Standard Exploration Licence 2/11 which was granted last year is held by a consortium comprising Providence Resources Plc (operator) and PSE Seven Heads Ltd over an area of approximately 380 square kilometres in the Kish Bank Basin off the Dublin/Wicklow coast. The licence, which is a follow-on authorisation to Licensing Option 08/2, is for a six year period with an obligation to drill an exploration well by August 2014. The licensees have not as yet submitted their detailed proposals for drilling to my Department for approval.
I am aware that the Minister for the Environment, Community and Local Government recently granted the company a foreshore licence in respect of works related to the drilling of a well on the acreage. A foreshore licence is required as the location for the exploration well is within the twelve nautical miles foreshore area.
In the event that the exploration activity was successful and resulted in a commercial discovery, profits would be subject to a tax rate of between 25% and 40% depending on the profitability of the field. Ireland’s tax rate for oil and gas production is similar to EU Member States such as France 34.4%, Portugal 27.5% and Spain 30%, who, like Ireland, have limited petroleum production and with whom we compete for investment. Ireland’s tax rate is lower than that of the UK which has a tax rate of 62%, which reflects the fact that the UK has had significant success as a petroleum producer.
In the event of a commercial discovery, petroleum exploration capital expenditures incurred in Ireland in the 25-year period prior to the commencement of field production would be 100% deductible against corporation tax at the start of production. This includes capital expenditure on exploration activities outside the lease production area but excludes expenditure incurred in other countries.
