Eoghan Murphy (Dublin South East, Fine Gael)
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To ask the Minister for Communications, Energy and Natural Resources in the event that a company (details supplied) or any other such company found oil in Dublin Bay, if the State will own that oil or a percentage thereof; if royalties will be paid to the Irish State; if the State will have a share in production of that oil; and if the company will be obligated to supply some oil to Ireland at a discounted rate to provide the State with security of energy supply. [52019/12]

Pat Rabbitte (Dublin South West, Labour)
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Ireland encourages exploration companies to invest in exploration for oil and gas in the Irish offshore on the basis that the exploration companies carry the full cost associated with that exploration. Then in the event of a commercial discovery being made, the oil or gas discovered would be demised to the licensees under a petroleum lease. While the State would benefit in a number of ways, the principal financial benefit would result from the special higher rate of corporation tax that applies to profits from production of oil or gas. A tax on profits of between 25% and 40% would apply in the case mentioned by the Deputy, in the event that the proposed drilling resulted in a commercial discovery.

While a commercial discovery would be very positive news for Ireland, the reality is that unless there is a substantial increase in the level of drilling activity in the Irish offshore, the true potential of our natural resources will continue to be unknown.

Taxation, royalty payments and production sharing are all instruments that can be used by a country to extract a value from production of its oil and gas resources. While these various instruments will impact in somewhat different ways, the key issue is to decide on the overall level of “State take” to aim for. In setting that level a country has to strike a balance between seeking to attract mobile international exploration investment and seeking to maximise the return to the State from successful exploration. Since the 1980s Ireland has taken a tax based approach, following the example of neighbouring countries such as the UK and Norway. Royalty payments or production sharing would not apply to any new commercial discovery made in the Irish offshore.

In relation to the specific issue of security of oil supply, Ireland is required under EU and IEA obligations to hold 90 days of oil reserves. The bulk of Ireland’s oil stocks are held by the National Oil Reserves Agency (NORA), with the balance held by industry.