with world markets, and spend the revenue—known as the "currency gift"—in the Petroleum Fund of Norway. The Norwegian government established its own oil company, Statoil, and awarded drilling and production rights to Norsk Hydro and the newly formed Saga Petroleum.

The North Sea turned out to present many technological challenges for production and exploration, and Norwegian companies invested in building capabilities to meet these challenges. A number of engineering and construction companies emerged from the remnants of the largely lost shipbuilding industry, creating centers of competence in Stavanger and the western suburbs of Oslo. Stavanger also became the land-based staging area for the offshore drilling industry.

If we find enough oil and gas off the coast to justify it, I would be 100% behind setting up an Irish version of 'Statoil'.

Godge

Spacedog wrote: »

Concerning Shell and the Corrib field, and using wikileaks documents on Nigeria as a reference. it appears that shell are not afraid to infiltrate a government to secure access to natural resources.

People talk about re-negoating the bad deal with the IMF, but not this deal whith shell which is nothing less than a giveaway. Ray Burke was either paid off, blackmailed, or was not mentally fit when he made this agreement.

Ireland needs to pass law by referendum to restore soverignty over natural resources, land ownership, retroactive financial culpability for failings of banking and property industries, and end the limited liability insurance policy on child sex abuse extended to the catholic church.

...or we can abolish the Seanad... that'll solve everything too. :rolleyes:

Once we have done all of the above we can welcome all the Eastern Europeans who long for the good old days when they were poor under the Soviet system.

Scofflaw

Hard to know where to start, given how many times this has been covered. Currently, the state of play for the fields valued so highly in the OP are:

1. Atlantic Margin - absolutely nothing has been found. The "potential" to contain oil or gas only indicates that the available data appear to show structures which might contain oil or gas. The PAD is in the business of drumming up interest in exploration.

2. Dunquin - the figures cited are so-called "P10" figures, which means that there's a 10% possibility they're true. No well has been drilled, and the actual size of the resources, and whether anything is actually recoverable, is basically unknown. ExxonMobil, which has the licence for the field, is currently trying to drum up interest in it.

3. Spanish Point - again, no well drilled, estimates only. Providence is a Tony O'Reilly company, and currently needs a boost to its share price after a 31% fall in early 2010.

4. Corrib - at least has relatively constrained reserves, and some chance of actually producing some gas in the next 5 years. The current value of the field is about €6bn, and the costs of development to date are €2.5bn.

5. Lough Allen - that's a hilarious valuation for a field that has been known about since 1960, is very easily accessible, and yet nobody has ever bothered producing from, because it's not economic to do so. The company making the claim is the 100% owner of the licence (which indicates that nobody else could be bothered), and the claim that "new technology" will somehow make an uneconomic field immensely valuable is the oil industry equivalent of claiming you've found a way to extract gold from seawater profitably. The field is described as "unconventional" - and as consisting of "tight gas sandstone reservoirs, which are defined by low permeabilities and porosities relative to conventional fields". That means daily production rates would probably be about enough to run your granny's gas ring.

In summary, these immense amounts of oil and gas collapse down to actual known reserves worth c. €3.5bn net of development costs, and a whole load of share price boosting and talking up of almost entirely unknown prospects.

People talk about re-negoating the bad deal with the IMF, but not this deal whith shell which is nothing less than a giveaway. Ray Burke was either paid off, blackmailed, or was not mentally fit when he made this agreement.

And finally, Ray Burke's deal is no longer applicable, except to fields originally licenced under it, which does not include the newer discoveries or possibilities. Further, it was a reasonable deal at the time, and not dissimilar to the deal initially offered by Norway before the discovery of Ekofisk. Despite Ray Burke's supposed giveaway, nothing was found in Irish waters until Corrib - and Corrib, it's worth reminding people, is only about 70% the size of Kinsale. People act as if it was another Ekofisk - but Ekofisk is the biggest single discovery of all time. The Norwegians won a decade's rolled-over lottery jackpot - we've found a fiver up a wet tree in a high wind.

cordially,
Scofflaw

Retail Hell

ireland was briefed by the norwegians about statoil, but itwas pee Flynn of FF who was part the government team, so any wonder it went tits up

Fussgangerzone

Scofflaw wrote: »

Hard to know where to start, given how many times this has been covered. Currently, the state of play for the fields valued so highly in the OP are:

1. Atlantic Margin - absolutely nothing has been found. The "potential" to contain oil or gas only indicates that the available data appear to show structures which might contain oil or gas. The PAD is in the business of drumming up interest in exploration.

2. Dunquin - the figures cited are so-called "P10" figures, which means that there's a 10% possibility they're true. No well has been drilled, and the actual size of the resources, and whether anything is actually recoverable, is basically unknown. ExxonMobil, which has the licence for the field, is currently trying to drum up interest in it.

3. Spanish Point - again, no well drilled, estimates only. Providence is a Tony O'Reilly company, and currently needs a boost to its share price after a 31% fall in early 2010.

4. Corrib - at least has relatively constrained reserves, and some chance of actually producing some gas in the next 5 years. The current value of the field is about €6bn, and the costs of development to date are €2.5bn.

5. Lough Allen - that's a hilarious valuation for a field that has been known about since 1960, is very easily accessible, and yet nobody has ever bothered producing from, because it's not economic to do so. The company making the claim is the 100% owner of the licence (which indicates that nobody else could be bothered), and the claim that "new technology" will somehow make an uneconomic field immensely valuable is the oil industry equivalent of claiming you've found a way to extract gold from seawater profitably. The field is described as "unconventional" - and as consisting of "tight gas sandstone reservoirs, which are defined by low permeabilities and porosities relative to conventional fields". That means daily production rates would probably be about enough to run your granny's gas ring.

In summary, these immense amounts of oil and gas collapse down to actual known reserves worth c. €3.5bn net of development costs, and a whole load of share price boosting and talking up of almost entirely unknown prospects.



And finally, Ray Burke's deal is no longer applicable, except to fields originally licenced under it, which does not include the newer discoveries or possibilities. Further, it was a reasonable deal at the time, and not dissimilar to the deal initially offered by Norway before the discovery of Ekofisk. Despite Ray Burke's supposed giveaway, nothing was found in Irish waters until Corrib - and Corrib, it's worth reminding people, is only about 70% the size of Kinsale. People act as if it was another Ekofisk - but Ekofisk is the biggest single discovery of all time. The Norwegians won a decade's rolled-over lottery jackpot - we've found a fiver up a wet tree in a high wind.

cordially,
Scofflaw

That's all very nice and detailed, but what it boils down to is this: if no other fuel is found, there's only €3.5bn worth. So it sets an absolute minimum value on resources off the west coast.

I'll admit that the it's in the PADs interest to attract exploration, but I imagine their figures have basis in reality, and that if they were in complete piss-take territory, they would have been called up on it a long time ago. They haven't been.

If you take their minimum estimate, we're still talking about over €700bn worth. Costs taken into account we could surely get a quarter of that for fixing the country, even if it would be over a long space of time, were it to be used?

Costs won't be as high for everyone else as they were for Shell, unless they share their disregard for planning law, and conflixt with people living near their infrastructure.

So my question for you is this: is now the time to change the way we deal with fuel companies to maximise the benefit to the state, or should we wait until it's all been found?

Can you make one compelling argument for not revising our share upwards on all future finds?

Overheal

Ekofisk is the biggest single discovery of all time. The Norwegians won a decade's rolled-over lottery jackpot - we've found a fiver up a wet tree in a high wind.

Like.

Chucky the tree

Fussgangerzone wrote: »

That's all very nice and detailed, but what it boils down to is this: if no other fuel is found, there's only €3.5bn worth. So it sets an absolute minimum value on resources off the west coast.

I'll admit that the it's in the PADs interest to attract exploration, but I imagine their figures have basis in reality, and that if they were in complete piss-take territory, they would have been called up on it a long time ago. They haven't been.

If you take their minimum estimate, we're still talking about over €700bn worth. Costs taken into account we could surely get a quarter of that for fixing the country, even if it would be over a long space of time, were it to be used?

Costs won't be as high for everyone else as they were for Shell, unless they share their disregard for planning law, and conflixt with people living near their infrastructure.

So my question for you is this: is now the time to change the way we deal with fuel companies to maximise the benefit to the state, or should we wait until it's all been found?

Can you make one compelling argument for not revising our share upwards on all future finds?

Is there is €700bn worth of oil there why haven't any oil companies started drilling for it?

yosemite_sam

Chucky the tree wrote: »

Is there is €700bn worth of oil there why haven't any oil companies started drilling for it?

They are, oil was found off County Mayo last year.

Scofflaw

Fussgangerzone wrote: »

That's all very nice and detailed, but what it boils down to is this: if no other fuel is found, there's only €3.5bn worth. So it sets an absolute minimum value on resources off the west coast.

I'll admit that the it's in the PADs interest to attract exploration, but I imagine their figures have basis in reality, and that if they were in complete piss-take territory, they would have been called up on it a long time ago. They haven't been.

That's partly because everyone knows they're spinning, but mostly because nobody knows any better.

Fussgangerzone wrote: »

If you take their minimum estimate, we're still talking about over €700bn worth. Costs taken into account we could surely get a quarter of that for fixing the country, even if it would be over a long space of time, were it to be used?

Costs won't be as high for everyone else as they were for Shell, unless they share their disregard for planning law, and conflixt with people living near their infrastructure.

We would get quarter of the profits under Ray Burke's deal, and somewhat more than a quarter under the existing deal, because that goes up to 40% of profits for the most profitable fields. If we assumed the same ratio of costs as Corrib (say €2.5bn on €6.5bn), that €700bn would net us somewhere between €107bn and €172bn. However, long before the stage of having resources worth €700bn, we would have revised the tax share up dramatically.

Fussgangerzone wrote: »

So my question for you is this: is now the time to change the way we deal with fuel companies to maximise the benefit to the state, or should we wait until it's all been found?

Can you make one compelling argument for not revising our share upwards on all future finds?

At the moment, I don't see a compelling argument for doing so, and the argument against it remains the same as ever, which is that without a decent probability of a good commercial find, it's probably going to put off exploration. Personally, I'd wait for a couple more reasonably commercial discoveries before revising the tax upwards.

cordially,
Scofflaw

Duke Leonal Felmet

Ah, another weekly edition of 'There is a trillion trillion dollars worth of oil and gas in Ireland, and Ray Burke sold it all to Shell for a warm pint of Beamish'.

You can't beat the classics.

Mr. Bean.

So can we increase the tax on oil dramatically if we find some? That'd be excellent.

yosemite_sam

Duke Leonal Felmet wrote: »

Ah, another weekly edition of 'There is a trillion trillion dollars worth of oil and gas in Ireland, and Ray Burke sold it all to Shell for a warm pint of Beamish'.

You can't beat the classics.

You should take a spin down to Erris for yourself, Shell are planning for the long hall. Serious money being spent down here

Fussgangerzone

Chucky the tree wrote: »

Is there is €700bn worth of oil there why haven't any oil companies started drilling for it?

Well, what was said to me the last time I was at a meeting of OPEC was, "Get out of our board-room you weirdo". I didn't learn much there. Heavy-handed security.

It's oil and/or gas, the two have common origins. Why aren't they drilling it now? Probably because they have enough for the moment. You know the law of supply and demand? OPEC play it like a banjo. Easier to charge loads of money when you can say you only have so much, now matter how many fields you've earmarked.

Apart from that, there could be a matter of waiting for the optimal time to do the work. There's surely a sweet spot where the cost of drilling, the price of fuel and the global supply of fuel line up to make a good time to drill.

Also, because they hate the baby jesus.

Duke Leonal Felmet

yosemite_sam wrote: »

You should take a spin down to Erris for yourself, Shell are planning for the long hall. Serious money being spent down here

Wake me up when they find something.

supersean1999

Sulmac wrote: »

At the moment barely any of this (supposed) oil and gas is being exploited because it is either not there or is very difficult to discover and extract (especially in the Atlantic). The process of either discovering or extracting in this location is very expensive at the moment and we do not know if it is 'worth it' yet.

Norway is the best known 'oil-rich' country in Europe and have their state-owned company Statoil, with profits produced being placed in the state pension fund, valued at just over $500 billion in 2010.

Norway didn't establish Statoil until they knew that there was enough oil and gas to justify doing so, and followed a policy not unlike our own until then, by giving exploration rights to private companies to go out and actually 'find' the oil.



If we find enough oil and gas off the coast to justify it, I would be 100% behind setting up an Irish version of 'Statoil'.

is it to late to do this say in 5 yrs or so, have we not gave away everything or am i missing something

Fussgangerzone

Scofflaw wrote: »

That's partly because everyone knows they're spinning, but mostly because nobody knows any better.

Yeah, well I don't think they're spinning as hard as you let on, but all either of us have there is idle conjecture.

We would get quarter of the profits under Ray Burke's deal, and somewhat more than a quarter under the existing deal, because that goes up to 40% of profits for the most profitable fields. If we assumed the same ratio of costs as Corrib (say €2.5bn on €6.5bn), that €700bn would net us somewhere between €107bn and €172bn. However, long before the stage of having resources worth €700bn, we would have revised the tax share up dramatically.

The bad news is, they can put 100% of their costs that against tax. So if you're accurate about the profit/loss on the Corrib field, our take there will be 0. Civilised countries claim ownership of a percentage of the resource as well as the profits, and we should do the same.

At the moment, I don't see a compelling argument for doing so, and the argument against it remains the same as ever, which is that without a decent probability of a good commercial find, it's probably going to put off exploration. Personally, I'd wait for a couple more reasonably commercial discoveries before revising the tax upwards.

I think that's a terrible idea. Say the next three finds are the last three finds? That would leave us completely screwed. If we're dealing with an unknown quantity of fields, as we are, we should treat every find like it's our last. Because it could be.

Chucky the tree

Fussgangerzone wrote: »

Well, what was said to me the last time I was at a meeting of OPEC was, "Get out of our board-room you weirdo". I didn't learn much there. Heavy-handed security.

It's oil and/or gas, the two have common origins. Why aren't they drilling it now? Probably because they have enough for the moment. You know the law of supply and demand? OPEC play it like a banjo. Easier to charge loads of money when you can say you only have so much, now matter how many fields you've earmarked.

Apart from that, there could be a matter of waiting for the optimal time to do the work. There's surely a sweet spot where the cost of drilling, the price of fuel and the global supply of fuel line up to make a good time to drill.

Also, because they hate the baby jesus.

What about the members outside of OPEC? IF there is so much oil I'd thought there be a gold rush to get the contract for it.

Scofflaw

Fussgangerzone wrote: »

Yeah, well I don't think they're spinning as hard as you let on, but all either of us have there is idle conjecture.

Eh, I have a fair idea of how much data they can have, and it's not enough to make the kind of predictions they're making in terms of value. They could equally well say that the amounts could be next to rock-all, because that would be an equally valid prediction on the basis of available data. That's why their values are always hedged with 'could be' and 'might contain' - and when you say "such and such a structure could contain x amount of oil and gas" you're pretty much putting a maximum number on that, because it's based on the extent and capacity of the structure.

Fussgangerzone wrote: »

The bad news is, they can put 100% of their costs that against tax. So if you're accurate about the profit/loss on the Corrib field, our take there will be 0. Civilised countries claim ownership of a percentage of the resource as well as the profits, and we should do the same.

Shell has claimed expenses of €2.5bn against Corrib, and Corrib hasn't ever been valued at less than about €7bn. If production costs add another €0.5bn, I have no idea where you'd come up with zero tax, because the tax take would actually be 25% of the €4bn profit.

Fussgangerzone wrote: »

I think that's a terrible idea. Say the next three finds are the last three finds? That would leave us completely screwed. If we're dealing with an unknown quantity of fields, as we are, we should treat every find like it's our last. Because it could be.

Not at all, otherwise our next find would be our last, because the oil companies won't bother to drill. We could probably raise taxes a bit (after all, we already did), but not too much.

cordially,
Scofflaw

Fussgangerzone

Chucky the tree wrote: »

What about the members outside of OPEC? IF there is so much oil I'd thought there be a gold rush to get the contract for it.

My second and third points still stand for this one.

Fussgangerzone

Scofflaw wrote: »

Eh, I have a fair idea of how much data they can have, and it's not enough to make the kind of predictions they're making in terms of value. They could equally well say that the amounts could be next to rock-all, because that would be an equally valid prediction on the basis of available data. That's why their values are always hedged with 'could be' and 'might contain' - and when you say "such and such a structure could contain x amount of oil and gas" you're pretty much putting a maximum number on that, because it's based on the extent and capacity of the structure.

Thank you for your more in-depth conjecture. That will get me far.

Scofflaw wrote: »

Shell has claimed expenses of €2.5bn against Corrib, and Corrib hasn't ever been valued at less than about €7bn. If production costs add another €0.5bn, I have no idea where you'd come up with zero tax, because the tax take would actually be 25% of the €4bn profit.

Their costs, €2.5bn, are greater than the governments projected tax revenue from the gas, €1.7bn. It cancels it out.

Scofflaw wrote: »

Not at all, otherwise our next find will be our last, because the oil companies won't bother to drill. We could probably raise taxes a bit (after all, we already did), but not too much.

We can take a cut of the find and still have them coming in, like every other country in the world. Except for Cameroon, the only country with a worse deal.

Scofflaw

Fussgangerzone wrote: »

Thank you for your more in-depth conjecture. That will get me far.

There's conjecture, and then there's educated conjecture. The original claim, which is that they'd be "called" on the figure if it was wrong, remains rather less than a confirmation.

Fussgangerzone wrote: »

Their costs, €2.5bn, are greater than the governments projected tax revenue from the gas, €1.7bn. It cancels it out.

Y...no. The revenue from the field is, say, €7bn . The costs are €3bn. The profits are therefore (7-3) €4bn, because profits are the amount of revenue left after costs. Tax is levied on the profits. Tax @ 25% on €4bn would therefore be €1bn.

The phrase "costs are set off against tax" does not mean that first the tax is calculated, and then costs are subtracted from that, although I can see how one might read it that way.

Fussgangerzone wrote: »

We can take a cut of the find and still have them coming in, like every other country in the world. Except for Cameroon, the only country with a worse deal.

We already do take a cut of the find. We take 25% of profits.

cordially,
Scofflaw

Chucky the tree

Fussgangerzone wrote: »

My second and third points still stand for this one.

So there's €700bn worth of oil there an no oil companies will go near it "because it's not the right time"? I find it strange oil companies are happy to risk losing out on that much oil to rivals. At the very least I'd expect them to be all over signing the deal to drill for it and then delaying drilling.

Fussgangerzone

Scofflaw wrote: »

There's conjecture, and then there's educated conjecture. The original claim, which is that they'd be "called" on the figure if it was wrong, remains rather less than a confirmation.

Correct. I could have asked, "Why haven't they been called on it?". But we don't have to go into semantic overdrive.

Scofflaw wrote: »

Y...no. The revenue from the field is, say, €7bn . The costs are €3bn. The profits are therefore (7-3) €4bn, because profits are the amount of revenue left after costs. Tax is levied on the profits. Tax @ 25% on €4bn would therefore be €1bn.

The phrase "costs are set off against tax" does not mean that first the tax is calculated, and then costs are subtracted from that, although I can see how one might read it that way.

I'm wrong here. You're not exactly right though. Going away and doing my homework, the way it works is, they make back their set-up costs, then they get charged 25% of profits.

However, that isn't equal to 25% of the value of remaining gas once costs have been recouped. To say so is to assume that their staff and suppliers both serve them for free from then on, which of course isn't the case.

So they pay some tax. But no way is it a billion euro. It's 25% of the operational profit of an established gas field extracting €4 billion worth of gas. What is that, you ask? I don't know.

According to this http://www.stock-analysis-on.net/NYSE/Company/Royal-Dutch-Shell-PLC/Ratios/Profitability Shells operating profits are about 5%. Let's say, for the sake of conversation, we say that's the expected profits from Corrib.

5% of €4bn = €200mill.
25% of €200mill = €50 million.
From €7 billion worth of gas? Is that a good deal?

Scofflaw wrote: »

We already do take a cut of the find. We take 25% of profits.

Not the same thing. Sensible governments demand both.

Scofflaw

Fussgangerzone wrote: »

Correct. I could have asked, "Why haven't they been called on it?". But we don't have to go into semantic overdrive.

I'm wrong here. You're not exactly right though. Going away and doing my homework, the way it works is, they make back their set-up costs, then they get charged 25% of profits.

However, that isn't equal to 25% of the value of remaining gas once costs have been recouped. To say so is to assume that their staff and suppliers both serve them for free from then on, which of course isn't the case.

Mm, no - I added half a billion to the set-up costs (€2.5bn according to Shell) to cover running costs.

Fussgangerzone wrote: »

So they pay some tax. But no way is it a billion euro. It's 25% of the operational profit of an established gas field extracting €4 billion worth of gas. What is that, you ask? I don't know.

According to this http://www.stock-analysis-on.net/NYSE/Company/Royal-Dutch-Shell-PLC/Ratios/Profitability Shells operating profits are about 5%. Let's say, for the sake of conversation, we say that's the expected profits from Corrib.

5% of €4bn = €200mill.
25% of €200mill = €50 million.
From €7 billion worth of gas? Is that a good deal?

Sigh. Shell's operating profits as a company are entirely different from the profits of the field. The profits of a field are very simple - revenue minus costs for the field and only the field. What's left after tax is fed into Shell the company, and goes to pay for the expenses of the company - but the costs of the company are not deductible from the field's revenues.

It's all in the various tax analyses.

Fussgangerzone wrote: »

Not the same thing. Sensible governments demand both.

Governments with provable reserves, sure. Given you didn't even know how tax is calculated in general, never mind on a particular field, I'm slightly disinclined to take your advice on economic incentivisation of exploration companies, if you'll pardon my saying so.

cordially,
Scofflaw

Fussgangerzone

Scofflaw wrote: »

Mm, no - I added half a billion to the set-up costs (€2.5bn according to Shell) to cover running costs.

Based on what exactly? Show me your figures, Captain Expert. Don't come over like you have all the facts, if you can't present them.

Scofflaw wrote: »

Sigh. Shell's operating profits as a company are entirely different from the profits of the field. The profits of a field are very simple - revenue minus costs for the field and only the field. What's left after tax is fed into Shell the company, and goes to pay for the expenses of the company - but the costs of the company are not deductible from the field's revenues.
It's all in the various tax analyses.

Toffee! (I was going to try a glib counter-point to "sigh" but I do like toffee. Who doesn't?) Yes I know. You know why I didn't bother adjusting for that? Becuase only Ireland lets a company recoup 100% of the set-up cost before profits are taxed. Didn't think I had to spell it out but hey-ho.

Scofflaw wrote: »

Governments with provable reserves, sure. Given you didn't even know how tax is calculated in general, never mind on a particular field, I'm slightly disinclined to take your advice on economic incentivisation of exploration companies, if you'll pardon my saying so.

Neither do you, pal-o-mine, based on what you've typed on this thread. And I'm not asking you to take my advice (unless you're secretly running the country). Just pointing out that there our governments out there overseeing functional economies, who we should seek to emulate, and not just in terms of their fossil fuel policy.

But hey, if you want to play the "you don't know what you're talking about I don't have to justify anything to you" card, stump up some figures. Any figures.