Rabbitte agrees to review oil and gas exploration tax

Ireland’s financial gain from private offshore oil and gas exploration is to be reviewed amid pressure to increase the tax take from firms profiting from the country’s natural resources.

However, Energy Minister Pat Rabbitte played down any major hike in Ireland’s tax charges on private companies involved in exploration, saying the extent of our natural resource finds were overshadowed compared with finds in other European states.

Mr Rabbitte was responding to an Oireachtas committee report on oil and gas exploration, which called for tax charges on companies to be hiked up to as much as 80% for significant finds.

The report also recommended there be controls on the volumes of gas or oil produced, to encourage the maximum production.

It said the overall tax take should be increased to 40% on finds and to as much as 80% on significant gas and oil fields found by firms.

Mr Rabbitte said there was a stark contrast between our exploration experience and that of Norway and the UK.

He said his department was reviewing the 1960 Petroleum and Other Minerals Development Act, which deals with the exploration licensing regime. “Our overarching strategy in this area is to seek to maximise the benefits to the people of Ireland from indigenous natural resources. The most significant way in which Ireland stands to benefit from successful exploration is through tax revenue.”

However, he warned against companies refraining from exploration here because of high tax charges. The Government could also not afford large-scale exploration charges, he added, with a single exploration well in the Atlantic costing in excess of €100m.

He signalled that a large hike in tax for exploration firms would be unlikely.

“The changes in that tax regime that are now proposed are not minor or modest in nature. What is proposed is a fundamental re-positioning, that would raise our tax to a similar level as that of the UK and, in the case of very profitable fields, would impose a higher tax here than would apply in Norway.

“We have to recognise that Ireland is competing with countries such as Norway and the United Kingdom to attract mobile international investment and that we cannot set our tax terms in isolation.”

However, Mr Rabbitte told TDs that his department would review the “fiscal terms” governing exploration and the maximum gain achievable for the State. He said the review would be concluded before the end of this year.