On statements on the report of the then Joint Committee on Communications, Natural Resources and Agriculture entitled, Report on Offshore Oil and Gas Exploration, I understand Deputy Doyle is the next speaker.
Report on Offshore Oil and Gas Exploration: Statements (Resumed)
I thank the Leas-Cheann Comhairle. I welcome the opportunity to speak on this report. I note that the last occasion of these statements was 14 May and events have deferred the matter a couple of times.
I was Chairman of the then Joint Committee on Communications, Natural Resources and Agriculture and I note that two of my colleagues, Deputies Martin Ferris and Thomas Pringle, are here with me in the Chamber this evening. The reason we set about producing the report in the first place was that there was much in the media dating back over a number of years about the way the resources were being allegedly abused and taken from the public good in the west. It made producing such a report a timely matter for us. We felt it was important to establish the facts, separate fact from fiction and dispel some myths. At the time there were constant references to the estimated amount of oil and gas reserves in Irish territory, usually quantified in billions of euro, but it had not been found. It was also stated that the Government had given it all away.
We set about our job. We held hearings involving several key stakeholders - those involved in oil exploration, the communities which had borne the brunt of what they felt were unfair practices and had been exploited, and other jurisdictions, in particular, Norway, the help of whose Ministry and ambassador I must acknowledge.
First, we found that, by comparison with other countries, namely Norway and the United Kingdom, the exploration that had taken place in Ireland over the past 40 years was minuscule. If one does not look for something, one will not find it. We had to ask the question: what was the reason companies were not so inclined to carry out exploration in Irish waters? If it was the case that the Government would give it all away, it would seem that was not a reason. The main reason was that nobody had found it. It was not seen to be viable or profitable to establish and take the risk of exploring for oil, gas and natural resources, in particular, off the Irish coast.
We then set about identifying the key priorities and followed them with recommendations. We based our recommendations on Article 10.1 of Bunreacht na hÉireann, which states:
All natural resources, including the air and all forms of potential energy, within the jurisdiction of the Parliament and Government established by this Constitution and all royalties and franchises within that jurisdiction belong to the State subject to all estates and interests therein for the time being lawfully vested in any person or body.
In other words, the resources of the State are for the benefit of the people of the State.
On the other hand, it is expensive to carry out exploration, especially in the challenging territories such as where the most potential seems to lie, off the west and north-west coasts of this country, and it would be folly for Ireland, even if it were flush with resources, to engage in exploration. Rather, it was better to try to tap into the potential by way of a suitable tax regime on foot of any discoveries. For those purposes, we set about looking at what was in place.
We acknowledge that, in 2007, the previous Government brought in a different regime to the one that had caused so much of the grief. Following on an Indecon report, a profit resource rent tax, PRRT, was established with a scale of taxation based on relative profitability of each field. Basically, it added 5%, 10% and up to 15% on top of corporation tax for any company the profit ratios of which reached in excess of 1.5:1, 3:1 and 4.5:1, respectively. We stated simply - we knew this would cause the most stir but maybe that was deliberate to get people thinking - that in between each offer of licensing rounds there should be a review carried out. Basically, that review should examine what had happened with the previous round of exploration, discover whether any significant viable discoveries been made, and if so, what was the likelihood on the next round of more of them being found. If it was the case that it was felt that more viable discoveries would be made, we could look at increasing the rate the Government would take on behalf of the people by way of increased profit resource rent tax.
The figures for overall tax take of 40%, 60% and 80%, respectively, became the popular ones that were thrown out. That is what it would amount to in very profitable fields. I note the Minister, in his opening statement, stated that perhaps the committee was indicating that such is what we should aim towards in the event of us having a level of activity and discovery similar to that in some of our neighbours, and that is exactly what we meant.
This report is a template. It contains quite a good deal of statistical evidence assembled. It states that in the event, after each round, on review it is felt that companies would be prepared to come in because the risk is decreased and the chances of viable discoveries are increased, then they should be prepared to pay more to the State. That is fair and reasonable. It works in other countries.
I would make a couple of points. First, whatever arrangements are made should be stuck to. If somebody is fortunate enough to make a discovery under a tax regime which, if it had not been made quite so soon, might have been higher, then that is his or her good fortune. The Ekofisk field in Norway was discovered on Christmas Eve 1967, one week before a three-year exploration licence was due to expire - that became known as the mother lode for the Norwegian oil and exploration sector from which the economy has benefited massively ever since. We are not saying that we should adopt a Norwegian rate of tax without Norwegian levels of discovery. We are simply saying that if and when this estimated potential becomes more realisable, we should look in each round of exploration licences at the levels of tax we are charging.
Under the current system profit resource rent tax does not become chargeable until the profit ratio is greater than 1.5:1. The committee recommends that the profit resource rent tax should be charged on profits from the moment they are earned. Corporation tax is not directly linked to discoveries in the field. In other words, companies could have other activities in the country and their corporation tax would not necessarily be as high as it might be, for various reasons such as write-offs. The committee recommends that when an exploration field becomes profitable there should be some level of tax from the moment it becomes profitable. This is not unfair. The profit resource rent tax is such that all of the accumulated costs are offset every year for as long as the activity take place. The committee decided not to interfere with that.
I wish to thank and acknowledge the assistance and wholehearted co-operation of all members of the committee of all parties and none. Our work has been very worthwhile. We all welcome the opportunity to have our say. I had a letter published in The Irish Times today to correct an article. I am sure the Minister will be flattered that he was identified as having appointed our committee. I am sure he will be even more flattered to know that some commentators think he had absolute influence over all the Opposition spokesmen-----
It is the only bit of credit I got on this issue.
-----and that we were actually prepared to go along with it and make a report to say nothing should be done. We recommended that the law should not be changed retrospectively. That was misinterpreted by the author of the article. I recommend that Members read this report and refer to it as it contains much useful information. The report makes 11 recommendations based on five key themes and it should be considered in its entirety.
I welcome the opportunity to contribute to this debate. We are all in favour of developing the natural resources of Ireland to their full potential so that the Irish people will benefit. I spent a year in the Department of which Deputy Rabbitte is the Minister. I was lashed on many occasions because we were giving away all our money and our resources to outside companies when at that time there was very little exploration and it was very difficult to attract exploration companies to the country. I was in the Department with Dermot Ahern when the Corrib field was opened. We have seen the length of time it has taken to attempt to bring that oil ashore, but it still has not happened. Hopefully, there will be a change which will be of benefit to the Irish people in the future.
Any development of petroleum resources in Ireland must benefit the Irish people. It is important that any policy development in this area balances the maximisation of State revenue with incentivising offshore oil and gas exploration. I welcome this detailed report and I commend the committee on the time and effort expended on it. The committee interviewed those involved in the oil exploration business and communicated with other countries where oil exploration has been successful. The report's recommendations are to be welcomed, particularly the proposed new tax regime. However, caution must be exercised in any desire to change taxation on exploration efforts, given the limited success of exploration in Ireland's jurisdiction since 1970.
The Joint Committee on Communications, Natural Resources and Agriculture published a significant report on offshore oil and gas finds in Irish coastal waters with recommendations including a substantial increase in the tax take from any future licences. The committee makes several proposals for the oil and gas exploration sector. In particular, the report calls for a more transparent system of licensing and public consultation while also recommending regular reviews of fiscal and licensing terms.
People in the wider community were concerned that the Department and the oil exploration companies operated in secrecy. It is very important, therefore, to have a more transparent system for the future so that all oil exploration opportunities are made public and fully explained to the people. I hear all the rumours about large gas and oil finds off Tuskar, Hook Head, Carnsore Point and many areas along the south-east coast. Much of this is probably fiction and some may be reality. Documents recently released by exploration companies gave the opinion that we would have oil in Kilmore overnight and thousands of jobs in the south east. We all know that this is not going to happen, and it will be a long drawn-out exploration to find a viable oil or gas field.
The report recommends that a simple and transparent system should be implemented through a review of the Petroleum and Other Minerals Act 1960. The first recommendation is that good basic law should underpin policy principles relating to Ireland's petroleum resources. The report recommends that the Petroleum and Other Minerals Act 1960 be reviewed. The report notes that a policy should be developed in such a way to maximise the take for the State and its citizens while at the same time being sensitive to the local needs in the host community. This is a very important point as in the past, matters may not have been handled initially as they should have been, as in the case of the Corrib field. More dialogue and discussion and less political play-acting would have been more appropriate. We need to learn the lessons for the future and take into consideration the concerns of the local communities if exploration opportunities are developed in the future.
The report referred to retrospective changes to fiscal and licensing terms which would risk long-term reputational damage. It is very difficult to look at things retrospectively and it is preferable to plan for the future. The committee recommendations include that tax revenue should be a minimum of 40% as opposed to the current corporation tax rate for exploration of 25%. This change should take place across a sliding scale up to 80%. The committee also noted that any future changes to the fiscal terms should be clarified before subsequent licensing rounds, to ensure certainty around the regime for the investing companies.
The report is very detailed and comprehensive. I am sure the Minister will take many of the suggestions on board. The current oil and diesel prices on the world market have substantially decreased but that does not seem to be reflected in the price at the pumps. The price has decreased a certain amount but not significantly compared to the world spot prices over recent months. I worked in the oil business for 15 years before I came to this House.
When oil prices increase on the world market, Irish oil companies are very inclined to increase prices immediately but when they decrease, they are very slow in reducing them. Not many oil companies are operating in Ireland and this affects the supply scale. It is very difficult to take on the companies but there should certainly be a more significant decrease in the price of diesel and petrol at the pumps at present. Obviously, that is not happening.
I welcome the report as it gives us an opportunity to debate. It also gives us an opportunity to explain to the people that there is not a great influx of exploration companies seeking licences and claiming there is a great opportunity in this country. Exploration companies have a very slow, tedious approach. Unless exploration is viable, companies pull out very quickly. Ultimately, if there is to be successful exploration in the country, the people ought to benefit substantially. I ask the Minister to comment on the price of oil, petrol and diesel.
I welcome the report of the joint committee and acknowledge the work of its members and Chairman, Deputy Andrew Doyle, who addressed this matter earlier. I acknowledge the considered response of the Minister, Deputy Rabbitte, to the report. All of us wish for significant exploration and, ultimately, successful drilling. If successful, we would wish for the maximum benefit for the people. It is a question of the modus operandi to achieve that and the balance of factors that have to work together in that regard.
The committee cites the benefits of exploration as an increase in tax revenue, job creation and strengthening the security of energy supply. These benefits are very clear from significant finds in countries such as Norway. However, in order to realise the benefits, we must find ways in which to appear attractive to potential investors and set ourselves apart from the competition.
According to the report, Ireland is considered a high-cost and low-reward environment for oil and gas drilling companies seeking potential investment sites. Our offshore territory is largely unexplored and, as such, our potential is not what it might be. There has been an upsurge in exploration activity in recent times but we have not had adequate success, nor has there been an adequate amount of exploration. I hope we will have success.
The report recommends that the Government strive to achieve the maximum tax revenue from petroleum exploration and production without deterring petroleum investment. That is our shared objective. Offshore gas and oil exploration is risky and costly, and a high level of certainty surrounding viable offshore wells is needed before any private company or investor will take a risk. PricewaterhouseCoopers has calculated that the likelihood of our making a substantial commercial discovery is comparably low, namely, one in 32 per round of exploration. To put this into context, the proportion in the United Kingdom is one in six, and the proportion in Norway is one in seven. It is worth citing these figures because they introduce a note of caution and prudence. While we hope for success, we must examine the challenge ahead in the context of the statistics. There is no avoiding realities. We can be overly idealistic about this but the reality is somewhat different.
I welcome the steps the Government has taken to increase the level of interest in Ireland. With recent departmental approval for the conducting of a major 2D seismic survey of the Atlantic region, coupled with positive indications off the coast of Cork, the drilling taking place in the Dún Chaoin field and our novel and appealing licensing opportunities, the focus of potential investors is increasingly on Ireland. I congratulate the Minister, Deputy Rabbitte, and his Department on that. All of these steps will go a long way towards realising our oil and gas exploration potential.
With regard to the level of drilling carried out off our shores, historically Ireland has had a low activity rate. Our average is the drilling of one well per year, which is hardly enough. As outlined in the report, this is one of the factors contributing to our lower-than-normal level of infrastructure and expertise in this area. The Department has noted that hundreds of wells need to be drilled every year in order to have any chance of making substantive recoveries of oil or gas. It is a chicken-and-egg situation; if there is no drilling, there is no success, and vice versa. It is a complex and difficult challenge.
As previously mentioned, drilling and exploration are costly. A single offshore exploration can cost in the region of €100 million. We have spent €5 billion on exploration and have generated only €1.8 billion in revenue. These are sobering figures but they are the kinds of facts that we need to take on board before we proceed. There is no point in proceeding on fantasy. In the past ten years, 17 wells were drilled and five discoveries were made. None of the five is turning a profit as of today. In light of this, we need to have practicality and common sense in our approach.
One would like to believe our potential is exciting. Let us hope it is. However, it should be noted that oil and gas exploration is high-risk activity. We need to be careful not to make rash decisions and that is why I welcome the fact that the Minister has said the private sector, rather than the Exchequer, should carry the financial risk associated with exploration. He recommends that any future oil and gas development project be subject to a number of consent processes, each of which would be subject to detailed public consultation. The fundamental point is that, because of the state of our national finances and the odds and risks involved, prudence dictates that the private sector should take the lead. If we had a discretionary billion euro or two to spend, we would have to be cautious about investing it given the need for job creation. The risk is too great to invest the family silver. Having said that, we need to attract the private sector, although not allowing it to go after the jewels of our economy. That is the balance that must be struck.
Public consultation is referred to in the report. There was inadequate public consultation in respect of the Corrib area. This has been a considerable difficulty and we will learn from it.
The main issue cited in the report is taxation. Critically, the committee recommends an increased tax yield from the sector. The committee recommends a tax increase up to 40% and applying revised profit resource rent taxes of 15%, 35% and 55%. Those recommendations are understandable given the context. The Minister has made a decision to have an expert study weighing up the feasibility and potential.
I support that and it will be important that the committee reports quickly to the Minister in order that he can give certainty in this area towards the end of the year. This will ensure the environment is certain next year to encourage further drilling.
The element of the report that has excited the most interest is taxation. The report states Norway is the world's second largest gas exporter and seventh largest oil exporter with the petroleum industry comprising 22% of GDP. It is a distinct position. The UK and Norway are not comparable to Ireland and, therefore, comparisons are not valid because of the level of drilling, the results to date and so on. We should await the outcome of the Minister's expert committee's deliberations. He will weigh up its report and I presume the House will have an input in the normal fashion.
I agree there should not be retrospective changes to licensing conditions, taxation and so on. That cannot be the case because it would create an uncertain environment and damage further opportunities. I also agree that consultation with communities is critical. While I acknowledge the 2006 Act provides for that, there is room for a sensitive consultation process.
The Minister's approach is prudent in the context of where we are at and we should await the expert committee report before setting the taxation rates. The objectives and recommendations of the joint committee's report should be accepted and I commend them to the Minister. We all aspire to successful exploration, a successful tax return for our country and enriching our people as a consequence. That should be the thrust of our activity. This should be an ongoing debate in the Oireachtas and we should focus on the question continually. Let us hope we have a major breakthrough shortly.
I thank the committee chairman, Deputy Doyle, and all the other committee members who worked on this report. Since I entered the House, it has been one of the best efforts to get the best deal for the taxpayer and, by extension, the people. Ireland's oil and gas resources have been a debate that has raged in this Chamber, the media and among the public for many years. Propaganda from multinational oil and gas companies, abetted and assisted by sections of the media, convinced successive Governments to keep their noses out of Ireland's natural resources. They have propagated the rumour that if Ireland's oil and gas tax take is kept artificially low, then oil and gas multinationals will come flooding to our shores. A line that the oil and gas lobby spins is that the more oil and gas extracted from our waters, the more jobs they will create in Ireland. This has proven to be false as we have witnessed in the Corrib field where workers were flown in from abroad to work on the project with little or no benefits for the local community. The lobby also claims that the current system will allow for energy security. However, Ireland is no more entitled to its own natural resources than any other country in the world. The oil and gas companies have implied that Irish homes will have access to cheaper fossil fuels if the current system remains. However, consumers will pay the international rate to fuel their homes.
The Minister will recollect that this debate has been ongoing since the 1970s when his then party, Official Sinn Féin, latterly The Workers' Party, campaigned for reform of our oil and gas policy. The then Labour Party Minister, Justin Keating, responded by introducing legislation based on best international practice, which claimed a 50% stake in oil and gas extracted from Irish waters. However, the years that followed saw the propagation of a myth that argued that this country needs low oil and gas taxation in order to promote exploration and develop our oil and gas industry. Ray Burke and Bertie Ahern, as Ministers, changed our oil and gas policy to benefit the oil and gas multinationals. Ireland's offshore oil and gas reserves have the long-term potential to be a significant source of revenue for the economy. According to a 2006 report carried out by the Department of Communications, Energy and Natural Resources, there are approximately 10 billion barrels of oil equivalent off our west coast, comprising 6.5 billion barrels of oil and 20 trillion cu. ft. of gas. At current oil prices, this equates to a value of approximately €540 billion. While the volume of oil and gas brought ashore has been small, those reserves exist. Little gas and no oil is being extracted from Irish waters, but this does not reflect the potential the State's reserves hold. Surely it would be of greater benefit to leave the oil and gas reserves in the ground than to extract them with no benefit to the people.
Oil and gas technology is constantly improving. What might not be seen as commercially viable today may become increasingly valuable as we reach peak oil consumption. Under the 1992 and 2007 licensing terms, a 25% tax on the net profits of oil and gas is applicable. However, oil and gas companies can write off 100% of costs against tax, including costs incurred up to 25 years before field production begins and including the cost of any unsuccessful wells the company has drilled in Irish waters during that period. Under the 2007 licensing terms, a profit resource rent tax , PRRT, was introduced. PRRT is payable on a profit ratio calculated by the cumulative after tax profits on the specific field divided by the cumulative level of capital investment on the specific field. Oil and gas companies may be subject to pay PRRT on after tax profits of between 5% and 15%. This means an oil and gas company may pay up 40% tax on its profits. However, only the largest oil and gas explorations pay the higher tax and small and medium size fields would pay little or no PRRT.
Compared with international standards, Ireland's licensing terms are extremely generous to oil and gas companies. A report carried out in 2007 by the US Government Accountability Office studied the licensing terms of 142 fiscal systems. The report found that Ireland has the second lowest tax take of all countries studied. In the US, the minimum government take is 42% while in Norway the government take amounts to 75%.
Sinn Féin supports the recommendations outlined in this report. This report received the backing of all parties represented on the committee and it provides a sensible and progressive roadmap about how we should go about managing our natural resources.
Much is made of the low strike rate, which Deputy O'Reilly stated is one in 16. Much of the exploration work carried out in the 1970s and 1980s was based on geology reports for future drilling exercises. Oil drilling took place in the Porcupine Basin up to 180 miles off the coast of Ireland, but it was difficult because of the terrain, the depth of water, the exposure to the wild Atlantic and so on. Many of the holes that were drilled were capped after carrying out the geology reports. It is ironic that the oil companies are returning to them now. I suspect that they are doing so because they know there is potential. I worked on a rig between 1978 and 1981 and there was what was believed to be a significant strike because of the time it took to burn off gas. That was in the low Porcupine and the oil companies have returned there. They project 20 to 30 years ahead during their exploration work. They look at how technology has advanced and continues to advance and the prospects that offers down the road.
For that reason, much of the exploration undertaken during that period was undertaken primarily by looking ahead. Those involved looked at the terrain, the depth of water, weather conditions, the difficulties in getting something ashore and so forth.
A number of wells are being drilled. The Minister probably receives a regular uptake, but what I hear is that people are quite excited about the potential of a reasonable strike some time this year. If that happens, it could change the whole ball cart in regard to future exploration. They are drilling in places that were capped almost 30 years ago. In our deliberations during preparations for this report we invited the Norwegian ambassador and a person from the oil ministry. It is ironic that a hole dug by Norway some 25 years ago happened to be the site of its biggest strike last year. I do not know to what depth they drilled, perhaps 40, 50 or 60 ft deeper, but they hit the spot. They have very good indications from the geology reports and what shows up on satellite images. The rock formation runs for a couple of hundred miles west of Norway down the North Sea to off the west coast of Ireland. I am very hopeful and confident, therefore, that oil is present. It is a matter of having a plan in place to extract the greatest benefit for the people of this country. If that happens, given the report produced by the committee on which I had the privilege to serve, it will give a great road map showing the way ahead. Whatever about this year, the Government should pursue the same course to get the best deal for the people.
I too am delighted to contribute to the debate and compliment and thank the Chairman of the joint committee, Deputy Andrew Doyle, the secretariat and all committee members, of whom I was one, for a hard year's work and investigations in putting together the report.
Article 10 of Bunreacht na hÉireann states: "All natural resources, including the air and all forms of potential energy, within the jurisdiction of the Parliament and Government established by the Constitution, and all royalties and franchises within that jurisdiction belong to the State subject to all estates and interests therein for the time being lawfully vested in any person or body". That is a very important article and the report was produced in looking to that element of the Constitution. In Ireland, while companies are awarded licences for petroleum exploration and production, the State owns the natural resources. As such, these should be protected and developed for the benefit of all citizens. Having deliberated on various aspects of petroleum exploration and production, the joint committee proposed many recommendations, to which I hope the Minister will be amenable. He got a history lesson a few minutes ago from Deputy Martin Ferris about where he was, about wearing different clothes and about what happened at different times in his past. He slagged me one night on a programme about jumping ship, but the Minister has been on many ships. He is now in charge of the ship of State in this very important area. It is very important that our natural resources be protected and it is up to the Minister, his advisers and people in the Department to ensure meaningful laws are laid down in regard to taxation policies. We should certainly not hunt away any potential investor but should be reasonable, ensure fair play, full transparency and have a fully exposed policy that people can follow.
It was only in 2007, after the Indecon report, that the Government made any effort to seek redress on profit ratios. That report stated a more forensic investigation should be carried out between each find and a licence being issued. The report the committee produced went down the same road. The committee looked at many aspects, and brought in and engaged with as wide a group as possible from the industry. Developing petroleum resources for the benefit of the people as a whole should form the basis of petroleum exploration policy in Ireland. That was one basic and obvious point - "To achieve this we must balance the need and maximise State revenue by incentivising offshore oil and gas exploration". It must be rewarding and there must be an incentive for companies to come. It is a very high risk job, given the elements, although perhaps less so now because of the technology available.
We refer to what has been ongoing in County Mayo in recent years. Although I hold no brief for any oil company, I certainly hold no brief for some of the headbangers who have gone there to protest. They are serial objectors. Some of my colleagues in my constituency have been there. These serial objectors have never created one job in their lives and would not know how to because they would not know the first thing about it. They merely object for the sake of objecting. I was speaking recently to some members of An Garda Síochána who had been there. They spoke about the tactics these protesters use and the efforts they make to get into places from where gardaí have to remove them. I certainly do not say gardaí should work for any company from outside the State, but they must keep the peace at all times. There are devious and sinister efforts made to inflict damage and be a nuisance to An Garda Síochána. Politicians from this House and my constituency who have aided and abetted these efforts have a serious issue to examine with their consciences. When did they ever create one job, or do anything of the kind? We must have balance and responsibility in what we do.
For that reason, the committee was very open-minded and recognised the changes in the field of offshore exploration and the huge advances in technology. These advances facilitate exploration, greatly improve the drilling success rate and result in better geological data. There is a need to ensure transparency. Simplicity must be kept to the forefront in legislation, licensing and forward planning. It is not easy to draft legislation and keep abreast of modern changes and challenges. As I remarked in another debate, there is something seriously wrong when we bring forward a Bill in 2012 and have to introduce several amendments to it by mid-2013. That must leave questions for those who draft legislation concerning their practical and legal knowledge and experience. Are we getting value for money in the legal advice we receive? This goes as far as the Attorney General in that people are finding out that advice from the Attorney General can be questioned. It is only right that it can be questioned - the people concerned are not infallible and we do not expect them to be. However, we do expect them to be able to proof-read documents and make them fit for purpose.
There are a number of recommendations, but the main one is that the State explore and consider ways of controlling production volumes as part of its resource management. That is a fundamental issue - managing our own resources for the people. That is why I was glad recently when we did not decide to sell off our valuable resource that is Coillte, a decision in which the Minister played a part. Norway, for example, uses production permits to have a flat production rate in order to ensure as much as possible is produced from a field. The joint committee recommends that consideration be given to prohibiting the flaring of gas. It also recommends that there be a clear and comprehensive approach taken to public consultation, beginning with the first substantive stage in offshore oil and gas exploration, when the plan of development is drawn up, setting out the basis for the project, the reasons behind the selection of the appropriate development option and a comprehensive and technical outline of the project and how it will operate. Even now we see this happening in the case of wind farms and wind energy production. Big companies come here without having much of an interest in the community. They do not bring the community with them because they do not invite people to make submissions and are not prepared to support the community in order that it has something to gain from the development.
The joint committee also recommended that the Minister for Communications, Energy and Natural Resources draw up a strategic policy document for petroleum exploration. This could dovetail with or feed into, where appropriate, other strategic policy documents and consultations such as a public consultation process on our ocean wealth.
As I said, I believe very strongly that Ireland's potential for petroleum must be explored and we must have a fair bang for our buck. We must have incentives to entice people in but when we get them in we must not throw the kitchen sink and everything else at them and have every kind of silly objector in the place arriving to stop them exploring the field for the benefit of their own companies but above all for the benefit of our nation and people. We must never lose sight of the community interests. While it is a key question for policy-makers at the national level to consider whether the State is maximising its take without unduly deterring industry, there are also many important issues to consider at community level. These include the vital issues of how best to ensure community consultation and consent which can be considered to be independent by all those concerned. When a resource is found there should be a system in place to ensure agreement on how it is developed in such a way that it maximises the take for the State and its citizens at the same time as being sensitive to the local needs of its host community. It is very important to state that point and that the Department would have it as part of its policy and never lose sight of it. We saw what happened with the banks and how a small number of people in the banks, some politicians, regulators and others brought this country to ruin yet nobody has been called to account. That is why people are so angry.
We must have sensible policies, ones that are sensitive to community needs. I believe also that there must be a community gain from resources. People do not know what kind of resources are underneath places where they live or work or out at sea but if some are found and the people have to put up with some disruption there should be some gain for the community, the taxpayer, the public and the economy. I appeal to the Minister, now that he is in the driving seat, to consider this and remember the different parties he has come from in his political career and the outlook, views and beliefs they held, to ensure that there is balance and careful consideration of a strategy to develop our natural resources, many of which I hope are not yet discovered. He needs also to ensure that the Government treats the taxpayer and the community fairly and gives them their just reward.
I thank my colleagues across the House who have contributed to the debate tonight and on 14 May. In particular I thank the former Chairman of the Oireachtas Joint Committee on Communications, Natural Resources and Agriculture, Deputy Andrew Doyle. The report has generated a healthy and robust debate on Ireland's offshore oil and gas exploration experience and potential.
The Government has a very clear strategy in this matter. The former Chairman of the committee, Deputy Doyle, expressed it well, that is, to seek to maximise the benefits to the people of Ireland from its indigenous natural resources. Perspectives and prescriptions for the fiscal terms appropriate to Ireland's offshore must be grounded in the reality of our perceived prospectivity and global competition for exploration investment. In over 40 years of exploration there have been four commercial natural gas discoveries, Kinsale, Ballycotton and Seven Heads and the Corrib gas field off north Mayo.
There have been no commercial discoveries of oil off Ireland. In 2011 alone the Norwegian authorities approved 11 new oil and gas production facilities. The United Kingdom has in excess of 300 producing fields. The employment, economic and fiscal dividend from oil and gas that is enjoyed by Norway and the UK, so often contrasted with Ireland, are the product of nearly 60 years of oil and gas production based on proven prospectivity.
Despite the low level of commercial discoveries to date, working petroleum systems are known to exist in many of Ireland's offshore basins. There has been a modest but welcome increase, as Deputy Ferris said, in the level of interest in oil and gas exploration off our coast in recent years, yet the fact remains that the Irish offshore is relatively under-explored and its petroleum potential is largely unproven, particularly when compared with other petroleum regions such as Norway and the United Kingdom. It is comparing apples with oranges. Deputy Ferris remarked that he detects a certain excitement around at the moment. It certainly is true that more of the licences from the last licence round have been converted than in recent years which is likely to see more offshore activity than we have seen for many years. We will know before the end of summer about the status of the particular reference that Deputy Ferris made to Dún Chaoin. The point is that the drilling of that well will cost €200 million. Although some colleagues on the opposite side made the argument, I do not think that anybody seriously thinks that the State has €200 million to risk on the drilling of a well. If that well, as Deputy Doyle said, strikes gold that will be fantastic but if it does not that would highlight the risk that we expect the private sector to take.
Ireland's focus needs to be on how to encourage an increase in the level of exploration investment and exploration drilling. Given that the cost of a single exploration well in the Atlantic is likely to be well in excess of €100 million, it is crucial that we provide the right environment to encourage industry to take the not so insignificant financial risk associated with investing in the exploration of Irish waters. I am optimistic that we can create such an environment by deepening knowledge of our offshore petroleum potential, through supporting data acquisition and research, actively promoting the Irish offshore, in particular to companies not currently active here, offering attractive and innovative licensing opportunities and providing a fit-for-purpose, transparent and robust regulatory regime, in respect of the specific contributions made. Deputy Ó Cuív hypothesised that if we find a big enough oil or gas field that companies will happily pay a tax rate of 80% but there is a disconnect in this analysis. In my view the key question to be posed is whether or not a company, knowing that it would pay a tax rate of up to 80%, would risk a significant amount of money in an under-explored area whose petroleum potential is largely unproven.
Deputy Colreavy stated that companies that make discoveries in Irish waters are not obliged to land the oil or gas in Ireland, and that Irish consumers would still continue to pay international market prices. The reality is that neither the UK nor Norway places such obligations on finds made within their jurisdictions. Both Deputies Ó Cuív and Colreavy referred to the need for consultation with communities impacted by an oil or gas development. I fully accord with the principle that early consultation is important.
Deputy Boyd Barrett stated that the current regime results in minimal jobs or investment accruing to Ireland. In response I point out that of the €3 billion invested by Shell to date on the Corrib field, over €1 billion has been spent on goods and services in Ireland. The Deputy also raised his concerns regarding the ability of companies to write off costs against tax, thus reducing the tax take from the headline rates of 25% to 40%. It is estimated that €3 billion has been spent in exploring the Irish offshore to date. A significant portion of such expenditure is no longer available for write-off against future taxes as the companies who incurred the expenditure have surrendered their licences and are no longer exploring in Ireland.
A fundamental point made by the committee relates to the need for stability and certainty as regards licensing terms. The nature of the oil and gas exploration business requires the taking of a long-term view. We have to recognise that Ireland is competing with countries such as Norway and the UK and we cannot set our tax terms in isolation or we risk discouraging potential investment. Ireland's tax terms for oil and gas production need to focus on attracting new investment. I said at the outset of this debate - one that I anticipated would run for longer in the House given the amount of noise made - that I will bring in independent experts to review whether the fiscal regime is fit for purpose so that before the next round is announced the industry will have certainty. I welcome the fact that all colleagues made plain that any messing around to make any changes retroactive would only generate uncertainty in the industry. I welcome that commitment, which is also stated in the committee's formal report.
I thank the Leas-Cheann Comhairle and the former Chairman of the Oireachtas Joint Committee on Communications, Natural Resources and Agriculture, Deputy Andrew Doyle in particular because Deputies and Senators invested considerable time and effort in producing what I regard as a key contribution to the public debate on how we can manage our indigenous oil and gas resources, in order to produce the best return for the Irish people.