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Report on terms of off-shore exploration due by end of April

Éanna Ó Caollaí - Irish Times

[Shell to Sea] The Dept of Energy opted for Wood McKenzie rather than Shell to Sea, who also submitted a free tender for the process [See here].  Wood McKenzie have a long history of involvement in the Corrib Gas Project since at least 1998 and have been previously employed by both Enterprise Oil and Shell.  It seems that the Dept of Energy want to back hear back advice, supporting the policy they are already pushing.

Minister for Communications, Energy and National Resources Pat Rabbitte has said he expects international consultants Wood McKenzie to report back to him by the end of April on the viability of terms under which the State engages with oil and gas exploration firms.

Announcing their appointment yesterday, the Government said Woods McKenzie would conduct a “fitness-for-purpose” review of current arrangements to advise on what level of fiscal gain is achievable for the State and how to best achieve that.

Speaking this morning, Mr Rabbitte said there will be an increase in exploration and drilling off the Irish coast “if we get the next round right”.

“Therefore, we need to know before June what precisely is the regulatory framework and the fiscal terms against which they will be operating,” Mr Rabbitte told RTÉ’s Morning Ireland.

“They are required to report by the end of April and then I have between the end of April and the June announcement to make the decision,” Mr Rabbitte told Morning Ireland.

Mr Rabbitte said Woods McKenzie will compare Ireland against 10 “comparator states”.

“Let them find what they will. The fact of the matter is that there have been 1200 exploration and appraisal wells drilled in Norway since the seventies. There have been 4,000 exploration and appraisal wells drilled in the United Kingdom. (and) 156 in Ireland in the same period of time.”

“We are doing marginally more than one drilling per annum so it’s like looking for a needle in a haystack.

Mr Rabbitte said there was evidence of oil and gas reserves off the Irish coast but warned of the prohibitive costs associated with exploration.

“The geological and seismic and other professional data that we have suggests that there may well indeed be valuable resources there but we have to find them.”

“At over €100m ‘a pop’ to drill a well, the State itself doesn’t have that kind of investment. Therefore, we have to bring in the big exploration companies and you have to get the balance right between on the one hand being able to attract them, and, on the other hand not having a fiscal regime that repels them.”

Mr Rabbitte said the terms under which Ireland engages with exploration companies was comparable to other European countries.

“If the present tax terms were wrong then why isn’t our off-shore black with exploration vessels drilling,” he asked.

“The tax rate in Portugal is 27.5 per cent, it is 30 per cent in Spain, 34.4 per cent in France. So, ours is between 25-40 per cent - depending on size of find. That doesn’t seem to be wildly out of line,” he said.

Commenting on critics who say Ireland should tax exploration companies similarly to Norway, Mr Rabbitte said: “There are advocates of leaving it in the ground. Some of them for environmental or other reasons who want to always compare with Norway.

“But it is the unique geology of Norway that confers the advantage on Norway. Norway refunds 78 per cent of an empty well. If you drill in Norway, so confident are they of the strike rate, that if it’s empty they refund 78 per cent of the cost.”

Posted Date: 
6 March 2014