Terence Flanagan (Dublin North East, Fine Gael)
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Question 122: To ask the Minister for Communications, Energy and Natural Resources if he will respond to correspondence (details supplied) regarding gas fields; and if he will make a statement on the matter. [33736/11]

Pat Rabbitte (Dublin South West, Labour)
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A finding from a research study sponsored by my Department estimated that there could be a total reserve potential in the order of ten billion barrels of oil equivalent in the frontier basins west of Ireland. This figure is simply an estimate of unproven potential, derived from an assessment of the scale of acreage, the state of knowledge of offshore geology and experience elsewhere. It is not a detailed estimate based on comprehensive survey and exploration drilling of Ireland's Atlantic offshore. Actual reserve figures are likely to vary widely from these estimates and will not be known without a dramatic increase in the level of exploration activity. In fact, Ireland's proven commercial reserves to date are estimated at 0.5 billion barrels and more than half of this has already been exploited.

The only commercial discoveries of hydrocarbons made in the Irish offshore to date are the three producing gas fields in the Kinsale area, along with the Corrib gas field, which is currently being developed off the coast of Mayo. There have been no commercial discoveries of oil.

In relation to the onshore, my Department in February of this year granted Licensing Options to two companies over parts of the North West Carboniferous or Lough Allen Basin. The Licensing Options are designed to allow the companies assess the natural gas potential of the acreage largely based on desktop studies of existing seismic and well data. This potential had been identified in earlier exploration, but was not considered to be commercially viable. It is too early to conclude whether or not these authorisations will proceed to the exploration licence stage let alone to anticipate a commercial discovery that would potentially lead to a petroleum production project.

In relation to royalties, Ireland followed the lead of other countries such as the UK and Norway and moved away from a royalty based payments system to a tax based system in 1987. Under a tax based system the return to the State is linked directly to the profitability of the oil or gas field compared to a royalty based system where payments are linked to the volume of production and take no account of differences in development cost or actual profitability.

A comprehensive review of Ireland 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%.

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. Ireland's petroleum taxation rate is deliberately pitched at a level that is consistent with countries such as France, Portugal and Spain, who, like Ireland, have limited petroleum production, rather than with major petroleum producers such as Norway or the UK.