We are at the end of the era of cheap oil. An era when we had access to an easily transported and uniquely dense form of solar energy. One that was stored for 150 million years, before being used to allow us to live like kings in comparison to previous generations.
We are at the point when the supply of conventional oil starts to contract and new demand for oil from the developing world continues to grow. That simple reality is pushing up the price which in turn is starting to effect politics right across our world.
Obama’s re-election will depend as much as anything else on the price of US gasoline over the next six months. IMF research shows that higher crude prices present one of the greatest threats to a global economic recovery and they expect prices to double over the next ten years. The motives for modern wars have been dressed up in different guises but it is clear the primary driver has been an attempt to secure the remaining energy resources. Lorry drivers in Britain and now in Ireland are starting to exercise the power they have, by threatening to cut off oil supply lines, which if it was to happen would shut down our country within a week.
Perhaps it was because of such vulnerabilities that the recent oil discovery in Irish waters made such an international news splash. A few weeks on we might get a more balanced perspective. As in wartime, the first casualty in oil and gas exploration seems to be the truth.
It is understandable that Providence Resources would want a good news story about the Barryroe field. Last week they announced a new share issue aimed at raising $100 million for the company. However, the most telling fact about the field is that it had already been discovered twice before. It is only with oil prices above one hundred dollars a barrel that it might now be economically viable.
Rather than being the start of an oil bonanza, it illustrates the fact that the large and easy to reach oil fields have already been discovered and that we are now forced to find smaller pockets of oil in expensive and dangerous locations. The predicted flow of 4,000 barrels of oil a day sounds impressive until you realise that we are currently using over 175,000 barrels of oil every day. Even if the field is fully exploited, Ireland will remain one most dependent countries in the world on imported fuels to meet its energy needs.
The fuel might be processed in the Whitegate oil refinery but it will not provide sufficient flows to insure the future of that plant. A major study completed for the Department of Communications Energy and Natural resources (DCENR) in 2008 showed how insecure our oil supply lines are. If anything happens to either Whitegate or to Dublin Port, one or other half of the country would very quickly run low on fuel. This new oil find does nothing to reduce that threat.
The smaller quantity of gas discovered should allow the extended use of the existing gas pipelines in the area, which might in turn make viable the development of other small pockets of gas. The best of use of that gas might be to store it in the depleted Kinsale gas field. We will need such a strategic reserve because neither this nor the Corrib gas field will be big enough on their own to give us a medium term secure supply. For that to happen we would need to find something much bigger. If we did find bigger fields, we would then have to work out what we would do with the carbon.
There is an alternative view that such large fields are there to be exploited if only we changed our licensing terms and keep a greater share of the resources for ourselves. That view often cites departmental reports which refer to the possibility of larger recoverable resources in the deep Atlantic waters. But such prospective documents are written to encourage investment in what is one of the harshest and to date, least successful exploration areas. You have to be careful and understand the real meaning of the words being used. Potentially recoverable does not mean we know where it is or how to get it.
People say we should follow the Norwegian exploration model, but they had very similar tax rates to our own up to the point that major discoveries allowed them strike a better deal. We did need to change our licensing terms in 2007 which brought us more into line with other countries around the Atlantic margin. We should change the terms again if we think it would lead to a better return to the Irish taxpayer but we should not cod ourselves that there is a great ‘El Dorado’ out there ready to be tapped.
Even after discovering some giant fields off their own coast, the Brazilian national oil company Petrobras is finding it very difficult to commission the 250 ships and raise the $250 billion they will need to develop some of their finds in the next five years. We are seeing more and more deepwater accidents occurring, even before we go out into much more difficult North Atlantic waters.
Perhaps when we do go back out and drill again, we will find another commercial field, but I was always taken by the line from the geologist Colin Cambell, who said that we were simply unlucky, the oil didn’t seem to be there. Cambell had worked for the leading oil companies exploring in the Atlantic but he then went on to found the Association for the Study of Peak Oil. I first heard of the concept about ten years ago and nothing since has made me doubt the underlying analysis.
The American, European and Chinese energy ministers I met in my time in office seemed to have a similar understanding of the scale of the problem. They realised that the real race was now on to reduce our dependency on oil and to develop alternative energy supplies.
The scary prospect is that our political system will believe either the oil industry or the utopian energy analysis of well intentioned others and think we can rely on finding new fossil fuel discoveries. The fact that our Seanad now wants to banish wind power from the land, that the Government has abandoned all public transport projects and that we are stalling on the development of electric vehicle charging points, all point in that direction.
Come what may the era of cheap oil is coming to an end. The real question is whether we have the wit and political will to develop the more sustainable, safer and equitable green alternative.
Eamon Ryan is the leader of the Green Party
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