3. OIL

Fiscal incentives for oil and gas exploration and production

There are several fiscal incentives for investment in oil and gas exploration and production. The following three principal incentives are in place:

A competitive corporation tax rate of 25% applied to all profits a company may have from producing fields in Ireland. A field-based petroleum production tax (PPT) was introduced in 2015 in respect of petroleum authorisations issued from June 2014. This is linked to profitability of discoveries with a minimum PPT of 5% of revenues as soon as a field goes into production. PPT payments are deductible when calculating corporation tax, resulting in a maximum marginal rate of 55%.

A complete write-off of the capital cost from exploration and development. If an exploration is unsuccessful, the costs can be written off against profits from future successful explorations.

Low level of exploration licence application and rental fees. The rental fee for a licensing option is EUR 29 per annum, per km2, and the application fee for a licensing option is EUR 1 520.

Infrastructure

Refining

The Whitegate refinery is Ireland’s only operating refinery with a distillation capacity of 75 kb/d (Figure 3.7). It was commissioned in 1959. The Irish National Petroleum Company sold the refinery to Tosco Corporation in 2001, which was acquired by ConocoPhillips. Phillips 66 took over operation of the refinery in 2012, when ConocoPhillips split its downstream operation into refining and marketing. It then sold the refinery to the Canadian company Irving Oil in September 2016.

In 2012, the average production was 56 kb/d. Production output increased to around 70 kb/d in 2017 since Irving Oil took ownership (Figure 3.8). The demand for gasoline halved from 2007 to 2017, while the demand for diesel fuel increased by 10%. Except for naphtha and residual fuel oil, refining outputs for gas/diesel oil, jet and kerosene, gasoline and liquefied petroleum gas fell short of total domestic demand, with gas/diesel oil showing the largest gap. Only residual fuel oil had a significant surplus output, which was mostly exported to the United States; its supply was 18.5 kb/d, well above its daily demand of 2 kb.

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3. OIL

Figure 3.7 Ireland’s oil infrastructure, 2018

THERN

ND (UK)

.........aGalway

North

Atlantic

Ocean

...... - n

Tarbert a • Foynes

0

UNITED KINGDOM

Kilroot•........,

•

Belfast

km

50 100

This map is without prejudice lo the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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3. OIL

Figure 3.8 Refinery gross output and demand by products, 2017

Ireland depends on imports for diesel and kerosene, but is a net exporter of fuel oil.

Source: IEA (2018b), Oil Information 2018, www.iea.org/statistics/.

To meet the increasing demands for diesel and light oil products, Irving Oil approved an investment programme to enhance production capacity in January 2018. It is due to be completed in the first quarter of 2020. Biofuel production has already been built up over the last few years at the Whitegate refinery, and Irving Oil has expressed a strong commitment to remain a leader of liquid biofuel research and development in Ireland.

Ports and road network

Ireland is entirely dependent on shipping for all oil imports. The four ports in Ireland with oil terminals that accept oil product imports for commercial distribution are: Dublin, Whitegate, Foynes and Galway (Table 3.2). Dublin Port supplies approximately half of the petroleum products coming into the Irish market.

A potential disruption to Dublin Port would cause a risk to the country’s oil supply, as the capacity of the three remaining ports to increase their throughputs is not sufficient to provide an alternative route for supply. However, a major supply disruption may be avoided if the two ports in Northern Ireland (Belfast and Derry) could be mobilised. Belfast could make a significant contribution as it typically operates at about half its maximum oil transit capacity.

Table 3.2 Capacity of main ports on the island of Ireland

Note: Expressed in kilotonnes of refined products: gasoline, kerosene and diesel/gas oil.

Source: Purvin & Gertz Inc. and Byrne O'Cleirigh (2012), Study of the Strategic Case for Oil Refining Requirements on the Island of Ireland, www.dccae.gov.ie/enie/energy/publications/Documents/9/StrategicCaseforOilRefiningIrelandRedactedfin.pdf.

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