Skip to main content

Tax Rate on Exploration Increased by Green Party Minister

Another one of the key demands of the Rossport 5 has been partially met, when Minister for Communications, Energy and Natural Resources, Eamon Ryan announced
last week that there was to be changes to the tax situation for oil and gas exploration in Ireland and its waters. However, whilst suggesting that the tax
situation had been a little generous, he declined to make the changes retrospective, and therefore the new tax regime will not apply to the contentious Corrib gas
discovery. In the government announcement that caught the exploration industry somewhat unawares, Minister Ryan announced an additional tax of up to 15% on profitable
operations, and he also announced changes to the terms of any new licenses. Minister Ryan also announced that he would be launching a new licensing round
for oil and gas exploration in the ‘Porcupine Basin’ in the early autumn, a source that could prove even more substantial than the Corrib Field finds.
According to a spokesperson for the minister, the Government has taken this decision in light of a detailed review of licensing terms carried out by the Department
of Communications, Energy and Natural Resources and the report by economic consultants Indecon. Minister Ryan said, “The basis for this decision was
to ensure a greater return to the State from our own natural resources, while maintaining the incentive for companies to explore off our shores. I believe these
changes achieve this balance. The previous terms were introduced in 1992 with the aim of encouraging petroleum exploration in Ireland. However, this did not
eventualise with only 23 exploration wells drilled in Ireland since that time.” Notwithstanding this fact, Minister Ryan said that he is optimistic that greater
exploration investment will take place under these new terms. He explained, “The difference now is in prospectivity, price and profitability.
The data available to us now and seismic technology necessary for prospecting have vastly improved in the intervening 15 years. Energy prices continue to rise.

Minister Eamon Ryan, before his appointment as minister for Natural Resources

Both of these factors are leading to greater profits in the industry. Fewer prospective areas are open for exploration internationally, making Ireland’s unexplored
basins more attractive. The Atlantic area is seriously under-explored. Departmental analysis of this area estimated risked reserves in the order of 10
billion barrels in the Atlantic area alone.” These figures would be much greater than industry sources have been inclined to predict to date.
The Minister also announced that he would be making changes to the non-fiscal licensing terms as well. These include reducing the overall length of certain licences,
and requiring licensees to surrender acreage earlier. All changes, both fiscal and non-fiscal, alter the way Ireland deals with oil and gas
exploration companies. They bring us into line with other comparable countries. Successful exploration will contribute greatly to securing Ireland’s energy supply
into the future.” In language unheard of from government sources in the long Corrib gas dispute, the minister stated that “Ireland’s oil and gas is a resource of
the people. The Government acts as caretakers/owners of these resources on their behalf. It has a duty to ensure appropriate return and to ensure that they are
adequately and properly explored. Overall, I feel these changes represent a licensing regime that is in the greatest public good”.
However, as predicted, Shell to Sea activists have rejected the changes, saying that they do not go far enough, and they do not apply to the Shell Corrib gas find.
A campaigner against the government-backed Shell scheme to exploit the Corrib Gas field has slammed the latest announcement from the minister for Natural
Resources, Eamon Ryan, as “more spin than win”. Micheál Ó Seighin, who spent 94 days in prison for protesting against Shell, has
pointed out the there are few gains for the people of Ireland from the new measures. New rules will have no effect on the potential profits from the Corrib scheme,
which still operates under licensing agreements drawn up by disgraced former minister Ray Burke.
Speaking in Erris, Michael Ó Seighin said that while there may eventually be some gains to the taxpayer from the changes, these are decades away, and the
Minister’s refusal to make the alterations to the licensing rules retroactive before January 2007 allows a two-tier situation, which can be easily manipulated by the
industry. Micheál Ó Seighin said it is clear to him that the new Natural Resources Minister has been mindful of the warning from the Irish Offshore Operators Association,
issued to then Minister Frank Fahy in 2001, that they would have what they called “serious problems” with any changes to the existing licences.

Ó Seighin also pointed out that the new measures “take no account of the fact that the people of Ireland have, through Government mismanagement, lost ownership
of their own natural resources. There is nothing in the Minister’s statement which deals with the issue of security of supply, since the new owners of the oil
and gas reserves (the big multi-nationals) can still sell it to the highest bidder on the international markets.” “Ireland has no price advantage, no control of reserves
in a world seemingly approaching peak oil, [and] no guarantee of supply superior to normal commercial contracts that apply to the market in general,” he said.
He continued “The proposed changes are a damp squib with more spin than win.
The changes to the non-fiscal terms are insignificant and will not put a cent in the national piggy bank. That the proposed gains are so far in the future probably
means that the Minister can bask in an unearned dividend, as will his successors over the next four or five Dáils. An altogether sad spectacle.”

Posted Date: 
14 August 2007 - 11:57pm