A PwC report “Making the most of our natural resources”, published today and commissioned by Irish oil and gas exploration and appraisal company Providence Resources, has outlined the significant potential value to the Irish economy of the developing offshore oil and gas industry.
The report was commissioned to provide an independent, third party, expert review of the operating environment for offshore exploration in Ireland, as well as the ability of the State to derive significant economic advantage from a major oil or gas find. It also looks at details of the emerging nature of the offshore industry in Ireland; international case studies (including comparisons with the UK and Norway); what needs to be put in place to assist the development of an oil/gas industry in Ireland; the rationale behind the current tax regime and the industry potential in terms of employment and financial value (tax take) to the exchequer.
The report outlines that even a single producing field the size of the anticipated scale of the recent (2012) Barryroe discovery could be worth upwards of €4.5bn in corporate tax and Profit Resource Rent Tax (PRRT) alone over its full project life - equivalent to the entire annual corporate tax take in Ireland in 2011.
Whilst there is significant potential from such a find as things stand, the potential is shown to much greater with a critical mass and the right supporting conditions. For example, the report finds that if Ireland were to have ten commercial fields of this scale operating at any given time, and there was an established supply base, there would be a potential to generate an average of 13,500 jobs a year during the development phase (10 years) and 11,500 jobs a year during production (25 years).
However, the report cautions that Ireland is a less attractive location for mobile exploration investment relative to the UK and Norway, both of which have substantially higher headline rates of taxation, for a number of reasons including the historically low incidence of making a commercial discovery, the poor industry perception of the planning and regulatory regime, high exploration and development costs and relatively few initiatives aimed at mitigating private sector investment risk.
Whilst Ireland’s tax regime is relatively favourable when compared to high production jurisdictions, its performance in terms of commercial discoveries is considered weak relative to Europe’s leading performers and the subsequent demand for Exploration Licenses is modest. The report outlines that in order to deliver the potential that is there, driving this exploration demand is critical.
The key findings of the report are:
The report notes that “Given the potential for the Irish economy of a major hydrocarbon find, there is a window of opportunity between now and the next licensing round to ensure that the issues and constraints identified, that are within the gift of policy makers, are addressed in order for Ireland to fully pursue the investment opportunities available, and to ensure that Ireland is in an optimum position to unlock the economic potential of the oil and gas industry.”
The key suggestions for improvement in the report are:
CEO of Providence Resources Plc. Tony O’ Reilly, noted that; “As Ireland’s leading independent E&P company, Providence is very pleased to be leading the renaissance of activity in the Irish offshore with our multi-basin drilling programme. Through our programme, we have seen an ever increasing array of international partners (including ExxonMobil, Repsol, Eni, Cairn and Petronas) who have co-ventured with us on our Irish portfolio and recent entrants like Kosmos and PGS only further demonstrate the renewed interest in the Irish offshore.
What this report illustrates is that if carefully nurtured, and ensuring that it continues to operate to the highest safety, and environmental standards, the Irish offshore oil and gas industry could deliver enormous benefits for the Irish economy in terms of further foreign direct investment, jobs and significant exchequer receipts. The report also, however, cautions that more needs to be done to streamline the manner by which the sector operates to remain internationally competitive. And further, that if Ireland is to successfully exploit its hydrocarbon potential, continued and significant foreign direct investment will be required.”
He added; “This report provides a factual basis on which people can begin to understand the benefits that could accrue to Ireland with the successful exploitation of its offshore potential. I call on all stakeholders to use it as basis to initiate a meaningful debate on how we can move forward to achieve this potential.”
The report included consultations with key players in the oil and gas industry in Ireland, including representatives from the Department of Communication, Energy and Natural Resources (DCENR)/Petroleum Affairs Division (PAD), the Irish Offshore Operators Association, Kinsale Energy, Enterprise Ireland and a range of other oil and gas exploration companies and companies associated with the industry, as well as a detailed desk-based analysis.
Notes for editors:
About the Report “Making the most of our natural resources: Oil and gas exploration in Ireland”:
PwC was commissioned by Providence Resources Plc to prepare an independent review of the relative attractiveness of the operating environment for off-shore exploration in Ireland, as well as the ability of the State to derive significant economic advantage (beyond immediate tax take) from a major oil or gas find.
Allied to the above, it was required that the report covered the following: details of the emerging nature of the offshore industry in Ireland, noting the current Government objectives for development in this area; a top-line look at international case studies; what needs to be put in place to assist the development of an industry; the rationale behind the current tax regime in terms of incentivising investment; and the potential in terms of employment and financial value to the exchequer.
About Providence Resources Plc
Providence Resources Plc is an Irish based oil & gas exploration, appraisal and development company with a portfolio of appraisal and exploration assets offshore Ireland and the U.K. The Company is currently leading a circa $500 million multi-year drilling programme on a number of exploration/development wells over multiple basins offshore Ireland, representing the largest drilling.
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