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Ireland to review tax on oil, cautious on Norway-style rate


* Committee recommends 25-40 pct rate be doubled

* Interest increasing in country's oil potential

* Energy minister says must be realistic about prospects

DUBLIN, May 14 (Reuters) - Ireland's energy minister launched a review of the country's low tax rate on oil and gas on Tuesday, but cautioned that it would need to maintain a regime that encouraged more exploration in its unproven waters.

Hopes that oil production could provide revenue for a debt-laden government and a path towards energy independence picked up last year after Irish explorer Providence Resources reported the first commercially viable oil-flow rate at its first drilling target, Barryroe.

However ill-fated past projects and the fact Ireland does not yet have a major commercial field have prompted a cautious approach towards tax comprising of a 25 percent corporation tax and a resource rent tax of zero to 15 percent of profits.

After a parliamentary committee recommended that the rate for future licences be increased to a minimum of 40 percent and a Norway-style 80 percent for larger projects, Pat Rabbitte, minister for communications, energy and natural resources, said he would conclude a review by the end of the year.

"While I have clearly indicated my reservations about Norwegian style tax terms, I am conscious that long-term investment decisions on exploration expenditure would benefit from the maximum degree of certainty on the stability of the fiscal regime," Rabbitte told parliament.

"With that in mind and having regard to the fact that the last review of the fiscal terms was in 2007, it is my intention to seek further independent expert advice on the "fitness-for-purpose" of Ireland's fiscal terms."

Rabbitte added that any adjustment to the tax rate would not be retrospective, thus not effecting Providence's activities at Barryroe where it is seeking a partner to help foot the bill of up to $1.7 billion to get the field into production.

Fellow Dublin-based explorer Petrel said on Tuesday it was also in talks about bringing in help to fund drilling off Ireland's coast, while Fastnet Oil & Gas is also in the process of trying to find a partner for its Irish licences.

Having sparked the interest of some of the world's biggest oil companies, such as Exxon Mobil, Rabbitte indicated that any change that would be in put place for Ireland's next licensing round in 2014 or 2015, would likely be modest.

"I do not wish to be negative, or to undersell Ireland as a location for exploration investment - quite the contrary - but we must deal in realities," he said.

"The reality is that the Irish offshore is under-explored and its petroleum potential is largely unproven, particularly when compared with other petroleum regions such as Norway and the United Kingdom."

Posted Date: 
14 May 2013