Pat Rabbitte (Dublin South West, Labour)

I propose to take Questions Nos. 111, 120 and 121 together.

I welcome the recent publication by the Joint Committee on Communications, Natural Resources and Agriculture of its report on offshore oil and gas exploration. I am aware the committee has invested a considerable amount of time in gathering information and discussing relevant issues. I am sure the report will contribute to the debate on how best to maximise the benefits to Ireland from the exploration and production of our indigenous oil and gas resources. The report is a detailed document. It runs to almost 130 pages and makes 11 recommendations. From my initial consideration of the report, I can see merit in a number of its recommendations. I look forward to discussing it in more detail in the Oireachtas in the weeks and months ahead.

In the period since the report was published, the recommendation that has attracted the greatest level of interest is that proposing that the existing tax rate applying to petroleum production should be almost doubled. The report recognises there is a balance to be struck between maximising revenue to the State and incentivising companies to invest in exploration for oil and gas in the Irish offshore. It goes on to recommend that the rate of tax applying to petroleum production in Ireland should be increased to between 40% and 80%, depending on the profitability of the field. It seems that factors such as high oil prices and advances in exploration technology were key considerations influencing this recommendation. Economic logic would suggest that such factors should encourage increased investment in exploration expenditure. However, high oil prices will not make Ireland any more or less attractive as a location for investment, compared to other countries with oil and gas potential. The principal factor driving investment decisions is prospectivity. The perceived likelihood of making a new discovery is the most important factor influencing investment decisions. Other important factors include fiscal terms, access to markets and ability to bring a discovery to production.

While I look forward to debating all of the recommendations in the report in more detail, I remain to be convinced that doubling the tax rate would be in Ireland's interest. I note that the report considered two other countries - Norway, which is a very successful petroleum producer, and Portugal, which has a modest production history more comparable to that of Ireland. The report proposes that Ireland should move from a tax level that is broadly comparable to that of Portugal to a level more comparable to Norway, which has been one of the largest exporters of natural gas in the world. As I have said previously in this House, Ireland needs an increase in the level of exploration investment - in particular, more drilling - if it is to establish the true petroleum potential of the Irish offshore. The approach we adopt to petroleum taxation policy will have an impact on the industry's investment decisions. I look forward to discussing the joint committee's report in more detail in the Seanad tomorrow.

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