Charlie McConalogue (Donegal North East, Fianna Fail)
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558. To ask the Minister for Communications, Energy and Natural Resources the total estimated value of oil and gas discoveries off the Irish coast; the current tax rate that applies to profits made on these discoveries; if this rate has been reduced in recent years; and if he will make a statement on the matter. [10124/15]

Alex White (Dublin South, Labour)
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Whilst there has been some welcome upturn in the level of interest in exploration off our coast in recent years, the hydrocarbon potential of the Irish Offshore is largely unproven and is likely to remain so until there is a significant and sustained increase in the number of exploration wells being drilled from the current levels of none to one well per year.

The only commercial discoveries of hydrocarbons made in the Irish offshore to date are the three producing gas fields in the Kinsale area, namely the Kinsale, Ballycotton and Seven Heads fields off the coast of Cork, and the Corrib gas field. There have been no commercial discoveries of oil.

The value of a gas field will depend on a combination of factors including the volume of recoverable gas, the cost of developing and operating the infrastructure, the price of gas over the life of the field, together with the timing and profile of production. As such it would be a speculative exercise to provide a total estimated value of commercial gas discoveries off the Irish coast.

Profits from the three producing gas fields are taxed at a corporation rate of 25% (double the standard rate of corporation tax for trading income). In addition, royalties from the Kinsale and Ballycotton gas fields are payable to the State at a rate of 12.5% of the fair market value of the gas at the well head. The combination of tax, royalties and acreage rental fees currently provides for a State take of 40% of net income from these two fields.

Royalties are not payable on production from the Seven Heads Gas field as Ireland moved away from a royalty based payments system to a tax based system in 1987 (following the lead of the UK and Norway who abolished royalties for new fields in 1982 and 1986 respectively).

The direct financial return to the State from the Corrib gas field, which is expected to come into production in 2015, will be through acreage rental fees and the 25% corporation tax on profits.

In June 2014 Government approval was received to revise Ireland’s oil and gas fiscal terms along the lines recommended by international energy consultants Wood Mackenzie. A key recommendation of Wood Mackenzie was that tax rates in respect of new licences should be revised to ensure a higher share for the State from the most profitable fields. This would result in the application of maximum rate of 55% in the case of new licences. My Department is working with the Department of Finance and the Revenue Commissioners to give operational effect to this approach.