Irish gas and oil 'could be as lucrative as FDI'
IRELAND'S oil and gas industry could be as lucrative as foreign direct investment (FDI) for the country, but the Government needs to ensure the relevant tax regime for the sector remains attractive enough in order to lure exploration interest, a conference on the sector has been told this morning.
The Government announced in September that it was hiring independent advisers to determine if the tax regime applicable to the oil and gas industry – including exploration reliefs – was appropriate.
A successful major find of oil or gas could have a major economic benefit for the country. The taxes levied on oil and gas finds are low in order to encourage exploration around Irish waters, particularly in the Atlantic where due to deep sea and a tough environment, exploration costs are steep.
"The tax regime is an important factor, particularly in the case of Ireland which is really at the embryonic stage in the development of this industry," said Ronan MacNioclais, a partner with PricewatehouseCoopers at the Atlantic Ireland Petroleum Conference in Dublin.
"Tax is one of the matters taken into account by exploration companies in the decision-making process for the location of exploration investment," he said. "Competition for such exploration investment is intense from other countries in the same way that it is for traditional FDI in other sectors."
An Oireachtas Committee on Communications, Natural Resources and Agriculture called in May for licensing and tax terms for big energy firms to be increased. It wants the tax to rise from a basic rate of 40pc on a sliding scale to as high as 80pc for very large commercial discoveries.
"A favourable tax regime should encourage exploration investment, thereby fostering the development of the industry but a high-tax regime would almost certainly deter investment in what is effectively a high-risk, start-up industry for Ireland Inc," said Mr MacNioclais.
Meanwhile, the Bord Gais Energy Index – which gauges prices of oil, gas, coal and electricity – rose 1pc in October, despite the price of Brent crude fluctuating during what was a turbulent month for the international energy sector. While the price of Brent crude oil by the end of October was unchanged on the previous month, the stability concealed price swings that were a response to negative and positive factors that ultimately cancelled each other out.