A study by the respected economist, Ricardo Paes Mamede, shows that the current oil and gas exploration concession so far have yielded "derisory amounts' for the taxpayer and have little chance of producing the sort of wealth the government keeps banging on about.
At a presentation today in Lisbon, Ricardo Paes Mamede said that anyone who still thinks that Portugal can become a country like Norway through the exploitation of oil in the Alentejo or the Algarve “has unrealistic expectations.” With the current concession contracts, extracting oil off the coast would have "a marginal impact on the public accounts."
The University Institute of Lisbon professor is part of the Futuro Limpo movement, which opposes oil exploration in Portugal. Mamede simulated the expected return based on the contractual conditions in the concession granted to the Galp-ENI consortium, particularly the low royalty income levels which remain one of life's great mysteries.
In addition to the surface rent in these concession contracts, the revenue for the State, once production started and taxes started to be paid, in a 'moderate' scenario would be an annual amount of €3.2 million per year, for each viable oil well.
Over 30 years, the cumulative income would be just €96 million, the equivalent to 0.05% of the current Gross Domestic Product.
This scenario predicts production levels similar to those in Spain (2,000 barrels per day), an average oil price of $56 - the figure used in the latest Government Stability Programme - and operating costs in line with international averages.
In the 'optimistic' scenario, with more advantageous conditions such as oil at $70 and a production of 17,000 barrels per day (a maximum output not seen in Spain since 1994), the State's annual return would rise to an unimpressive €64.1 million per year, equivalent to 0.03% of the current GDP.
In cumulative terms over three decades, this ‘optimistic’ return would be €1.9 billion, or 1.04% of GDP.
"The impact on the public accounts would be negligible," said the economist, who looked at the amounts receivable for oil exploration with the amounts currently being negotiated for the State Budget for 2018 - figures of €200 million to €600 million for income tax reductions alone.
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"FUTURO LIMPO is a nationwide movement created with the sole purpose of giving substance to the disagreement and opposition of many Portuguese citizens regarding the concession of exploration rights, exploration, exploration and production of oil and gas in national territory, both onshore and offshore."
Prof. Ricardo Paes Mamede, University Institute of Lisbon
