Jerry Cowley (Mayo, Independent)
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Question 21: To ask the Minister for Communications, Marine and Natural Resources his views on whether a long-term strategic plan for the oil and gas industry operating here, and a repayment of at least 20 per cent on gross profits, should be enforced by statute on these speculator companies; and if he will make a statement on the matter. [26681/06]

Noel Dempsey (Meath, Fianna Fail)
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The fiscal terms for the licensing regime under which offshore exploration companies operate are provided for by the Finance Act 1992. The system is straightforward and is based on a corporation tax rate of 25% applying to profits earned. Historic capital expenditures are 100% deductible at the start of production. No royalty or production bonus or their equivalents are required. The regime was introduced with a view to establishing a risk-reward balance, which reflects Ireland's circumstances, including the industry perception of relative prospectivity, and acknowledges the realities of competition for internationally mobile exploration/ production investment.

I recently put in motion a review of the licensing regime under which offshore exploration companies operate in the State. My Department will engage the advice of external experts to independently validate the proposed changes and terms of reference for such engagement are being finalised. My concern is that the regime in place must be sufficiently progressive to accommodate both future variations in oil and gas prices and the high cost of deep-water field development. Amendment of the existing terms would only apply to future licences. Changes in the make-up of licensed entities are a normal part of the exploration business and, in the instance referred to, I very much welcome the renewed interest in the Irish offshore scene by the incoming partner. Since exploration is a licensed private sector activity, the question of a strategic plan for the industry prepared by Government does not arise.

Jerry Cowley (Mayo, Independent)
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I thank the Minister for his detailed reply. I welcome the review of the fiscal terms and I am glad the Private Members' motion tabled by the Technical Group was instrumental in this happening.

However, it will only be when 50% of the Corrib gas field has been exploited that the company will have to pay 1 cent in tax. Given the 100% capital write off, it will be light years before tax is paid. In the meantime, significant funding is needed for hospital beds and so on. A licence was granted to Tony O'Reilly's companies, Providence Resources and Sosina Exploration, in November 2004. They, in turn, sold it to Exxon Mobil while retaining a 20% stake but Exxon Mobil is paying all the exploration costs, which are estimated at hundreds of millions of euro, before anything is found. It would have been much more equitable if the Exchequer had received this money. This leaves a dirty taste in every person's mouth in the context of the Corrib gas project because such funding could have been targeted at the local community. In County Donegal, an Irish company, Grianan, states it will give 10% of gross profits to the local community. It would be wonderful if 20% of gross profits resulting from exploration went to the local community affected. It would also act as an incentive. Will the Minister consider it?

I am on record as seeking a 50% stake in any oil or gas discovery for the State, including royalties. Sounds emanating from Providence Resources and Sosina Exploration suggest they have great hopes that much more gas will be found. It would be a shame not to be able to take advantage of such a situation. Both Norway and the community on the Shetlands have done well from exploration. Why should we always be the poor relation? Will the Minister comment on whether the local community should benefit?

Noel Dempsey (Meath, Fianna Fail)
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I have stated all along that the community in the immediate vicinity of the pipeline and the terminal should benefit from any gas find. I have believed for a long time that where people are discommoded by a development in the national interest they should gain locally, and that includes those near the pipeline. Unfortunately, no one can gain from it until the gas is piped ashore, which has been a difficulty in the Corrib area.

I agree a local community, wider region and nation should benefit from any gas or oil exploration success. That is Government policy. Where Deputy Cowley and I differ is in what he might demand or feel is reasonable in that context. Our disagreement is a matter of figures rather than principle.

At present, the corporation tax rate of 25% applies to finds, with a 100% write-off of historic capital costs. That was deemed necessary when it was put in place between 1987 and 1992, particularly in the Finance Act 1992. Despite what Deputy Cowley previously described as generous terms — I agree they are generous — we have received few responses. We must keep exploration attractive and not put people off by taking too much. Circumstances have fundamentally changed, particularly with the rise in prices of oil and gas during the past 18 months to two years. This enables us to review and revise the terms to ensure the State and taxpayers benefit more from future finds without scaring companies away.

We must remember 25% or 50% of nothing is nothing. If we do not attract exploration companies, the State itself must carry out that exploration. I recently spoke to someone who knows about these matters. Regarding the area off the west coast of Ireland, the usual cost for an exploration well is €20 million but it is estimated it will cost €70 million in some places. We must maintain a balance in the terms to make it attractive to prospectors. However, we are reviewing the terms and we will seek a greater take.

If, as I hope and as seems to be the case, greater prospectivity occurs and we have more discoveries, we will be in a much stronger position to increase the terms. I have spoken to experts who are not directly associated with oil exploration companies and who have conducted negotiations for other countries. They state if companies believe they have a good chance of finding oil and gas, they do not mind the terms increasing or the State's take being larger so long as they know they have a return.

I do not want to rake over old sores, but in the case of the Corrib, the costs have doubled during the past two years while the company is waiting to bring the gas ashore. The price has gone up so it is balanced to a certain extent. However, we must progress the issue.

Jerry Cowley (Mayo, Independent)
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I agree that unless the Corrib gas does come ashore we can never profit from it. The difficulty is that a material deviation has taken place in the development plan under the 1992 terms. This deviation takes the form of transporting material several kilometres instead of putting it behind concrete dams at the site in Ballinaboy, and the Advantica report suggests major changes in pressure and so on. Does the Minister agree this is a material deviation requiring the development plan to be thrown out and negotiating a new plan to take people's safety fears into account? I attended a briefing with Shell and I am disappointed because it appears it will not change its position and is intent on doing what it intended from day one.

Noel Dempsey (Meath, Fianna Fail)
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Neither the Deputy nor I should anticipate what Shell intends to do. The Advantica report deals with all safety issues in an objective way — I was asked about this matter prior to and after the report was published. It was given a free hand to examine those issues of concern to the people in the area. I categorically state to the Deputy that any future consent I give, and there are a number I must still give to Shell as the Corrib developer, must contain specifications fully in line with the Advantica report, and Shell accepts that. I assure the Deputy and people locally that all aspects of safety have been dealt with and will be fully met in any future consent.