I have received notice from the Tánaiste and Minister for Energy that he proposes to make a statement to the House under Standing Order No. 38.
Whiddy Island (Cork) Oil Terminal : Statements.
I wish to thank the House and the Opposition spokesman for Energy for facilitating me. On 12 December 1984 I made a statement to the House concerning a package which had been agreed arising out of discussions between my Department and Gulf Oil Terminals (Ireland) Ltd., owners of the Whiddy Island oil terminal. The principal element of that package, which was subsequently the subject of a formal agreement signed by the respective parties on 4 February 1985, was a commitment on the part of Gulf to rebuild the jetty at the terminal which had been severely damaged in the Betelgeuse disaster in January 1979. Among other elements in the package agreed was a commitment on the part of Gulf to maintain at the terminal a quantity of 160,000 barrels of crude oil on behalf of the State.
Following intensive negotiations, the Government have decided to conclude with Chevron, the ultimate owners, through their ownership of Gulf, of the Whiddy Ireland oil terminal, a new agreement which will supersede the February agreement. The principal elements of the new agreement will be that:
(a) Chevron will pay to the State $44 million in cash in consideration of release of the obligation placed on them by the February 1985 agreement. This is additional to the $2 million paid by Chevron to the State earlier this year and
(b) Chevron will transfer ownership of all the assets of Gulf Oil Terminals (Ireland) Ltd. at Whiddy to the State. The principal asset of the company is the oil terminal, comprising jetty, tank farm and lands.
Chevron will be permitted to remove the remaining crude oil from the terminal. The necessary legal drafting work on the text of the new agreement will now get under way and I would expect that the document would be ready for signature in a matter of weeks.
For the benefit of the House, I would like to explain the background to this matter. Subsequent to the signing of the February agreement preparatory work for the rebuild project was set in train by all concerned. On the part of the Government, an inter-agency co-ordinating group was established with the objectives of establishing close liaison between those Government Departments and State agencies which had an interest in the various aspects of the project in order to ensure that the reconstruction of the jetty would take full account of the findings of the Costello Tribunal of Inquiry into the 1979 disaster.
The Institute of Industrial Research and Standards were retained by my Department to advise and assist those Irish companies seeking a share of the project against the background of a Gulf declaration of intent to maximise the use of Irish goods, services and personnel. On the Gulf side, a planning application was prepared and lodged in June 1985 and planning permission, although now the subject of appeal, was forthcoming from Cork County Council in August 1985. Gulf were also engaged in the engineering design work prerequisite to a jetty re-build and in lining up potential contractors prior to selecting those who would actually do the job. In addressing the House on 19 July 1985 in relation to the Estimates for my Department, I made reference to the fact that this type of preparatory work was then in train. Deputies may recall that the target date for completion of the rebuild project was the end of 1986.
Over recent months, Gulf have been looking beyond the rebuild of the jetty at the future prospects for the terminal. They recently concluded that they now see no prospect, in current or foreseeable circumstances, of operating the terminal themselves or of attracting others to use it. With a view to eliminating the waste of economic resources which would be involved in constructing facilities for which no commercial future could be seen, Gulf put forward other proposals as an alternative means of discharging their obligations to the State, while recognising at all times that the Government, on foot of the February 1985 agreement, could insist on the rebuilding of the jetty.
After due consideration, Gulf's assessment of prospects for future utilisation of the terminal is accepted by the Government as being well founded. There is currently, and is likely to be for the foreseeable future, a ready availability of vacant crude oil storage capacity at more attractive locations in other parts of Europe. The current state of international oil movements, and current and foreseeable conditions on international oil markets, are accepted as also impacting very adversely on the outlook for future commercial use of the terminal in an international trading mode. In the circumstances, and conscious of the fact that although the company could be obliged to rebuild the jetty, there is no means by which they could be obliged actually to operate the terminal, the Government have decided that rather than insist on Gulf rebuilding the jetty it would be preferable to accept Gulf's discharge of their liabilities to the State in a manner providing more options to the Government and greater benefit to the national interest.
The choice before the Government, when considering the revised proposals which form the basis for the package I have just outlined, was a straight forward one. The Government could have "dug in" and insisted that up to $60 million be spent on rebuilding the jetty notwithstanding the very bleak outlook for usage of the terminal and in the hope that at some indeterminate time in the future commercial possibilities might arise which could enable it to operate. On the other hand, the Government could have elected, as they have done, to resolve the matter in a manner which, on the one hand takes account of international oil market realities and, on the other, maximises both the magnitude and the certainty of direct national economic benefit.
There is no doubt that this deal is far superior, in national economic terms, to the rebuild agreement. The terminal will be transferred to the ownership of the Irish National Petroleum Corporation, as the State's agent, and will be maintained at minimum cost by the corporation against future eventualities. Thus the integrity of the terminal's oil storage capability will be maintained should it be required in the future, although I wish to make it quite clear that there are no plans at present for the State to put it into an operational mode. If, however, opportunities arise in the future which hold real promise of economic utilisation of the terminal, appropriate courses of action can be considered at that time on merit and in the light of circumstances then obtaining. The sum of money which the State will receive, in one early payment, is very substantial. The magnitude of this receipt and the fact that it will be both early and direct compares very favourably with the indirect and short term benefits which would accrue form the reconstruction work, if that were to be undertaken in the face of the economic realities.
In permitting Chevron to remove the remaining oil from the terminal, we will be taking a small drop in our level of strategic storage. This drop in storage levels will be equivalent to about 1.5 days national oil requirements. The burden of this is minuscule in comparison with the benefits to the State, in cash and kind, which are to be provided under the agreement. I should mention that notwithstanding any stockholding-security of supply elements in relation to the Whiddy issue my Department are in the course of conducting a comprehensive review of this country's oil stock-holding arrangements.
I would also like to take this opportunity to inform the House that the INPC are shortly to conclude a crude oil supply arrangement with Chevron which will provide the INPC with an option, exercisable at any time over a two year period, to purchase a significant quantity of North Sea crude oil at attractive prices. In terms of magnitude, the quantity of crude oil which would be involved in this arrangement would cover by more than six times the quantity to be removed from Whiddy.
It is clear that this deal is, in national terms, a very good one. I recognise, however, that in the Bantry area, there will be disappointment at the fact that the reconstruction project will not now go ahead. Accordingly, the Government are examining, in consultation with relevant Departments and State agencies, the prospects of promoting additional investment in the Bantry region. As far as industrial investment is concerned, the IDA are in negotiation with prospective promoters regarding their 24,000 square feet advance factory and their two smaller factory units at 3,700 square feet each in Bantry. The IDA will continue to promote vigorously their 7.5 acre development site in the town. It would also be my intention to consult with local interest groups. For reasons of confidentiality it has not been possible for me to do so heretofore, but I would welcome discussions with such groups with a view to an exchange of ideas whereby measures could be adopted to offset the loss of the rebuild project.
At a more specific local level I am well aware of the fact that about 30 people are currently employed by Gulf at the Whiddy terminal. Gulf have at no stage attempted to shirk their responsibilities to these employees and at this moment are advising them of the nature of the deal with the Government which I have just outlined. They are also informing their employees that they will shortly initiate discussions with them as to the manner in which the company propose to discharge their responsibilities to them.
Finally, bearing in mind the comments of certain Deputies on the occasion of my Department 1984 statement to the House in relation to Whiddy, and given that the deal which I have outlined today surpasses, in terms of national economic advantage, the deal which I outlined then, I wish to state emphatically now, as I did then, that this deal involves no "trade off" or "back room" arrangement of any kind in any other policy area. The proposals which form the basis of this deal were advanced and negotiated on their own merits, and exclusively in the context of the rights and obligations of the State and Chevron in respect of the Whiddy facilities.
Before concluding, I want to pay tribute to the Secretary of my Department and the other officials involved in these negotiations. Without their skill, dedication and commitment, the outcome would not have been as successful as it has been.
Springing items like this on the House at such short notice is a very poor way to do business, particularly to deal with a matter of such magnitude. On 12 December 1984, we spoke here about a deal to rebuild Whiddy involving a $60 million package. The short notice given at that time coupled with today's announcement does not augur well so far as doing business is concerned because there is very little time for those concerned to read through the script and try to make a sensible evaluation of the arrangement.
The Minister's announcement is a sad and disappointing blow to the Bantry area and to the Cork region generally. It is very disappointing, too, in terms of national confidence and also in terms of the confidence with which the Minister made the announcement in 1984. Confidence in our total offshore oil exploration business must have waned significantly since then. When the Minister made his statement to the House on that last occasion, I expressed two grave reservations about the deal. I expressed apprehension about the confidence with which the Minister announced that a job of such magnitude, costing about $60 million and providing 250 jobs in construction and 100 permanent jobs thereafter, would be in operation by the end of 1986. I said then that nobody in his right senses would make that sort of announcement with such confidence having regard to the various aspects, such as planning permission and so on that would have to be dealt with before the work could begin. I called then for the implementation in full of the Costello recommendations and I said that the work could not be completed within the period outlined.
My second reservation was even more serious. It related to the timing of the announcement. I had good reasons for doubting the figure of $60 million because, under the foreshore lease that Gulf had got from the Government originally, they had a legal obligation to rebuild the jetty to its former status. At that time I made the House aware that actions resulting from the explosion on the Betelgeuse were about to be heard in the High Court in London. I expressed the view then that the figure being mentioned for the development could be used legitimately to bolster up compensation claims in that court case for Gulf Oil. The rebuilding was to involve a mooring system rather than the original system, in other words, it would accommodate smaller tankers without the need to incur the very significant expenditure that would be involved in restoring the jetty to its original form.
Therefore, for a much smaller investment than the figure mentioned then, the job could have been done. This contention is based on estimates I had drawn up during my time in the Department in 1982 and at a time when Gulf were thinking of pulling out. We were all only too well aware that the announcement about the agreement was prepared for a devastated region in the run up to the local elections.
The reservations I expressed in 1984 have proved to be correct. Subsequently the High Court actions were settled in London and I have little doubt that the arrangement reached with the Irish Government for a $60 million package played a significant part in the level of the compensation awarded to Gulf in settlement of the case.
On one or two occasions since I have pressed the Minister to tell us how soon the operation would be got under way. After a considerable time, planning permission was applied for to Cork County Council but that matter has not been finalised yet. However, what is more important is to ask what has happened in the whole oil industry since. Such big corporations as Gulf do not take major decisions lightly. They look well ahead into the future as to what their strategic corporate planning ought to be before committing themselves to such expenditure. One must ask, therefore, what has resulted in their changing their minds. They have got their adequate compensation so one must ask what has changed in the internal operations of Gulf Cheveron.
As we know, Gulf have been taken over in the meantime by Chevron for a sum in the region of $13 billion so we are now dealing with a much larger corporation. Many changes have taken place in the Gulf operation since they were taken over by Chevron. If they had not made up their minds on their long term strategic planning at that stage, changes would have taken place in relation to the package, but they proceeded to apply for the planning permission. We know that the price of oil has dropped in the meantime but a corporation of the size of Gulf Chevron do not have much regard to hiccups in the market in the short term.
When I raised this matter before I sought the memorandum of agreement and I am grateful to the Minister for having lodged the document subsequently in the Library of the House. The agreement contained a couple of release clauses. One of these confirmed the doubts I had then. It was that the Government would assist Gulf Chevron in selling the lease. I thought that a very strange clause to include in an agreement if the intention was to rebuild the terminal at a cost of $60 million. However, it appears that Gulf Chevron have changed their minds and have pulled out of the original agreement, though their legal obligation was to restore the jetty to its original status.
In 1982 the cost of that operation was estimated for me at between £30 million and £35 million but I suppose today's price lines up with that. At that stage we were enjoying a reserve of one million barrels of oil as part of our strategic oil reserves. That is why we must consider all the factors involved. First, we are to receive $44 million but I see no mention here of the cost to the State of replacing the one million barrels of oil. The terminal is to be handed over to the Irish National Petroleum Corporation. The Minister tells us that the only effect on our strategic oil reserves will be a drop in the form of 1.5 day's national storage. Is that based on the new part of the strategic oil reserves which was represented by 160,000 barrels as a result of the original agreement or does it represent the replacement of one million barrels? One way or the other, there will be a huge cost to someone in the State.
There is no indication that any oil company supplying the Irish market will be asked to take up the additional burden of keeping our national oil reserve up to the strategic level as we are obliged to do, not only for our own reasons, but in compliance with EC regulations. From where will it be replaced? Who will replace it? How much will it cost? That is another element of this deal. If we have to purchase one million barrels of oil today it will cost a minimum of $25 or $26 a barrel, that is $25 million or $26 million. If we take that amount from the cash flow of $44 million, the deal does not look half as attractive. When we deduct the cost of maintaining those strategic oil reserves, the cash flow dwindles even lower. Is the deal as good as it is being presented here today?
The most important aspect of this matter is that it is a bad blow for the Bantry area, the Cork region, for national confidence as far as international investors are concerned and, probably most important, it is a bad blow to the future expectations of our off shore oil explorations. Taking the last agreement in good faith, I would have thought that a strategic link-in to the expectation of finding oil off our shores, having it refined at Whitegate and stored in Bantry Bay——
Never. It was a bad deal in the first place.
Order, please.
Jack Lynch gave it away for nothing.
I am not talking about that deal. I am talking about the deal this Government made 12 months ago. If the Deputy is not aware of it, he should go to the Library and look at it and then come in here when he knows what is he talking about.
(Interruptions.)
Order, please.
At that time I was accused in this House of being a Doubting Thomas, but my doubts of 12 months ago have been borne out quite clearly now. Whatever the strategic thinking of Gulf, it was not to spend $60 million——
(Interruptions.)
We must not have interruptions.
If the Labour Party are here to bolster up withdrawal from the Cork region, the loss of 250 jobs in the construction phase, and 100 permanent jobs——
It was multinational convenience.
We are not in the business of providing convenience for multinationals or anybody else.
I cannot have interruptions, and I will not have interruptions.
We are in the business of looking after our natural reserves, resources and assets and deciding the best use to make of them——
(Interruptions.)
Deputy Skelly must cease interrupting.
You were supporting Tara last week.
Deputy Skelly does not know what he is talking about.
If Deputy Skelly does not cease interrupting he must leave the House.
I will continue to support anybody who will develop Bula mines——
They will pull out——
As I said in my opening statement last year I will support anybody who will develop the Whiddy oil terminal in Bantry Bay. It is my duty as Opposition spokesman to look at these matters critically——
(Interruptions.)
——to give credit where credit is due and to point out to the people what I believe is involved in this deal. The Deputy does not have to accept it. I am here to do a particular job and I am not throwing any cold water on anything.
(Interruptions.)
Deputy Skelly must obey the ruling of the Chair. If he does not, he will have to leave the House. Deputy Reynolds, without interruption.
The multinationals are pulling out.
Deputy Skelly will now leave the House.
Deputy Skelly withdrew.
Deputy Skelly said another multinational is pulling out. I am not here to run the multinationals out of this country, although he may be. We will need multinational investment for a long time to come. I would like to think we are at the stage of development where we could do everything ourselves, but we are not. The multinationals are involved in off shore exploration and I would have thought this was part of a national strategy, coming together with Whitegate on the one hand, and Whiddy oil terminal on the other with, hopefully, successful oil exploration off our shores to get the greatest benefit for our people. I cannot see what changed in the world outside when Gulf entered into an agreement to rebuild this terminal. They know, and everybody has known for a number of years that oil prices would be soft for a number of years to come. Those people do not make investment decisions on the basis of two or three years ahead. At that stage they obviously saw great potential off our shores and decided to rebuild this terminal and make good use of it.
I do not accept part of the Minister's statement that there have been dramatic changes because it was known at that time that we would not be taking huge oil tankers into Whiddy. The basis of the planning for which they had applied was for the small tankers and a buoy system which, as I already said, is a cheap way of doing it, and that basis still remains as valid today as it was then. What we will be doing is taking in oil from off shore Ireland, hopefully in the future, refining it at Whiddy, storing, transferring and trans-shipping it.
No matter what anybody says, the natural assets of Bantry Bay will not be easily found anywhere else in Europe and for small tanker trans-shipment it is ideally placed to service the north European market. We all hear about the expectancy of Europe to be as self-sufficient from an energy point of view as they can, and if we successfully brought oil ashore we could establish our own markets in north Europe and trans-ship it in small tankers from the Whiddy oil terminal. Nothing in that scenario has changed since this agreement was signed originally.
What is the reason for this? I do not know because it has not been made clear in the Minister's statement. All I can say is that this is either a vote of no confidence in our oil industry or else 12 months ago we were conned into an agreement which was brought forward for a specific reason — to get compensation in the High Court in London and subsequently to use it for a different purpose.
I have already dealt with the $44 million. I admit it is a welcome boost to any Government but what will the outgoing be nationally? As I said, we will lose 150 jobs, 100 permanent jobs; we will lose our strategic £1 million and the renegotiated level of 160,000 barrels. We have not been told in this statement from where the strategic reserve will be replaced at what cost to the State the INPC or whoever will store it for us, or if other oil companies in the market place are going to take on an additional burden. One way or another we must preserve our strategic reserve. There are no free lunches. Somebody has to pay, and this has not been made clear so far. In the light of those remarks I am saying that this $44 million may be attractive at the outset, but it will become less attractive as we make subtractions. I am not in a position to do all the subtractions but I have outlined what I believe are the obvious ones and there may be more hidden subtractions that I do not know about.
Chevron will be permitted to remove the remaining crude from the terminal. Who will replace this and at what cost? In his statement the Minister said that over recent months Gulf had been looking beyond the rebuilding of the jetty and the future prospect for the terminal. I dealt with that adequately but I cannot see that any changes have taken place since they decided they were going to rebuild it. The Minister also said that the future utilisation of the terminal is as clear now as it was originally — I have also dealt with that statement. He said the bleak outlook for the use of the terminal is not a vote of confidence in what we expect to do with the oil off our shores.
The Minister said he could have dug in. I was not a part of the negotiations and I have to take what the Minister says on trust, that he got the best deal available. I have already referred to my doubts. What do INPC intend to do with it? Apparently they are going in as caretakers. What will happen the existing jobs at Bantry? Will the people be paid off by Gulf? Will anybody be employed by INPC or will they just become a national monument? What are the Government proposals? Will the Government go abroad to recruit the people who were interested in 1982, the people in the North African oil companies, and the private interests in Saudi Arabia who were interested in taking portion of it for strategic storage for the North European area.
There is nothing in the statement to show that the Government know where they are going. I wonder now fast this was thrown at them. However, we will have to use a different occasion in this House to try to extract the information which I must get before I can say conclusively that this is a good deal. I cannot say that it is a good deal for the reasons outlined. I do not want to be seen as obstructing any development, but it is sad that the development which the people in the Bantry area looked for will not take place. It is unfortunate that people who thought they could earn their living there have been dealt a body blow today.
For whatever reasons the multinational companies have decided that Ireland is not for them for future oil exploration or for exploration of our oil potential, for some time to come. When all the factors are taken into consideration, they have bought their way out rather cheaply. It is easy to say that, not having made the deal. However, there is no doubt that they have specific legal obligations under the original foreshore lease to restore it to its former status and they were getting away with restoring it to part of its status. The legal obligations were quantified for me in 1982 at about $35 million. When I see the other factors that I have to take from that $44 million, I can only conclude that at the end of the day we are not getting a lot out of it and it is a bad blow to the hopes of Cork, Bantry and the national oil scene.
I am not happy with the statement made by the Minister, and nobody could be happy with it. Last December we welcomed the Minister's statement in regard to the agreement that was made but pointed out that it was only a memorandum of understanding which could probably be changed by Chevron. The Minister has put a very nice gloss on what has occurred, but it is fairly obvious that, once Chevron changed their minds and offered $44 million, the Minister and the Government jumped at the chance of the money and accepted the pay-off. The Minister's statement does not indicate that the Government went deeply into this. They certainly have not explained their thinking about what has occured in the House.
As Deputy Reynolds said, Chevron have changed their minds, but why? What occurred in the past 12 or six months to make them change their minds? Surely when agreeing to build the jetty, Chevron must have looked beyond the rebuilding of the jetty to the future prospects for the terminal before offering to put up $60 million. It was not that they put up $60 million to build the jetty and then started to look at future prospects for the terminal. They are not that stupid. The Minister has now accepted Chevron's assessment of the prospects for future utilisation of the terminal as being well founded, but the Minister does not explain how he has come to that conclusion.
What new decisions have been made in regard to the Irish market by the multinationals? It is nonsense for Deputy Skelly to say that the multinationals are pulling out. They run the oil business and control it more than they ever did. All they are doing is refusing to pay in anything while they are continuing to take out profits. For a start they are saving at least $16 million on this deal. While they are making big money they will not pull out, but they have stopped putting anything into the economy. What decisions have been made in regard to the Irish market?
Has the discovery of so-called now commercial quantities of oil off the Irish coast anything to do with this deal? Has it been based on any decisions as to what would occur if commercial quantities of oil were discovered in the Celtic Sea? Have Chevron and Gulf made a decision that such a discovery would be brought ashore not in Ireland but in Milford Haven and elsewhere? Is that one of the considerations as to why they now see no further use for Bantry and for the jetty? Have they decided to save themselves $16 million by offering this Government who are hard up for cash, $44 million now? The offer of cash now rather than cash or jobs later has been very much emphasised by the Minister.
The Government jumped at this hastily and neither the people in Cork nor Bantry are happy with it. No matter what gloss the Minister puts on it, $60 million would have gone into the Bantry area in the provision of jobs and into consumer spending in that area. What will happen to the $44 million? It will go into the big open pit of debt. The Minister says he will look at the situation to see the alternatives, and we all know what that means. In terms of jobs and in terms of an asset for the State and in terms of our oil storage capacity, our strategic needs, our future prospects of oil being discovered a few miles off Bantry, nothing has been taken into consideration by the Government in this deal which seems to be just a simple cash deal, as Deputy Reynolds said.
Any reasonable examination of this deal will show that our future interests are not really taken into consideration. It is all right to say that the current conditions on international markets are accepted as impacting very adversely on the outlook for future commercial use of the terminal in an international trading mould, but that is accepting that there will not be changes and that there are not oil prospects in the Irish market and that the current state of the market will not change over the next five or ten years. There is a very volatile situation in the international oil market and it could change in the next two years. These are not sufficient reasons. The Minister has not given sufficient evidence that the Government have given thought to this. We must accept that they have jumped for the cash and that it is a very bad day for the Cork area.