Government to change tax regime for oil industry
Updated rules expected to be announced this month at conference in Dublin Castle
Minister for Energy Pat Rabbitte will this month unveil changes to the tax regime for the oil and gas industry. Photograph: Stephen Collins/Collins Photos
Minister for Energy Pat Rabbitte will this month unveil changes to the tax regime for the oil and gas industry, based upon recommendations contained within a consultants’ report that was handed to Government in recent days.
The Department of Energy, Communications and Natural Resources is currently assessing the report , drawn up by international energy consultants Wood MacKenzie. The report will be discussed at Cabinet, prior to an expected announcement on updated terms for oil and gas exploration on June 18th, at the Our Ocean Wealth conference in Dublin Castle.
The Department confirmed it has received the Wood MacKenzie proposals but declined to comment further upon them.
There are fears in some parts of the industry that the report may recommend a toughening of the tax regime for oil and gas exploration, where the tax on profits currently ranges from 25 per cent to 40 per cent.
“From what I’ve heard about what’s contained within the report, the industry won’t like it,” said one source. Another source said many within the industry are braced for an increase in profit resource rent tax (PRRT). PRRT was introduced by former Green Party energy minister Eamon Ryan in 2007 as a top-up to the normal corporation tax on exploration profits of 25 per cent. PRRT can only be levied on the most profitable fields, and ranges from an extra 5 per cent up to 15 per cent, giving a total possible tax rate of 40 per cent.
Many within the industry expect an increase in the PRRT rate for new licences, although it is unclear if any increase could be backdated to cover existing licences. The Government is expected this summer to launch a new licensing round under the updated tax regime.
Senior members of the Irish oil and gas industry gathered in Dublin yesterday for the opening session of the Ireland Oil and Gas Summit in the Conrad Hotel. The gathering was addressed by Ciarán Ó hÓbáin, principal officer of the Government’s Petroleum Affairs Division, who will also address the Our Ocean Wealth conference later in the month on the issue of licensing terms.
Tony O’Reilly Jr, the chief executive of Providence resources, also addressed yesterday’s conference. Mr O’Reilly told the conference that Ireland needs to attract more international exploration companies to shoulder the cost of drilling off the Irish coast.
He warned that concerns about a possible vote for independence by Scotland could lead to reduced levels of investment in the North Sea, and consequently lower production and higher prices.