IRELAND UNVEILS PETROLEUM TAX MEASURES

Ireland's Government has introduced detailed petroleum tax legislation designed to boost offshore exploration and development.

The petroleum tax measures, published last week and included in the government's omnibus finance bill for 1992, will provide Ireland for the first time a comprehensive petroleum tax regime.

They include elements which, in tax terms, will make Ireland "a most attractive location" for oil and gas exploration and development," said Irish Energy Minister Robert Molloy.

He said, "Exploration companies will now have the benefit of the certainty of a detailed tax framework and attractive tax rates."

Debate on the finance bill has begun in the Irish Dail (parliament). Under Ireland's constitution, the budget bill must be approved and signed by the president by the end of May. Failure to approve a budget bill within that time would mean the current government's collapse.

TAX DETAILS

Here are the main features of petroleum tax provisions in the finance bill:

A corporation tax of 25% applied to profits from oil and gas production on "petroleum" (development) leases issued before specified dates. No production related levy or higher tax rate applies. There will be no royalties or state participation.
A corporation tax at the standard rate of 40% applied to profits from production of oil and gas from petroleum leases issued after specified dates.
Allowance of 100% for development outlays, which may be used in the first year of commercial production with unlimited carryforward for unused allowances.
Allowance of 100% for operating expenses.
Allowance of 100% for exploration costs.
Ring fence provisions with adjustments to allow losses from onshore mineral losses to be offset against offshore petroleum profits.
Allowances and loss relief related to abandonment expenditures.

A Department of Energy official said the proposed measures make Ireland's petroleum tax regime competitive with any in Europe.

The measures soon will go to a parliamentary committee for possible amendments.

"At this stage, there are no objections (in parliament) to the petroleum tax measures," the DOE official said.

OTHER MEASURES

Ireland's DOE also is implementing other measures aimed at enhancing the country's attractiveness for petroleum investment.

It is overhauling licensing procedures and expects in June to issue the country's first new license terms in 17 years.

DOE expects to issue three new types of offshore exploration licenses: standard, covering friendly marine environments and likely to carry a term of less than 10 years; deepwater, likely to carry a term of 10-15 years; and frontier, likely to carry a term of more than 15 years.

That would put the operative dates for petroleum (production) leases at June 1, 2003, June 1, 2007, and June 1, 2013. Petroleum leases issued after those dates would be subject to the standard 40% corporation tax rate.

In addition, plans call for Ireland's first frontier licensing round, in the Erris and Slyne Trough areas of the deepwater Atlantic Ocean, to be held in mid-1993 (see map, OGJ, Apr. 29, 1991, p. 77).

The government last year signed an agreement with Marathon Petroleum Ireland Ltd. calling for Marathon to drill at least seven exploratory wells and conduct at least 4,000 line km of seismic surveys through Dec. 31, 1996 (OGJ, Dec. 16, 1991, p. 30).

Molloy said he is "particularly anxious" to bring about an early increase in exploratory drilling.

"Accordingly," he said, "the structure of the tax terms now on offer is such that greatest benefit can accrue to those who make early commitments to exploration licenses and drilling."