State launches latest round of offshore licensing

The Government has launched its first offshore licensing round for three years, adding that its revised fiscal terms for incoming operators should encourage new investment in Irish waters.

Natural Resources Minister, Fergus O’Dowd formally announced details of the long-since anticipated 2015 Atlantic Margin Oil and Gas Licensing Round yesterday, saying it should build on the success of the 2011 round, which has to date seen 11 licensing options being converted into full exploration licences by their holders.

Again, this round — which is open to applications until September 2015 — will offer two-year licensing options and no exploration drilling will take place unless later converted.

The new licensing round divides the Atlantic Margin into three size categories — with a limit of four blocks available for every applicant in the Donegal, Erris and Slyne Basin regions; six blocks for the Porcupine Basin and Goban Spur region and a maximum of 10 blocks for the Rockall Basin; the latter aimed at stimulating exploration interest in an underexplored area.

Mr O’Dowd said “a good number of quality applications” are expected, with the new fiscal terms also offering “a backdrop of regulatory certainty”.

That “regulatory certainty” has been cautiously welcomed. The Irish Offshore Operators’ Association (IOOA) chairman, Professor Pat Shannon, said such fiscal clarity is vital for the development of Ireland’s offshore sector. He added that no retrospective tax hikes is significant, opining that if such a term had been included we could see the “nightmare scenario” of companies already operating here opting to leave our waters.

“While this stable fiscal regime is less favourable than that which currently operates, it should still help to attract industry and convince companies that, by investing in offshore Ireland, they are making a sound commercial decision,” he added.

The prospect of an increased financial return for the State from future drilling activity has also been welcomed by PwC, but it added that the introduction of a new 5% royalty charge could surprise some future licence applicants.

“One of the key challenges for Government will be the communication of these new fiscal terms to international stakeholders.”