Dáil Éireann debate -
Wednesday, 29 Jan 2003

Vol. 560 No. 1

Other Questions. - Offshore Exploration.

Pat Rabbitte

Question:

118 Mr. Rabbitte asked the Minister for Communications, Marine and Natural Resources the projected life and reserves of the Seven Heads gas field being developed by the consortium led by a company (details supplied); if, at this stage, this company and its partners have submitted, as required, a plan of development for their Seven Heads gas field; if so, if he has approved the plan; when in 2003 it is expected that this consortium will begin to deliver gas to shore; if his Department or any agency on its behalf, has made any estimate or estimates under different assumptions, of the possible or likely return to the Exchequer as a result of the field's development through corporate taxation; and if he will make a statement on the matter. [1831/03]

Mr. D. Ahern

The Seven Heads gas field, which lies in the North Celtic Sea Basin some 50 km. off the Cork coast to the south-east of the Kinsale Head gas field and for which a plan of development, POD, accompanied by an environmental impact statement, EIS, has been submitted to me for approval, is estimated by the developer, Ramco Seven Heads Limited, to contain some 300 billion cubic feet with an estimated economic field life of 15 to 18 years. The application is currently under consideration in my Department and I hope to be in a position to make a determination in relation to it in the coming weeks.

Ramco Seven Heads Limited hope to bring ashore the gas in the autumn of 2003. The field will supply Ireland with between 10% and 15% of its requirements for the next 15 years approximately. Moreover, the development will use the processing and export pipelines of the Kinsale gas field. This, in turn, will extend the economic life of the field and its associated employment.

The company will be liable to pay corporation tax at the rate of 25% on profits from the sale of gas. The corporation tax yield to the State is estimated in the region of €60 million to €100 million.

Mr. Broughan

What is the Minister's initial reaction to the plan of development? Would he agree that many citizens noticed the widespread publicity given a few weeks before Christmas to the deal between Ramco and the German com pany, Innogy? They were surprised by the estimate put on the value of this resource and the fact that there seemed to be no way this State could acquire any royalties from this flow of wealth. Is it not the case that some of the estimates in the energy press refer to a capacity of 500 billion cubic feet and perhaps more? While I understand Ramco is a specialist company and that it has organised its finance through Bank of Scotland, it seems this small company and others like it are getting a bargain basement deal from the Irish State.

We sometimes hear that we may be the Norwegians of the future given that our coastal shelf, with new technology, is an immensely valuable resource given its energy freedom and potential exports for many centuries into the future. If that is the case, should it not be a priority of this Administration to look urgently at the return to this State in terms of royalties, the workforce and all other benefits gained from our oil and tax regime?

Is it not time for an urgent review?

Mr. D. Ahern

I am surprised Deputy Broughan is so critical of his former colleague, Mr. Spring, who was in my position years ago and oversaw the conditions under which oil companies got into this country. Despite all the publicity which people like the Deputy might seek when in opposition as opposed to what they might do when in government, the reality is that the level of exploration around our coast is at an all time low. The vast majority of companies have not even drawn on any of the conditions about which there is so much publicity. This is a relatively small company which had the courage to stay in Ireland and investigate the possibilities. As I said earlier, it is estimated, based on certain price levels which are verifiable, that in the range of €60 million to €100 million will come to the State based on the corporation tax rate, which for oil companies is still very high in comparison to 12.5% for everything else. An objective analysis of oil exploration off our coast over the years will show that, despite what might be perceived as favourable conditions for oil companies, there has been little or no exploration. Many issues about royalties are similar to those granted in the UK and elsewhere.

An Ceann Comhairle

Deputy Broughan, a brief final supplementary please.

Mr. Broughan

When Innogy brings the gas home, does the Minister expect that Bord Gáis will be the only distributor or is he looking forward to a new regime in that regard?

Mr. D. Ahern

I am surprised at the Deputy's negativity because this will sustain the jobs of many Irish people in the area as well as throughout the country. It will ensure we have at least some portion of our energy supplies available to us in the future rather than having them imported. Indeed we may get to a situation with the gas interconnector where we will be able to trade some of this outside the State and be an exporter of gas.

Mr. Broughan

Will energy sell direct?

Mr. D. Ahern

In regard to Bord Gáis, the people who are in charge of the infrastructure will have an input in relation to the distribution of gas.