The Irish Offshore Operators’ Association has said a review would be timely by the end of this year or in the first half of next year.
This would depend on oil price movement, results of drilling activity in Irish waters and any tax movements made in the UK.
Three years ago the Government changed its terms, by upping the top rate of tax on profits made from any oil find from 40% to 55% and introducing a 5% royalty revenue payable to the State for each year of a producing field’s lifespan.
Previously the association has called for a lowering of corporate tax levels for exploration firms operating here and the exclusion of smaller field operators from the 5% royalty revenue element of the terms.
This week, Brent crude dropped below $50 for the first time this year and association chief Pat Shannon said the longer prices stay between $50 and $55 a barrel a review of the fiscal terms is warranted. He said an eye must be kept on any tax regime changes in the UK.
However, Mr Shannon welcomed yesterday’s results of Britain’s latest licensing round, which saw 25 oil and gas exploration licences in previously untapped waters awarded to 17 companies.
It comes ahead of another licensing round for mature areas of the North Sea, which is still estimated to have billions of barrels of oil left for extraction worth around £200bn (€232bn) to the UK exchequer.
However, drilling activity in the North Sea has been at a record low for two years due to high costs and the fall in oil prices, which forced companies to focus on producing assets. This year, the UK’s oil lobby group expects 16 exploration wells to be drilled, a slight uptick from 14 last year.
Analysts at global energy research group Wood Mackenzie expect exploration costs to fall another 10% this year because of oversupply in equipment, which could help make exploration work more economic.
Mr Shannon said more activity in UK waters should complement activity here and be viewed as “a vote of confidence” in the neighbouring Irish offshore arena. However, he said the Irish government cannot afford to let too much distance materialise between fiscal incentives being offered by both countries.
Last summer, a PwC survey found that 70% of offshore explorers with Irish assets wanted a review of the government’s fiscal terms in order to reflect the lower oil price environment.