Phil Hogan (Carlow-Kilkenny, Fine Gael)

I am replying to this matter on behalf on the Minister for Communications, Energy and Natural Resources, Deputy Rabbitte. I thank Deputy Feighan for his remarks and for giving an opportunity to the House to discuss the matter relating to the Lough Allen gas field in the north west.

The Lough Allen, or North West Carboniferous, Basin is situated in the north west of the country and includes parts of counties Cavan, Donegal, Leitrim, Mayo, Monaghan, Roscommon and Sligo. The North West Carboniferous Basin also extends into Northern Ireland.

The basin has been subject to a number of petroleum exploration authorisations since the early 1960s. Six exploration wells have been drilled in the area since 1963 and while some natural gas potential was identified, it was not considered to be commercially viable. In recent years there has been renewed interest in exploring the natural gas resource potential of the area. Earlier this year, following an open competition, the Department of Communications, Energy and Natural Resources offered onshore petroleum licensing options to Tamboran Resources Limited covering 986 km2 over parts of Cavan, Leitrim and Sligo and to the Lough Allen Natural Gas Company Limited covering 467 km2 over parts of Cavan, Leitrim, Roscommon and Sligo. The licensing options offered are for a two year period and are subject to agreed work programmes. The work programmes include procurement of all available and relevant technical data, including geological and geophysical studies, along with new data acquisition projects as considered necessary. Exploration drilling is not allowed under these authorisations, but shallow geological sampling is permitted where subsurface penetrations would typically not exceed 100 m to 200 m. Option holders wishing to enter on to land would need the landowner's permission.

While exploration activities under these licensing options are at an early stage, the licensing options will allow the companies to participate in developing exploration objectives and assess the petroleum potential of their acreage before deciding on whether to progress to an exploration licence. It is positive that these two companies, one Irish and one Australian, have demonstrated an interest in investing in exploring the petroleum potential of the North West Carboniferous Basin. Ireland's petroleum potential, both onshore and offshore, can only be proven through effective exploration.

On the return to the State from any possible future commercial finds of hydrocarbons in the area, a comprehensive review of Ireland's licensing terms was carried out in 2007 by independent economic consultants. Following this review both the fiscal and non-fiscal licensing terms were revised. The revised terms apply to all exploration licences issued since 1 January 2007. The terms provide for a new profit resource rent tax of up to 15%, in addition to the 25% corporate tax rate previously applying. The revised terms ensure that the direct return to the State would be up to 40% in the case of very profitable fields.

The tax regime applicable to petroleum production is a key factor in attracting internationally mobile exploration investment to Ireland. The tax terms offered to companies reflect the fact that Ireland's petroleum potential is largely unproven and that we need to encourage a higher level of exploration activity. It is, however, much too early to talk about a possible commercial development. While the exploration activity planned for the next two years will help develop the understanding of the area's hydrocarbon potential, it will not prove the existence of commercial quantities of hydrocarbons. That could only happen in a number of years, after a further programme of exploration work is carried out, including successful exploration drilling. Before that could happen the two companies mentioned would each have to apply to the Department of Communications, Energy and Natural Resources for an exploration licence.

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