Martin Ferris (Kerry North-West Limerick, Sinn Fein) | Oireachtas source

I thank the committee chairman, Deputy Doyle, and all the other committee members who worked on this report. Since I entered the House, it has been one of the best efforts to get the best deal for the taxpayer and, by extension, the people. Ireland's oil and gas resources has been a debate that has raged in this Chamber, the media and among the public for many years. Propaganda from multinational oil and gas companies, abetted and assisted by sections of the media, convinced successive Governments to keep their noses out of Ireland's natural resources. They have propagated the rumour that if Ireland's oil and gas tax take is kept artificially low, then oil and gas multinationals will come flooding to our shores. A line that the oil and gas lobby spins is that the more oil and gas extracted from our waters, the more jobs they will create in Ireland. This has proven to be false as we have witnessed in the Corrib field where workers were flown in from abroad to work on the project with little or no benefits for the local community. The lobby also claims that the current system will allow for energy security. However, Ireland is no more entitled to its own natural resources than any other country in the world. The oil and gas companies have implied that Irish homes will have access to cheaper fossil fuels if the current system remains. However, consumers will pay the international rate to fuel their homes.

The Minister will recollect that this debate has been ongoing since the 1970s when his then party, Official Sinn Féin, latterly The Workers Party, campaigned for reform of our oil and gas policy. The then Labour Party Minister, Justin Keating, responded by introducing legislation based on best international practice, which claimed a 50% stake in oil and gas extracted from Irish waters. However, the years that followed saw the propagation of a myth that argued that this country needs low oil and gas taxation in order to promote exploration and develop our oil and gas industry. Ray Burke and Bertie Ahern, as Ministers, changed our oil and gas policy to benefit the oil and gas multinationals. Ireland's offshore oil and gas reserves have the long-term potential to be a significant source of revenue for the economy. According to a 2006 report carried out by the Department of Communications, Energy and Natural Resources, there are approximately 10 billion barrels of oil equivalent off our west coast, comprising 6.5 billion barrels of oil and 20 trillion cu. ft. of gas. At current oil prices, this equates to a value of approximately €540 billion. While the volume of oil and gas brought ashore has been small, those reserves exist. Little gas and no oil is being extracted from Irish waters, but this does not reflect the potential the State's reserves hold. Surely it would be of greater benefit to leave the oil and gas reserves in the ground than to extract them with no benefit to the people.

Oil and gas technology is constantly improving. What might not be seen as commercially viable today may become increasingly valuable as we reach peak oil consumption. Under the 1992 and 2007 licensing terms, a 25% tax on the net profits of oil and gas is applicable. However, oil and gas companies can write off 100% of costs against tax, including costs incurred up to 25 years before field production begins and including the cost of any unsuccessful wells the company has drilled in Irish waters during that period. Under the 2007 licensing terms, a profit resource rent tax , PRRT, was introduced. PRRT is payable on a profit ratio calculated by the cumulative after tax profits on the specific field divided by the cumulative level of capital investment on the specific field. Oil and gas companies may be subject to pay PRRT on after tax profits of between 5% and 15%. This means an oil and gas company may pay up 40% tax on its profits. However, only the largest oil and gas explorations pay the higher tax and small and medium size fields would pay little or no PRRT.

Compared with international standards, Ireland licensing terms are extremely generous to oil and gas companies. A report carried out in 2007 by the US Government Accountability Office studied the licensing terms of 142 fiscal systems. The report found that Ireland has the second lowest tax take of all countries studied. In the US, the minimum government take is 42% while in Norway the government take amounts to 75%.

Sinn Féin supports the recommendations outlined in this report. This report received that backing of all parties represented on the committee and it provides a sensible and progressive roadmap about how we should go about managing our natural resources.

Much is made of the low strike rate, which Deputy O'Reilly stated is one in 16. Much of the exploration work carried out in the 1970s and 1980s was based on geology reports for future drilling exercises. Oil drilling took place in the Porcupine Basin up to 180 miles off the coast of Ireland, but it was difficult because of the terrain, the depth of water, the exposure to the wild Atlantic and so on. Many of the holes that were drilled were capped after carrying out the geology reports. It is ironic that the oil companies are returning to them now. I suspect that they are doing so because they know there is potential. I worked on a rig between 1978 and 1981 and there was what was believed to be a significant strike because of the time it took to burn off gas. That was in the low Porcupine and the oil companies have returned there. They project 20 to 30 years ahead during their exploration work. They look at how technology has advanced and continues to advance and the prospects that offers down the road.

For that reason, much of the exploration undertaken during that period was undertaken primarily by looking ahead. Those involved looked at the terrain, the depth of water, weather conditions, the difficulties in getting something ashore and so forth.

A number of wells are being drilled. The Minister probably receives a regular uptake, but what I hear is that people are quite excited about the potential of a reasonable strike some time this year. If that happens, it could change the whole ball cart in regard to future exploration. They are drilling in places that were capped almost 30 years ago. In our deliberations during preparations for this report we invited the Norwegian ambassador and a person from the oil ministry. It is ironic that a hole dug by Norway some 25 years ago happened to be the site of its biggest strike last year. I do not know to what depth they drilled, perhaps 40, 50 or 60 ft deeper, but they hit the spot. They have very good indications from the geology reports and what shows up on satellite images. The rock formation runs for a couple of hundred miles west of Norway down the North Sea to off the west coast of Ireland. I am very hopeful and confident, therefore, that oil is present. It is a matter of having a plan in place to extract the greatest benefit for the people of this country. If that happens, given the report produced by the committee on which I had the privilege to serve, it will give a great road map showing the way ahead. Whatever about this year, the Government should pursue the same course to get the best deal for the people.

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