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State 'should double' tax take on gas and oil finds

Lorna Siggins, The Irish Times

[Shell to Sea] The Joint Oireachtas Committee on Communications, Natural Resources and Agriculture report on Offshore Oil and Gas Exploration can be found here

A JOINT Oireachtas committee has recommended that the State double its resource tax take for large oil and gas finds off the Irish coast, and initiate a “transparent” system of public consultation in exploiting new finds.

An all-party report, which is due to be published today by the Joint Oireachtas Committee on Communications, Natural Resources and Agriculture, says that there should be a review of offshore fiscal and licensing terms before each licensing round.

The report, which has been seen by The Irish Times, advises against “retrospective changes” to terms of existing agreements – such as those for the Corrib gas field and recent Providence Resources finds – as this could “risk long-term reputational damage”.

However, it points out that only 9.3 per cent of the geologically significant portion within the designated Continental Shelf is currently licensed for exploration or leased for production.

Any “large increase” in the number of commercially viable finds or the size of fields could therefore yield greater benefit to the State, if new tax terms are introduced by the Government, it argues.

The joint committee, chaired by Fine Gael TD Andrew Doyle, makes 11 recommendations to Minister for Energy Pat Rabbitte, including the need for a “clear and transparent fiscal and licensing regime which provides certainty for the State and industry alike”.

This would require a review of the 1960 Petroleum and Other Minerals Act.

Fianna Fáil TD Éamon Ó Cuív said last night that while he could not comment on the report details in advance of publication, it was a “radical and well-founded” document which carried “huge weight” due to its “all-party agreement”.

The committee review was undertaken after Mr Ó Cuív and Sinn Fein secured an undertaking from Mr Rabbitte in the Dáil.

The last review conducted by former energy minister Eamon Ryan introduced a profit resource rent tax, in addition to the 25 per cent corporation tax which is currently levied – and which exploration and development costs can be offset against.

The 2007 licensing terms increased the State take from 25 per cent to 40 per cent for the most profitable fields.

However, the committee believes 40 per cent should be the overall “minimum” tax take for future licences.

It says that the profit resource rent tax should increase on a sliding scale from 40 per cent for small to 60 per cent for medium to 80 per cent for very large commercial discoveries; terms should be reviewed before each new licensing round; and the State should explore ways of controlling production volumes as part of resource management.

Prohibition of flaring gas, where surplus gas is burned off from a well to relieve pressure, should be considered; and the Minister should draw up a strategic policy document for petroleum exploration which could dovetail into other policy documents such as the marine policy review.


Final-JCNRA-Report-on-Offshore-Oil-Gas-Exploration.pdf3.19 MB
Posted Date: 
9 May 2012