Written Answers. - Natural Gas Grid.

Jerry Cowley

Question:

176 Dr. Cowley asked the Minister for Communications, Marine and Natural Resources if public service obligation commitments will be introduced to ensure that towns in County Mayo will be provided with a natural gas service; if there will be a re-negotiation of the agreements with the oil and gas companies, in view of the dismal return to the State of those agreements; and if he will make a statement on the matter. [14534/02]

I do not believe an approach involving public service obligations is an appropriate one for extension of the gas transmission and distribution network. Such an approach would have to be funded at the expense of existing gas users and therefore raises risks for national competitiveness. Bord Gáis Éireann, which has a commercial mandate, is actively considering which towns in County Mayo can be supplied on a commercial basis.

As regards re-negotiation of agreements with the oil and gas companies, I presume the Deputy is referring to the petroleum lease granted for the development of the Corrib gas field. The Corrib gas field was discovered in 1996 as a result of an exploration well drilled under a licence issued in 1993 under the 1992 licensing terms to the companies involved. The Corrib discovery was declared commercial in January 2001 and under the conditions of the licence the companies applied for and were granted a petroleum lease. Exploration licences and petroleum leases are legally binding contracts and it would not be possible to change the terms under which the companies explored for oil or gas.

The current licensing terms introduced in 1992 were very carefully designed to compensate for Ireland's perceived disadvantage in terms of 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. Out of those 37 licences, a total of 29 have been relinquished, including 19 of the frontier licences, which means that there are now only eight offshore exploration licences in place compared to a peak of 32 in 1997.

The assertion that vast oil and gas resources in Ireland's offshore have been given away as a result of the 1992 terms is not supported by the facts. The facts are that to date there have been only two commercial discoveries in 30 years and, apart from the Corrib find, exploration in recent years has seen a succession of dry and disappointing wells.

The stark reality is that Irish prospectivity is not comparable with our oil producing neighbours. The Corrib gas find, although very welcome, cannot be regarded as changing that view. Only four exploration wells have been drilled in the Irish offshore in the past three years, despite the existence of the 1992 terms. We have only had three successful exploration wells out of 125 wells in 30 years. Over the same period the United Kingdom has drilled about 3,000 wells of which about 250 are in production.
Despite the fact that operating conditions off our west coast are more difficult than anywhere in Europe, the 1992 terms are not very different to those in place in the UK which also does not have a system of royalties for current exploration.
In the light of these factors calls for a review of the 1992 licensing terms are premature and cannot be justified at this time. Any indication of our intention to do so would send the wrong signals to the industry at a time when we need to encourage the companies to increase the level of exploration. However, it is my intention to keep the terms under continuing review.