Survey: Regulators hindering exploration growth
The results of the study, conducted by PwC to coincide with this year’s Atlantic Ireland conference, which begins today in Dublin, represent a real mixed bag of views about the sector.
Long-term sentiment is positive and there is a feeling that Brexit will not have a significant impact on the Irish offshore sector. However, only 28% of exploration firms with Irish-based assets rate the overall outlook for the industry, here, as being favourable for the next two years.
Furthermore, in that timeframe only €300m is expected (by survey respondents) to be invested in Irish-based projects — down from €1bn last year.
That said, more than 80% of respondents were optimistic about the level of petroleum reserves yet to be discovered in Irish waters and 50% said they have a high level of optimism on that front, pointing to long-term positivity about the sector here.
However, the level of red tape and amount of Government bodies involved in the planning and regulatory process, and a perceived lack of commitment given to enhancing that system, was given as a major frustration.
It was also included by some companies as a reason not to take part in the recent Atlantic Margin Licensing Round, which saw a record number of licensing options awarded.
“In times of economic uncertainty, it is crucial that the Government takes positive steps to encourage investment into the Irish oil and gas industry,” said Ronan MacNioclais, partner with PwC’s oil and gas practice.
“It is clear that steps need to be taken to improve the regulatory and planning processes to fast-track developments, as these are causing companies difficulties and impacting on Ireland’s reputation internationally.
"It was a recurring theme in the survey and specifically mentioned by some respondents amongst the reasons for non-participation in the 2015 licensing round.
“Linked to this is the Corrib factor (specifically, the amount of time it took for that project to reach commercial status) and it is very disappointing to see that it is continuing to have a significant deterrent effect on investor decisions in Ireland.”
Also back in the firing line, in the survey, is the State’s amended fiscal terms dictating potential tax revenues from the sector. Last year, the Government formally upped the headline tax rate — from 40% to 55% — on profits generated from oil and gas finds and introduced a 5% royalty revenue take for each year of a producing field’s lifespan.
Those against the terms have argued they should be modified to reflect the ‘new normal’ of $50 oil prices and only 24% of surveyed firms said the new fiscal terms are appropriate.
“The Government’s decision to introduce new fiscal terms in Finance Act 2015, at a time when the industry was in turmoil, was also disappointing and I feel that it sent the wrong message to the industry at a time when it was in a bad place economically,” said Mr MacNioclais.
