Pat Rabbitte (Dublin South West, Labour)

I propose to take Questions Nos. 24 and 25 together.

While Ireland has recognised potential as a petroleum producing area, the Irish offshore is relatively underexplored. As a result, Ireland's petroleum potential is largely unproven. This is likely to continue to be the case until there is an increase in the level of Irish offshore exploration, exploration drilling in particular. Ireland competes with other countries in Europe and much farther afield to attract mobile international exploration investment. To this end, it is important that Ireland maintains a licensing regime that appropriately reflects the risks and rewards of investing in petroleum exploration in the Irish offshore relative to investing in exploration in other jurisdictions.

Regarding periodic publicity about Ireland's oil and gas resources, recent assessments of yet-to-find potential based on petroleum systems studies indicate a total reserve potential in the order of 10 billion barrels of oil equivalent for the offshore frontier basins west of Ireland. This divides approximately into 6.5 billion barrels of oil and 20 trillion cubic feet of gas. It should be understood that these figures only represent potential reserves, namely, the reserves that might be present based on geological criteria and regional comparisons, and that they have not been discovered. Actual reserve figures are likely to vary widely from these estimates and will not be known without a dramatic increase in the level of exploration activity.

A comprehensive review of Ireland's fiscal terms was carried out in 2007. This review, which was underpinned by independent economic analysis, considered the appropriateness of Ireland's licensing terms in comparison with other European countries with which Ireland competes for exploration investment. The review concluded that there might be potential to capture a higher share for the State on more profitable finds, but that the potential for this should not be overestimated. The outcome of the review was the introduction of a supplementary tax, known as a profit resource rent tax, of between 5% and 15% that will apply in the case of more profitable fields. The supplementary tax would be payable in addition to the standard petroleum corporate tax of 25%, which is double the standard corporation tax rate of 12.5%.

Since the review concluded in 2007, there has been no significant change in terms of the level of exploration activity and no new commercial discoveries have been made. The level of exploration activity will continue to be the critical factor in Ireland obtaining a benefit from our indigenous oil and gas resources. We need to get drilling levels above the recent levels of one or two wells per year if more commercial discoveries are to be made.

As part of an ongoing strategy to attract new companies and new investment, my Department is running a licensing round that is deliberately structured to attract new exploration companies. This licensing round, which closes at the end of May, also aims to encourage companies to look at areas of the Irish offshore where few data currently exist and, as a consequence, little is known of their potential prospectivity.

While I will keep the licensing terms, both fiscal and non-fiscal, under review in light of relevant future developments, at this juncture the focus should be on attracting a larger share of mobile international exploration investment to Ireland to increase the chances of new commercial discoveries being made.

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