A Government grant of $5 per barrel of oil or gas produced should be paid to offshore exploration companies for the first 5 years of production in Irish waters, a new report has recommended.

The report, prepared by Dr Barry Brunt and Dr Richard Moloney of University College, Cork, argues the Republic remains "lightly explored" and a cash incentive is required to encourage exploration.

It found exploration results achieved to date in the Republic were poor, with only 130 wells drilled offshore since the 1970s and only one field, the Kinsale Head area, brought to production.

Two other fields, Helvick and Corrib, are likely to be declared productive but to date have produced no output.

This represents a success rate of less than 3 per cent compared to the international success rate of around 10 per cent, the report argues.

The proposed $5 Government grant would be managed by an agency such as Enterprise Ireland and paid for a five year period and to a maximum of 250 million barrels. It would only apply to output landed in Ireland, says the report.

Under the proposal, the hydrocarbon products landed in Ireland would be required to be available for purchase by Irish National Petroleum Company and Bord Gais under the normal market conditions at the benchmark price with the Exchequer paying the $5 premium.

A major benefit of the proposal would be the increased security of supply. Some 67 per cent of Ireland's energy requirements are imported and therefore subject to disruption in event of world crises, says the report.

The proposal could reduce Ireland's trade deficit, worth some £3 billion over 5 years in hydrocarbon products, and increase Government revenue from income taxes, corporate taxes, profits of State companies and exploration licensing fees.

The total value of exploration activities in Ireland since 1970 has been £1.38 billion in 1998 prices. Since 1960, the Government has received over £130 million for licensing fees and royalties. In 1998 alone, the total contribution of production operations was £19.80 million and 387 full-time equivalent jobs.