Pat Rabbitte (Dublin South West, Labour) | Oireachtas source

I thank my colleagues across the House who have contributed to the debate tonight and on 14 May. In particular I thank the former Chairman of the Oireachtas Joint Committee on Communications, Natural Resources and Agriculture, Deputy Andrew Doyle. The report has generated a healthy and robust debate on Ireland's offshore oil and gas exploration experience and potential.

The Government has a very clear strategy in this matter. The former Chairman of the committee, Deputy Doyle, expressed it well, that is, to seek to maximise the benefits to the people of Ireland from its indigenous natural resources. Perspectives and prescriptions for the fiscal terms appropriate to Ireland's offshore must be grounded in the reality of our perceived prospectivity and global competition for exploration investment. In over 40 years of exploration there have been four commercial natural gas discoveries, Kinsale, Ballycotton and Seven Heads and the Corrib gas field off north Mayo.

There have been no commercial discoveries of oil off Ireland. In 2011 alone the Norwegian authorities approved 11 new oil and gas production facilities. The United Kingdom has in excess of 300 producing fields. The employment, economic and fiscal dividend from oil and gas that is enjoyed by Norway and the UK, so often contrasted with Ireland, are the product of nearly 60 years of oil and gas production based on proven prospectivity.

Despite the low level of commercial discoveries to date, working petroleum systems are known to exist in many of Ireland's offshore basins. There has been a modest but welcome increase, as Deputy Ferris said, in the level of interest in oil and gas exploration off our coast in recent years, yet the fact remains that the Irish offshore is relatively under-explored and its petroleum potential is largely unproven, particularly when compared with other petroleum regions such as Norway and the United Kingdom. It is comparing apples with oranges. Deputy Ferris remarked that he detects a certain excitement around at the moment. It certainly is true that more of the licences from the last licence round have been converted than in recent years which is likely to see more offshore activity than we have seen for many years. We will know before the end of summer about the status of the particular reference that Deputy Ferris made to Dún Chaoin. The point is that the drilling of that well will cost €200 million. Although some colleagues on the opposite side made the argument, I do not think that anybody seriously thinks that the State has €200 million to risk on the drilling of a well. If that well, as Deputy Doyle said, strikes gold that will be fantastic but if it does not that would highlight the risk that we expect the private sector to take.

Ireland's focus needs to be on how to encourage an increase in the level of exploration investment and exploration drilling. Given that the cost of a single exploration well in the Atlantic is likely to be well in excess of €100 million, it is crucial that we provide the right environment to encourage industry to take the not so insignificant financial risk associated with investing in the exploration of Irish waters. I am optimistic that we can create such an environment by deepening knowledge of our offshore petroleum potential, through supporting data acquisition and research, actively promoting the Irish offshore, in particular to companies not currently active here, offering attractive and innovative licensing opportunities and providing a fit-for-purpose, transparent and robust regulatory regime, in respect of the specific contributions made. Deputy Ó Cuív hypothesised that if we find a big enough oil or gas field that companies will happily pay a tax rate of 80% but there is a disconnect in this analysis. In my view the key question to be posed is whether or not a company, knowing that it would pay a tax rate of up to 80%, would risk a significant amount of money in an under-explored area whose petroleum potential is largely unproven.

Deputy Colreavy stated that companies that make discoveries in Irish waters are not obliged to land the oil or gas in Ireland, and that Irish consumers would still continue to pay international market prices. The reality is that neither the UK nor Norway places such obligations on finds made within their jurisdictions. Both Deputies Ó Cuív and Colreavy referred to the need for consultation with communities impacted by an oil or gas development. I fully accord with the principle that early consultation is important.

Deputy Boyd Barrett stated that the current regime results in minimal jobs or investment accruing to Ireland. In response I point out that of the €3 billion invested by Shell to date on the Corrib field, over €1 billion has been spent on goods and services in Ireland. The Deputy also raised his concerns regarding the ability of companies to write off costs against tax, thus reducing the tax take from the headline rates of 25% to 40%. It is estimated that €3 billion has been spent in exploring the Irish offshore to date. A significant portion of such expenditure is no longer available for write-off against future taxes as the companies who incurred the expenditure have surrendered their licences and are no longer exploring in Ireland.

A fundamental point made by the committee relates to the need for stability and certainty as regards licensing terms. The nature of the oil and gas exploration business requires the taking of a long-term view. We have to recognise that Ireland is competing with countries such as Norway and the UK and we cannot set our tax terms in isolation or we risk discouraging potential investment. Ireland's tax terms for oil and gas production need to focus on attracting new investment. I said at the outset of this debate - one that I anticipated would run for longer in the House given the amount of noise made - that I will bring in independent experts to review whether the fiscal regime is fit for purpose so that before the next round is announced the industry will have certainty. I welcome the fact that all colleagues made plain that any messing around to make any changes retroactive would only generate uncertainty in the industry. I welcome that commitment, which is also stated in the committee's formal report.

I thank the Leas-Cheann Comhairle and the former Chairman of the Oireachtas Joint Committee on Communications, Natural Resources and Agriculture, Deputy Andrew Doyle in particular because Deputies and Senators invested considerable time and effort in producing, what I regard as a key contribution to the public debate on how we can manage our indigenous oil and gas resources, in order to produce the best return for the Irish people.

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