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Offshore operators criticise oil and gas tax proposals

Tim O'Brien & Lorna Siggins - Irish Times

THE IRISH Offshore Operators’ Association has expressed concern at an Oireachtas committee’s recommendation that large oil or gas finds could be taxed at 80 per cent of profits.

Such a rate would be comparable to or higher than Norway, which has “an established industry, a high rate of commercial discoveries and which refunds 78 per cent of the cost of unsuccessful exploration”, the association said in a statement yesterday.

The report from the Oireachtas Committee on Communications, Natural Resources and Agriculture said tax on future offshore oil and gas profits should be set at a minimum of 40 per cent, rising to a maximum of 80 per cent. The proposals also include reform of the planning and public consultation process to address “reputational damage” done to Ireland through the Corrib gas dispute.

Committee chairman Andrew Doyle said the “key concern” was to maximise State revenue while incentivising offshore oil and gas exploration.

Much of the report’s proposals were modelled on the Norwegian experience, meaning a small find would attract the lowest rate of overall tax – 25 per cent corporation tax and a 15 per cent profit tax.

However, should a very large find be made then the tax could rise to 80 per cent overall, meaning Ireland would not lose out on the resource. Medium-sized finds would be taxed at an overall rate of 60 per cent.

The report cautions against retrospective changes to existing licences because of fears of creating uncertainty among oil explorers. It also recommends that taxation and other regulations be reviewed after every round of licence offerings. It said the State should also consider controlling production volumes as part of its resource management.

In relation to public consultation, the report said there should be “a clear and comprehensive process” beginning “at the first substantive stage”, which is when a plan of development is drawn up.

Mr Doyle said it was hoped these changes would show oil and gas exploration companies they should have “no hesitancy about coming here”.

The proposals were welcomed by Siptu spokesman Pádraig Campbell who said they had the potential to “rebalance” changes made by former minister Ray Burke in 1987.

The offshore operators’ association said the proposals could “discourage companies who are currently considering Ireland as a location for exploration”.

Posted Date: 
10 May 2012