Written answers

Wednesday, 26 October 2011

Department of Communications, Energy and Natural Resources

Prospecting Licences

10:00 pm

Photo of Michael Healy-RaeMichael Healy-Rae (Kerry South, Independent)
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Question 72: To ask the Minister for Communications, Energy and Natural Resources in regard to the 13 licences that have been issued to an array of international oil companies to explore the waters off the Atlantic coast, if he will give an assurance that this is a prudent decision and is it not giving away the rights of our national resources to foreign companies; the benefit that will accrue to the Exchequer; if the licensing and taxation terms need to be radically revised; and if he will make a statement on the matter. [31704/11]

Photo of Pat RabbittePat Rabbitte (Dublin South West, Labour)
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The potential of the Irish offshore as a petroleum producing region is largely unproven and this is likely to remain the case unless there is a relatively significant increase in the level of exploration activity, in particular exploration drilling. Over the past decade on average only two exploration wells have been drilled per year.

The principal aim of the recently completed 2011 Atlantic Margin Licensing Round was to inject new momentum into the level of exploration in the Irish offshore and to attract new exploration companies to Ireland. The Irish and international companies offered two-year licensing options under the round will have to undertake work programmes agreed with my Department. These work programmes will then inform decisions to be made two years from now as to whether or not these companies will want to apply for exploration licences, with a view to moving towards exploration drilling.

As any exploration drilling that might result from the 2011 licensing round is unlikely to take place until six years from now at the earliest, it would not have been in the public interest to delay decisions on the award of licensing options. To do so would only delay the much needed increase in exploration activity levels and potentially damage investor confidence.

With regard to taxation, Ireland competes with other countries, both in Europe and much further afield to attract mobile international exploration investment. To that end, it is important that Ireland maintains a licensing regime that appropriately reflects both the risks and rewards of investing in petroleum exploration in the Irish offshore, relative to investing in exploration in other jurisdictions. A comprehensive review of Ireland's fiscal terms for oil and gas exploration and development was carried out in 2007. The review, which was underpinned by independent economic analysis, considered the appropriateness of Ireland's licensing terms in comparison to other European countries that Ireland competes with for exploration investment. The outcome of that review was the introduction of a profit resource rent tax, of between 5% and 15% that will apply in the case of more profitable fields. The profit resource rent tax would be payable in addition to the standard petroleum corporate tax of 25%. The revised terms apply to exploration licences issued since 1st January 2007.

While I will keep the licensing terms, both fiscal and non-fiscal, under review in light of relevant future developments, at this point in time I believe that the focus should be on attracting a larger share of mobile international exploration investment to Ireland, to increase the chances of new commercial discoveries being made.

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