Dáil Éireann Debate, Tuesday - 3 July 2012
415 Deputy Terence Flanagan asked the Minister for Communications, Energy and Natural Resources if he will deal with a matter (details supplied) regarding oil exploration; and if he will make a statement on the matter. [32121/12]
View answerIreland's fiscal and non-fiscal licensing terms were revised in 2007 following a comprehensive review by independent economic consultants. The revised fiscal terms provided for a new supplementary tax, known as a profit resource rent tax, of up to 15% in addition to the 25% corporate tax rate already applying. The revised terms apply to production arising from exploration licences granted since 1 January 2007 and ensure that the return to the State would be up to 40% in the case of very profitable fields. Standard exploration licence 1/11 (Barryroe) is subject to the provisions of the 2007 Licensing Terms.
Ireland's fiscal terms for oil and gas exploration and production are often compared to those of major petroleum countries such as Norway. Unfortunately this is simply not comparing like with like. Norway has over 70 producing oil and gas fields while Ireland has only three gas fields with a fourth in development. Norway is the second largest gas exporter and the seventh largest oil exporter in the world. Ireland on the other hand imports over 95% of our gas and 100% of our oil requirements.
Compared to Norway, Ireland's petroleum potential is largely unproven and this is likely to remain the case until there is a significant increase in the level of exploration activity from the current level of one to two exploration wells per year. Ireland competes with other countries to attract exploration investment and maintains a licensing regime that reflects the risks and rewards of investing in petroleum exploration in the Irish offshore, relative to investing in exploration in other jurisdictions. As a result, Ireland's petroleum taxation rate is deliberately pitched at a level that is consistent with countries such as France, Portugal and Spain, who, like Ireland, have limited petroleum production, rather than with major petroleum producers such as Norway.
Exploring off the west coast of Ireland is expensive due to its remoteness and deep-water depths. Drilling a single deep-water well in the Atlantic can cost in the region of €80m. Limited infrastructure (pipelines, terminal and platforms) makes development costly and negatively affects the commerciality of smaller marginal oil and gas discoveries. Given the high cost and high risk of unsuccessful exploration in the Irish Offshore, it is difficult to make the case that the taxpayer should invest in this high-risk sector at this time. A State exploration company would have to compete with the private sector for exploration licences and there is no reason to believe that it would be any more successful than private industry in choosing the most prospective areas in which to invest. On that basis I consider that it is the industry and not the State that should continue to take the risk associated with investment in exploration for oil and gas.
