Broadly, the purpose of this Bill is to facilitate the carrying out of a comprehensive scheme of exploration for oil and natural gas in Ireland. There can be no certainty that petroleum deposits exist in this country in quantities that could be worked economically. At the same time, the benefits that would accrue to the national economy from the discovery of petroleum in worthwhile quantities would be so valuable that it is desirable that a scheme of exploration should be undertaken which would establish whether oil or natural gas occurs in quantities which would be capable of being developed economically. Exploration for oil is very costly and highly technical, and it is desirable that it be carried out by concerns which have the necessary up-to-date equipment and adequate experience of similar work in other parts of the world.
Oil and natural gas, which are covered by the term petroleum as used in this Bill, are found in association with sedimentary rock formations. Such formations are fairly extensive and of moderate thickness in Ireland and, although there is no direct evidence, it is possible that oil could occur in these formations unless it has been released by disturbances during their long geological history. The main oil producing areas of the world are in the Middle East and the American Continent, but oil has also been found in Western European countries in quantities somewhat greater than might have been expected, having regard to their geological structure and history. Holland, France, Western Germany, Austria and Italy have all undertaken oil exploration and development with varying degrees of success. Great Britain has also carried out extensive oil exploration at considerable cost, but only limited quantities have been discovered up to the present. A report published in December, 1957, by O.E.E.C. in regard to the development of the oil resources of Western Europe is discouraging in its assessment of the prospects of finding oil in Ireland, but the fact that applications have been made to me for the grant of oil prospecting facilities indicates that in some quarters, at least, the prospects are not regarded as too discouraging.
The existing legislation relating to petroleum exploration is contained in the Petroleum (Production) Act, 1918, and the Minerals Development Act, 1940. These Acts were passed at a time when there was little prospect that exploring for petroleum would be undertaken in this country, and they do not provide adequate means for facilitating large-scale exploration programmes. I am satisfied that new legislation must be enacted to facilitate comprehensive exploration under the most up-to-date conditions.
This Bill provides for the vesting in the Minister for Industry and Commerce of all petroleum in the State and empowers him, by the grant of licences and leases, to secure that any petroleum deposits that may be discovered will be developed efficiently. There is provision in the Bill for the grant of compensation to the persons who formerly owned the petroleum rights if petroleum is subsequently found and worked, and also to persons whose land may be damaged by operations carried out in searching for and working petroleum deposits. A number of the provisions of the Bill are already contained in our general legislation relating to minerals, but it is desirable to repeat them in this Bill in order that all the legislation relating to petroleum may be contained in one measure.
Mineral ownership in Ireland presents a mosaic of holdings varying from 100 to 1,000 acres in extent. About one half is already in State ownership. The balance is in private ownership but it is frequently difficult to determine who are the legal owners. It is obvious that oil companies could not be expected to enter into commitments to spend money on oil exploration in Ireland if they were faced with the endless difficulties associated with negotiations for the acquisition of oil rights with a large number of private owners. It is necessary, therefore, that, subject to the payment of compensation, the State should acquire title to such petroleum rights as are not already vested in it. If, at any time in the future, petroleum is found and worked, the owners of the petroleum rights which are now being vested in the Minister under this Bill will be entitled to a royalty related to the royalty rent reserved by the lease.
In oil producing countries, the general practice is that profits earned by oil operators are shared with the Government. The most common arrangement has been one which provides for profit-sharing roughly on a 50-50 basis, though some of the major oil producing countries are now demanding a higher percentage. Generally speaking, the more favourable the prospects of discovering oil, the higher the percentage of the profits demanded by the State. The Bill provides for the sharing with the State by way of royalties or similar payments of the profits earned from the sale of any petroleum that may be found here. Having regard to the relatively poor prospects of discovering oil in economic quantities in Ireland, I am satisfied that it would not be reasonable in present circumstances at any rate, to insist upon a 50-50 profit-sharing arrangement.
As Senators are aware, I have entered into an agreement with American oil interests for the carrying out of a comprehensive scheme of exploration for petroleum in this country and for the working of any deposits that may be found. The Agreement, copies of which were laid on the Table of the House, will not come into operation until this Bill is enacted. I ought, perhaps, to say that I have not had from any Irish interests a satisfactory scheme for the carrying out of a full scale exploration programme for oil.
The company with which the Agreement has been made is Ambassador Irish Oil Ltd., an Irish registered company which will be a wholly owned subsidiary of Ambassador Oil Corporation, Fort Worth, Texas. Ambassador Oil Corporation are an organisation with extensive practical experience of oil exploration and the working of oil fields and they have the resources necessary for the carrying out of a comprehensive exploration for petroleum in Ireland. Under the terms of the Agreement, their subsidiary company, Ambassador Irish Oil Ltd., will be given exclusive exploration rights over the whole country for an initial term of five years, and, if they meet their obligations under the Agreement, over 75 per cent of the country for a further 5 years, 50 per cent for a third term of 5 years and 25 per cent for a fourth term of 5 years. They will be entitled to prospecting licences and mining leases in any area over which they have exploration rights.
During the first three years of the first five year period, Ambassador Irish Oil will be obliged to spend at least 300,000 dollars on exploration and to drill at least one well to a depth of 5,000 feet. If they do not meet both these obligations, the unexpended balance of the 300,000 dollars will be forfeited to the Minister, and they will have no right to any further prospecting rights or to any mining leases which may have been granted to them in the period.
If the company, having met these obligations, does not elect to proceed with further exploration they may retain any leases acquired by them up to that time but will have no further right to leases or to explore further for petroleum. If they elect to continue exploration after the first three years, they must spend a further 200,000 dollars during the remaining two years of the first five year term. If they do not spend all that amount of money in the two years, the unexpended balance will be forfeited to the Minister and they will have no further right to exploration licences or mining leases but they will be entitled to retain any leases acquired in the first three years.
If Ambassador Irish Oil meet all the obligations which I have mentioned, they will retain the right to any leases granted to them during the first five years. If, however, they spend 1,000,000 dollars in the first five years, they will have, in addition, the right to renewal of their exploration licence for a further period of five years but must surrender to the Minister for Industry and Commerce 25 per cent. of the territory.
During the second period of five years, Ambassador Irish Oil will be obliged to spend at least 750,000 dollars but, if they actually spend 2,500,000 dollars, they will be entitled to renewal of the exploration licence for a third period of five years over 50 per cent. of our territory.
During the third five year term, Ambassador Irish Oil will be obliged to spend not less than 750,000 dollars but if they actually spend 4,000,000 dollars, they will be entitled to renewal of the exploration licence for a fourth term of five years over 25 per cent of our territory.
During the fourth term, Ambassador Irish Oil will be obliged to spend not less than 750,000 dollars but, if they actually spend 5,000,000 dollars, they will have a preferential right over other applicants, other things being equal, for renewal of their concessions. If, in any specified period, Ambassador Irish Oil fail to spend the appropriate minimum amount, then the difference between what they spend and the specified minimum sum is forfeited to the Minister for Industry and Commerce.
If, during any five year term, Ambassador Irish Oil have spent more than the minimum amount but not the amount which entitles them to automatic renewal, they may "purchase" such automatic renewal by paying the difference to the Minister for Industry and Commerce. As I have already indicated the Bill provides, in accordance with normal practice, for the sharing with the State of profits earned on the sale of oil and gas. The effect of the provisions relating to this matter which are contained in the Agreement is that the contribution payable to the State will never be less than a 7½ per cent. royalty computed on the selling price of the oil or gas or more than 40 per cent. of the company's net income as defined in the Agreement. Having regard to the very speculative nature of any project for seeking and working petroleum deposits in this country, I consider that this arrangement is a reasonable one.
In addition to the provisions relating to petroleum, the Bill provides for certain amendments to the Minerals Development Act, 1940. These amendments have been found to be necessary as a result of experience gained in the administration of the Act, and it is useful to include them in the present Bill. At present, for example, the Minister for Industry and Commerce is required, before granting a prospecting licence, to serve one month's notice by registered post on each surface occupier of land in the area covered by the licence.
When this provision was made in the law, it was not anticipated that prospecting licences would cover large tracts of land. The present practice, however, is to give prospecting licences for relatively large areas, and this means that formal notice has to be served on hundreds of surface occupiers. In the circumstances, I feel that, in the interests of administrative convenience, the publication in a local newspaper of notice of intention to grant a prospecting licence should replace the existing arrangement. A map giving details of the area affected will be made available for inspection in the Geological Survey Office and in the local post office, and, in this way, the interests of surface occupiers will be adequately safeguarded.
The Act of 1940 provides for compulsory acquisition by the Minister of ancillary rights, e.g., the right to construct roads, the right to a supply of water, the right to cross lands adjoining a leasehold, but I am advised that the Act is defective because, inter alia, it does not empower him to assign such rights to the holder of a State mining lease. It is desirable that this defect should be remedied in relation to oil and other minerals and this is being done in the present Bill.
A prospecting licence issued under the Act of 1940 may not be expressed to apply to named minerals but is deemed to apply to all minerals and, in effect, therefore, it confers on the licensee an exclusive authority to search for all minerals in a given area. I propose to amend the Act of 1940 so that, in future, the authority conferred by a prospecting licence may, if necessary, be confined to one or more specified minerals so that the Minister for Industry and Commerce will be in a position to authorise different persons to prospect for different minerals in one area.
It is my hope that the Bill will commend itself to all Senators, and that there will be general acceptance of the principles of the measure. On its enactment by the Oireachtas, the first major scheme of petroleum exploration in Ireland will commence. Ambassador Irish Oil Ltd. will apply to me for an exploration licence within three months of the enactment of the Bill, and they will be required within a further three months to make substantial deposits in an Irish Bank of moneys to cover expenditure during the first part of the exploration programme.
It will, I am sure, be appreciated that the Bill has been prepared on general lines which will make it possible to facilitate a number of exploration projects for petroleum. As I explained, the first project will be carried out by Ambassador Irish Oil Ltd., but it is possible that, after the completion of this project, or of such part of it as the company may decide to undertake, other groups may formulate proposals for exploration programmes. The wide basis on which the Bill rests will make it possible to grant any reasonable facilities which may be necessary for the purposes of carrying out a number of successive exploration projects.
I hope that, on its enactment, the Bill will provide the facilities which are necessary for the exploration and development of whatever oil deposits we may possess.