I am pleased to open this debate on the report of the former Joint Committee on Communications, Natural Resources and Agriculture on the subject of offshore oil and gas exploration. I am grateful to the Government Chief Whip for acceding to my request to make time available for the debate.
Although issues relevant to the subject matter of the report have been discussed in this House from time to time under a range of business, today's debate provides an opportunity for a more detailed discussion. I look forward to the contributions of Deputies on the report and its recommendations and, more generally, in respect of Ireland's approach to this policy area. My colleague, the Minister of State, Deputy Fergus O'Dowd, will close the debate on behalf of the Government.
This is both an interesting and a topical area of public policy. The report discussed a range of diverse subjects and issues and the joint committee invested considerable time in its preparation. Detailed evidence was taken from a range of parties and considerable time was spent in considering that information. Accordingly, the report represents a valuable contribution to the debate on how we should manage our indigenous oil and gas resources to ensure the best result for the people of Ireland. The 11 recommendations reflect the broad nature of the report and address a number of themes. The report recognises the importance of our legislative and strategic policy approach being fit for purpose and brings a focus to specific aspects of the non-fiscal regulatory regime. It considers interactions involving the public in general, as well as those relating to communities living in areas where development activity is planned.
The theme, however, that has generated the greatest level of comment relates to the tax terms that should apply in the case of future commercial discoveries. There have been occasions when debate on this subject has been premised on myth rather than fact and it is a positive aspect of the report that it captures so much detail in a single document. Understanding Ireland's petroleum exploration experience over four decades is important to any balanced consideration of the nature of fiscal terms that should apply to this industry.
Understanding our experience relative to that of neighbouring jurisdictions is also critical, as well as understanding that the hopes and aspirations that many of us held out for the industry in the 1970s have not been realised and tilting at romantic windmills amidst the dreamy spires of Princeton will not change that. It is helpful, therefore, that the report contains considerable detail of Ireland's exploration history, together with some detail on neighbouring jurisdictions, particularly Norway. An examination of Norway's experience as a major oil and gas producer demonstrates a stark contrast between that country's fortunes and ours over the past half-century. Today there is a significant difference in our respective fiscal regimes, which reflects very different levels of exploration success. In the 1970s our fiscal terms were similar but in the subsequent decades the optimism that existed in the 1970s about the potential of the Irish offshore diminished as significant and repeated commercial discoveries in the North Sea were not, unfortunately, replicated here.
There are times, however, when some contributors to the debate on fiscal terms advocate policies that clearly ignore the stark contrast between our exploration experience and that of Norway and the UK. Although they contribute nothing constructive to an important public policy consideration, such interventions can give rise to confusion, deflect focus from the real questions to be addressed and do little to engender confidence among those considering the relative merits of investing in the Irish offshore, as opposed to elsewhere in Europe or even further afield.
In general terms, some of the report's recommendations appear both sensible and desirable. Others are already provided for in the existing licensing and regulatory regime. There are a number of recommendations that could usefully be explored further, including several which have wider public policy implications. Finally, there are a number of recommendations in respect of which I have strong reservations and remain to be convinced that their adoption represents the best way for us to proceed. As examples of recommendations I would endorse, the report proposes that there be a clear and transparent fiscal and licensing regime which provides certainty for the State and industry alike. It stresses the need for a clear strategy governing Ireland's approach to petroleum exploration and goes on to recommend that the 1960 Petroleum and Other Minerals Development Act be reviewed. The 1960 Act is important in setting out the high-level exploration licensing regime and the rights conferred by the various authorisations. Since it was enacted, a broad body of legislation at national and European Union level that is directly relevant to petroleum exploration and production activities, including planning, safety and environmental legislation, has been passed. Against that background, my Department is currently engaged in a review of the 1960 Act.
Our overarching strategy in this area is to seek to maximise the benefits to the people from Ireland's indigenous natural resources. The most significant way in which Ireland stands to benefit from successful exploration is through tax revenue.
However, the potential impact should not be overestimated and needs to be put in context. It would be a positive development, both as a new commercial discovery and as Ireland's first ever commercial discovery of oil. However, it would also be Ireland's first commercial discovery since the Corrib gas field was discovered in 1996, nearly two decades ago. While it would be positive news, it would not by itself make Irish waters the new North Sea.
I do not wish to be negative or to undersell Ireland as a location for exploration investment - quite the contrary - but we must deal in realities. The reality is that the Irish offshore is under-explored and its petroleum potential is largely unproven, particularly when compared with other petroleum regions such as Norway and the United Kingdom. The statistics speak for themselves. A total of 156 exploration and appraisal wells have been drilled to date in Ireland's offshore compared with more than 1,200 wells in Norway and 4,000 wells in the United Kingdom. The UK has more than 300 producing fields, while Ireland has only three, 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 more than 95% of its gas and 100% of its oil.
Ireland's focus should be on how to encourage an increase in the level of exploration investment and drilling. This is what we need if we are to establish the true petroleum potential of the Irish offshore. The principal factor driving exploration investment decisions is the likelihood of making a new discovery. The challenge is how to improve the industry's perception of Ireland's prospectivity relative to that of other countries. Exploration drilling and new seismic acquisition are both key. In 2011 and 2012 we had just one exploration well and this year it seems that Dunquin will be the only well drilled offshore. That is the backdrop against which we are having this debate. We must recognise that Ireland is competing with countries such as Norway and the United Kingdom to attract mobile international investment and we cannot set our tax terms in isolation.
We find ourselves in a complex and challenging position. There is a clearly recognised potential and there have been positive recent signs in the number and quality of exploration companies becoming involved in the Irish offshore. The exploration cycle is a very long cycle, however, and many current authorisations are at the stage at which exploration drilling has yet to be undertaken or even committed to.
The joint committee signalled clearly in its recommendations that it considered a review of the fiscal terms would be appropriate. It was also clear that an adjustment to the fiscal terms should not be retrospective. I am completely in agreement with this latter point.
While I have clearly indicated my reservations about Norwegian-style tax terms, I am conscious that long-term investment decisions on exploration expenditure would benefit from the maximum degree of certainty on the stability of the fiscal regime. With this in mind and having regard to the fact that the most recent review of the fiscal terms took place in 2007, I intend, following the conclusion of this debate, to seek further independent expert advice on the fitness for purpose of Ireland's fiscal terms. Such expert advice would focus on what level of fiscal gain is achievable for the State and its citizens and, equally important, the mechanisms best suited to produce such a gain.
Certainty as to fiscal terms is a prerequisite for attracting oil and gas exploration investment. In that regard, particularly in the context of planning for the next licensing round, it is my intention to bring my consideration of this matter to a conclusion before the end of the year. This would ensure that the next licensing round could be launched against a backdrop of regulatory certainty and encourage much-needed new investment in exploration in our offshore. I thank the former joint committee for its detailed report and look forward to hearing the views of Members in this debate.