Ladies and Gentlemen, I am very pleased to have this opportunity to meet and speak with you today on what is both an interesting and topical area of public policy.
In the context of climate and environmental policy there is an urgent need to reduce our dependence on fossil fuels. However, the reality remains that oil and natural gas fulfil over 50% of world energy needs, and are likely to continue to play a significant role into the future.
The Government’s underlying objective in respect of oil and gas exploration and development is to ensure that any exploitation of the State’s natural resources is conducted in a manner that maximises the benefits accruing to the people of Ireland.
Such benefits may take a number of forms including, increased economic activity, additional revenue to the State; and the strengthening of the State’s energy security of supply.
The most significant way in which Ireland stands to benefit from successful exploration is through tax revenue. However, we should not underestimate the boost to economic activity, and particularly employment, that can result from exploration and development activities. For example, over 1,000 people were employed at the height of the construction phase of the Corrib gas terminal, and even today the project continues to provide both considerable direct and indirect local employment opportunities in North Mayo.
So what are the prospects of realising such benefits?
The reality remains that the Irish offshore is under-explored and its petroleum potential is largely unproven, particularly when compared with other petroleum regions such as Norway and the United Kingdom.
The statistics speak for themselves. A total of 156 exploration and appraisal wells have been drilled to date in Ireland’s offshore, compared with more than 1,200 wells in Norway and 4,000 wells in the United Kingdom. The United Kingdom has in excess of 300 producing fields while Ireland has only three, with a fourth in development. Norway is the second largest gas exporter and the seventh largest oil exporter in the world. Ireland on the other hand imports more than 95% of its gas and 100% of its oil.
The challenge therefore remains as to how best to encourage an increase in the level of exploration investment, and particularly exploration drilling. This is needed if we are to establish the true petroleum potential of the Irish offshore.
In that light it is the policy of the Government to continue to provide an environment that encourages industry to make the necessary investment.
We do this in a number of ways, including:
· offering attractive and innovative licensing opportunities, such as the 2011 Atlantic Margin licensing round;
· providing a fit-for-purpose, transparent and robust regulatory regime;
· deepening knowledge of our offshore petroleum potential, in particular through data acquisition and supporting key research projects, and;
· actively promoting the opportunity to invest in exploration in the Irish offshore, in particular to companies not currently active here.
A practical and recent example of efforts in this regard is the major 2D seismic survey recently announced by my colleague Minister of State, Fergus O’Dowd, that will go a long way towards revealing the true oil and gas exploration potential of Ireland’s Atlantic Margin.
At a cost of €20 million and covering up to 18,000km of full-fold seismic data, this survey is by far the largest regional seismic survey acquired in the Irish offshore, and will provide a regional grid of modern seismic data over Ireland’s frontier basins. Additionally it is designed to infill data gaps that exist, particularly in the Southern Porcupine, Rockall and Hatton basins; and the data should allow resource potential to be predicted with much greater confidence and enable both the industry and the Government to adequately evaluate future licensing opportunities. The survey is being undertaken by ENI Ireland BV in conjunction with my Department in the Atlantic waters of the Irish-designated Continental Shelf.
The current national debate on oil and gas exploration has tended to focus on calls for Norwegian style tax rates in the absence of Norwegian levels of commercial discoveries.
Unfortunately exuberant and highly optimist statements on the potential of the Irish offshore have left the general public with a general impression that the State’s, and more importantly their, oil and gas assets are being given away to industry for very little effort or return.
The high risk of failure; the scale of investment required for both exploration and development; and the long lead times necessary to see a return on such investment; these are not matters that register to any significant degree in the current debate.
Moreover, the extent to which the State must compete for exploration investment , particularly in the context of the growing impact of unconventional oil and gas discoveries, is not fully appreciated. In my view we need to view exploration investment through the prism of the general need for foreign direct investment.
The consequence of this is that both Government and industry have a critical role to play in informing and contextualising the public debate.
In that regard I welcome the recent publication by PwC of its report “Making the Most of our Natural Resources - Oil and Gas Exploration in Ireland”. This report, as commissioned by Providence Resources, provides a timely and, more importantly, evidence based input into the national debate.
Whilst I have clearly indicated my reservations about Norwegian style tax terms, I am conscious that long-term investment decisions on exploration expenditure would benefit from the maximum degree of certainty on the stability of the fiscal regime.
With that in mind, and having regard to the fact that the last review of the fiscal terms was in 2007, it is my intention, following conclusion of the current debate in Dáil Éireann on the Report on offshore oil and gas exploration by the former Joint Committee on Communications, Natural Resources and Agriculture, to seek further independent expert advice on the “fitness-for-purpose” of Ireland’s fiscal terms.
Such expert advice would focus on what level of fiscal gain is achievable for the State and its citizens and, equally important, on the mechanisms best suited to produce such a gain.
In the context of planning for the next licensing round, it would be my intention to bring my consideration of this matter to a conclusion before the end of this year. That would ensure that the next licensing round could be launched against a backdrop of regulatory certainty and encourage much needed new investment in exploration in our offshore.
I would like to conclude on a positive note. There is a clearly recognised hydrocarbon potential in the Irish offshore and there have been very positive recent signs, in terms of the number and quality of exploration companies getting involved in the Irish offshore. New entrants will, I believe, bring a new perspective and new interpretation of our hydrocarbon potential.
It is my earnest hope that the current upturn in interest will result in substantial additional work programmes; an increase in the number of wells drilled; and ultimately the realisation of our hopes in respect of producing fields.
Thank you.