Minister for Energy Eamon Ryan has said that he would not rule out a "windfall tax" on the profits of oil and gas production companies licensed to work in Irish waters.
However, the State's decision to impose an additional "resource" tax of up to 15 per cent on the sector will only apply to licences issued from January 1st of this year, Mr Ryan said yesterday when he announced new licensing terms for oil and gas exploration.
The revised licensing terms include a profit resource rent tax, which could increase the State's take to up to 40 per cent for the most lucrative fields. The new tax is additional to the current 25 per cent corporate tax rate - which remains the same - and is graded according to profit ratios to capital investment.
The top rate of 15 per cent resource rent tax will apply to fields where the profit ratio exceeds 4.5, while fields with a 3 to 4.5 profit ratio will be subject to 10 per cent. Fields where the profit ratio is between 1.5 and 3 will be subject to 5 per cent resource rent tax, and there will be no change to fields where the profit ratio is less than 1.5.
Mr Ryan said the Government took the decision in the light of an internal review carried out by his department last year and a separate report by economic consultants Indecon.
The Indecon report, which the Minister published yesterday, was commissioned last year by Mr Ryan's predecessor, Noel Dempsey, following a private members' motion spearheaded by former Independent TD for Mayo, Dr Jerry Cowley.
Mr Ryan said the rise in energy prices, along with increased data and improved seismic technology, made Irish waters more attractive. His department's analysis of the area had estimated risked reserves of 10 billion barrels of oil equivalent resources (oil or gas) in an Atlantic area which was "seriously under-explored". Experts have estimated this value at €455 billion, or sufficient to supply Irish energy needs for 90 years.
Mr Ryan told The Irish Times the new tax was slightly higher than that recommended by Indecon, which had advised a supplementary corporate profit resource rent tax of between 5 and 10 per cent for more profitable finds. He would not rule out a "windfall" tax on existing finds, similar to that imposed on North Sea production by Britain's then chancellor, Gordon Brown, two years ago.
Mr Ryan said the aim was to take a balanced approach which ensured a greater return to the State from our own natural resources,
Labour energy spokesman Tommy Broughan disputed this claim yesterday, but described the changes as a step in the right direction. Mr Broughan said it was regrettable that the Minister and his consultants had rejected suggestions for a petroleum sharing contract regime, similar to that run by states like Denmark.
Irish Offshore Operators' Association chairman Fergus Cahill said the changes were "complex" and required careful and detailed analysis before commenting further. Exploration in offshore Ireland remained a "high risk, high cost activity", he added.
Dr Cowley, who received the support of the Opposition for his private members' Bill on the issue last year, also gave it a qualified welcome.
Pádraig Campbell, of the Campaign for Protection of Resources, congratulated Mr Ryan and called for establishment of an independent oil and gas directorate, similar to that in Norway.
