Monday 11 December 2017

Government to reassess oil and gas tax rates

The Atlantic coast of Ireland will be explored for oil and gas reserves
The Atlantic coast of Ireland will be explored for oil and gas reserves

Ed Carty

Independent advisers are being sought by the Government to assess if the right tax is being charged for the oil and gas industry.

A review of controversial reliefs for exploration companies will be included in the audit along with the level of other special fiscal arrangements for big energy firms.

Pat Rabbitte, Minister for Communications, Energy and Natural Resources, said he wants experts to review if the current terms for exploration, development and production are fit for purpose.

"Ireland's offshore, whilst holding great promise, is relatively under-explored with only four commercial gas finds to date," he said.

"In setting our fiscal terms we need to strike the necessary balance between attracting the high-risk exploration investment needed to prove that promise, whilst maximising the return to the State and its citizens from our natural resources."

Mr Rabbitte's decision to seek advice follows a report from the Oireachtas Committee on Communications, Natural Resources and Agriculture in May last year which called for licensing and tax terms for big energy companies to be hiked.

It wanted to see overall tax jump from a basic rate of 40% on a sliding scale up to 80% for very large commercial discoveries.

The generous regime in play at present was put together by former Fianna Fail minister Ray Burke who was jailed over tax fraud.

They allow for a 25% tax rate on the profits energy giants make on offshore oil and gas discoveries in Ireland and the cost of exploration to be written off - one of the lowest rates in the world.

But waters off Ireland are proving lucrative, with Shell's Corrib gas field nearing production and Providence Resources revealing last year that its Barryroe field off Cork, contains up to 1.6 billion barrels of oil, and plans to prospect off Dalkey.

Department officials are seeking applications from tax advisers under a tendering process.

Mr Rabbitte's office said successful auditors will focus on what level of fiscal gain is achievable for the state and its citizens and also on the appropriate mechanisms best suited to produce such gain.

It will look at petroleum prospectivity offshore and the attractiveness of Ireland for mobile international exploration investment.

A report released by the Shell to Sea campaign, which has opposed the Corrib gas field off Mayo, last year claimed there are 69 prospects, discoveries and licensed areas off Ireland and that energy firms estimate the potential finds could hit 21 billion barrels of oil equivalent.

Fergus O'Dowd, junior minister in the department, said that the Government needed to be competitive on the open market to attract investment in exploration.

"The Government's strategy for the exploitation of the State's natural oil and gas resources aims to maximise the level of exploration activity and increase the level of production activity, while ensuring a fair return to the people from these activities," said Mr O'Dowd.

"Ireland competes for mobile exploration investment in the same way it competes for other forms of foreign direct investment.

"Given increasing international interest in the Irish offshore it is timely that the fitness-for-purpose of the existing fiscal terms be reviewed. This will ensure regulatory certainty in advance of the next oil and gas exploration licensing round."

Online Editors

Promoted Links

Today's news headlines, directly to your inbox every morning.

Promoted Links

Editor's Choice

Also in Irish News