Creating a Viable Exploration Environment

In March 2007, following a Green Paper and a detailed consultation process, the Government published its White Paper on Energy. While largely dealing with longer-term issues such as renewable energy sources and reductions in energy consumption, this major policy document emphasised both our serious dependence on fossil fuels into the medium term, and the fact that most of our gas and all of our oil are currently imported. Recognising the need to "ensure supplies of energy at competitive prices and to minimise the risk of supply interruption", it thus rightly adopted as a Strategic Goal the "creation of a stable and attractive environment for hydrocarbon exploration and production". This affirmation of policy was welcomed by the industry.

The White Paper also identified the need for diversity of energy sources. While recognising the validity of this concept, it is well to remember that diversity of supply is as important as diversity of energy types. When one considers that all our imported gas comes through one installation in Scotland, the importance of finding and developing indigenous oil and gas attains further significance.

Meanwhile during the first half of 2007, the International Energy Agency (IEA) carried out a review of Irish Energy Policy. The IEA also identified the urgency of developing indigenous oil and gas, and commented that "great care should be taken not to increase risk" to licensees.

In 2006, the then Minister for Communications, Marine and Natural Resources commissioned Indecon Consultants, in association with London Economics, to provide expert advice on Irish Petroleum Licensing Terms. The consultants reported in February 2007. Their general conclusion was that the existing rate of taxation (25%), was not markedly out of line, taking into account the low rate of discoveries offshore Ireland. They did, however , recommend a sliding scale of tax, rising to 35% on the most profitable fields, In the event, Minister Eamonn Ryan has increased this maximum to 40%, making oil and gas production by far the most highly taxed business activity in Ireland.

The long-term effects of this increase in taxation remain to be seen.






























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