Michael Noonan (Limerick City, Fine Gael) | Oireachtas source

I put the speaking note on the record on Committee Stage so I will do so as a courtesy to those who are here this evening. The amendment, in the names of Deputies Pearse Doherty and Tóibín, proposes that a report be prepared on options available with regard to ensuring that the PPT will apply to all earnings from all petroleum revenue, regardless of the discovery date of the taxable field. This amendment seems to indicate that the Deputies recognise that the new regime is a suitable measure to ensure that the State will receive a reasonable and equitable return from the discoveries. The overall objective of the new legislation is to ensure that the State will get a higher return in the case of more profitable oil and gas fields while continuing to encourage the industry to invest in exploration for oil and gas in offshore Ireland.

There is a balance to be struck in revising the taxation policy as it applies to these activities. To apply the new regime to existing authorisations would be ill advised because it would give rise to reputational damage and generate fiscal uncertainty, undermining efforts to attract exploration investment to the Irish offshore. If we change once, how can people have faith in a new regime or be assured that we would not change again in a couple of years' time? The new fiscal regime provides industry with certainty and clarity. It allows industry to forecast and prepare detailed business plans. It allows it to evaluate the risks involved in exploring the Irish offshore and the potential returns. Given that the cost of a single exploration well in the Atlantic can be in excess of €100 million, a key element of the State's strategy for this sector is that industry, rather than the Exchequer, should carry the financial risk associated with exploration. Exploration in the Irish offshore is heavily capital intensive, particularly in the Atlantic margin with its deep waters, its distance from shore and adverse weather conditions. Ireland also faces competition for exploration investment from established and proven oil and gas provinces and from emerging provinces with similar exploration profiles. The maximum degree of certainty on the stability of the fiscal system encourages industry to make those high-risk, high-cost, long-term exploration investment decisions which are necessary to realise the oil and gas potential of the Irish offshore. The implementation of new fiscal terms for existing authorisations would undermine that certainty. Any decision to alter the fiscal terms for existing authorisations would impact on exploration investment in such authorisations, many of which are at the stage at which exploration drilling has yet to be undertaken or even committed to.

The Oireachtas joint committee report into Ireland's offshore oil and gas regime, published in May 2012, recognised that retrospective changes to fiscal and licensing terms can risk long-term reputational damage and it recommended that existing agreements should be adhered to irrespective of changing circumstances. The Wood McKenzie report also recognised that making retroactive changes to fiscal terms is not a policy that should be pursued in Ireland. Ireland's strategy for the exploitation of indigenous oil and gas resources aims to maximise the level of exploration activity and increase the level of production activity while ensuring a fair return to the State for these activities. The new PPT achieves this. It is only through active exploration that the potential of the Irish offshore will be proven.

I am not accepting the Deputies' amendment. Deputy Rabbitte has put on the record the background to this legislation. The proposals were brought to Cabinet by Deputy Rabbitte when he was Minister for Communications, Energy and Natural Resources. The Cabinet made decisions and those decisions are now being reflected in this Finance Bill. I congratulate and compliment Deputy Rabbitte on bringing such an important item of work to conclusion. He spoke with authority on the subject today and he has much expertise in the area.

There was some debate on the ability for discovery and on drilling wells in different jurisdictions. The probability of discovery in drilling a well in Ireland is one in eight but the possibility of a commercial discovery on drilling that well is one in 32. In the UK, the probability of discovery when drilling a well is one in four and the probability of commercial discovery is one in six. In Norway, the probability of discovery on drilling a well is one in two and the probability of a commercial discovery is one in seven. The source of this is a PwC report entitled "Making the most of our natural resources" from May 2013.

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