Other Questions. - Offshore Exploration.

Derek McDowell


8 Mr. McDowell asked the Minister for the Marine and Natural Resources his proposals for a review of the 1992 terms granted to oil and gas exploration companies; and if he will make a statement on the matter. [17402/01]

The current licensing terms were very carefully designed and introduced in 1992 to compensate for Ireland's disadvantage in terms of perceived prospectivity and operating conditions and to encourage interest in exploration and development. Since the introduction of the 1992 licensing terms, a total of 37 exploration licences have been granted, of which 26 were frontier exploration licences. Earlier this month, eight of the 11 frontier licences granted under the licensing round in 1997 were relinquished which means there are now only 13 offshore exploration licences in place at present compared to a peak of 32 in 1997. Out of the 37 licences granted since the 1992 terms were introduced, a total of 24 have been relinquished, including 15 of the frontier licences.

Only three exploration wells have been drilled in the Irish offshore in the past 3 years, despite the existence of the 1992 terms. Irish prospectivity is low and is not comparable with our oil producing neighbours. We have only had three successful exploration wells out of 123 wells in 30 years. Over the same period the United Kingdom has drilled about 3,000 wells of which about 250 are in production.

In light of these factors, it is premature to consider changing our terms but I intend to keep them under continuing review. Such a debate at this time is not justified by our record of prospectivity, and would send the wrong signals to the industry at a time when we need to encourage the industry to increase the level of exploration.

Some of the confusion regarding this matter arose from a report in theSunday Business Post on 24 April last. The Department of the Marine and Natural Resources is quoted as playing down a statement made by the Minister on the review of the new licensing rounds. Does the Minister agree that an enterprise showing a profit of £1.7 billion – and that is likely to increase over coming years – needs a close eye kept on it and the tax regime applying to companies in this field?

A small number of people continually engage in a philosophical debate about this issue. I am blue in the face repeating Government policy. In addition to what I have said, there is no point in changing terms and applying a taxation regime to increase income for the State until we have an oil or gas province. We do not have that with just one successful well after 30 years of exploration. Our terms are continually kept under review. We do not intend to break any binding contracts we have made with companies. In the event of successful drilling programmes in the years to come, and in the event of finding an oil or gas province, at that point we would be justified in improving the terms so that we can increase the flow of taxation to the Exchequer. There is no point talking about taxing people on an income that we do not know exists.

I am not advocating that contracts or agreements already entered into on behalf of the State should be broken. I am talking about future arrangements.

Will the Minister accept that he can put an end to these philosophical speculations if he stops using meaningless phrases such as "keep it under constant review," while in the next breath telling the House that he does not intend to do anything because he sees no reason to do anything? Will the Minister accept that until we have, as he calls it, an oil or gas province, it would be madness to consider increasing the burden of taxation on exploration activities? If the Minister said something simple and straightforward like that, it might put an end to the speculation.

I have repeatedly said simple and straightforward things like that. I described some of the proposals coming from these people as being a load of codswallop. I reiterate what the Deputy has said. We do not intend to change our terms as they now exist. However, we must keep those terms under review in the event of there being a success in the exploration programme, which we all hope for, including the oil and gas companies currently drilling.

There the Minister goes again.

If and when that comes about, and a new round of licences becomes necessary, we will look at getting a better take for the Exchequer.

The Minister will keep it under review by sitting on his hands.

That is not correct. In the circumstances, we have quite a successful drilling regime as a result of the 1992 terms which resulted in the Connacht gas field. We would not have that field if not for the 1992 terms.