Noel Dempsey (Meath, Fianna Fail)

The fiscal terms for the licensing regime under which offshore exploration companies operate are provided for by the Finance Act 1992. The system is straightforward and is based on a corporation tax rate of 25% applying to profits earned. Historic capital expenditures are 100% deductible at the start of production. No royalty or production bonus or their equivalents are required. The regime was introduced with a view to establishing a risk-reward balance, which reflects Ireland's circumstances, including the industry perception of relative prospectivity, and acknowledges the realities of competition for internationally mobile exploration/ production investment.

I recently put in motion a review of the licensing regime under which offshore exploration companies operate in the State. My Department will engage the advice of external experts to independently validate the proposed changes and terms of reference for such engagement are being finalised. My concern is that the regime in place must be sufficiently progressive to accommodate both future variations in oil and gas prices and the high cost of deep-water field development. Amendment of the existing terms would only apply to future licences. Changes in the make-up of licensed entities are a normal part of the exploration business and, in the instance referred to, I very much welcome the renewed interest in the Irish offshore scene by the incoming partner. Since exploration is a licensed private sector activity, the question of a strategic plan for the industry prepared by Government does not arise.

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