By Sarah Young
DUBLIN, May 15 (Reuters) - Oil company executives shrugged off on Wednesday the risk of Ireland hiking its tax on licences, as the minister reviewing the rate said it was similar in other countries trying to encourage oil exploration.
Ireland launched a review on Tuesday of its tax rate on oil and gas, currently a relatively low 25 to 40 percent, after a parliamentary committee recommended future licences be issued at rates more in line with Norway.
Norway's tax on oil producers is 78 percent, but the government provides heavy support at the investment phase, including a 78 percent rebate related to drilling.
Ireland hopes any oil production could help provide relief on a state debt that has swelled above 120 percent of annual output, but so far has just one field, Barryroe, is flowing oil at a commercial rate and it has yet to be developed.
Oil companies already exploring off the Irish coast welcomed the government's cautious response to the committee's findings, saying they expected the review to find the regime was appropriate for the early-stage nature of the industry and would provide certainty for future investment.
'If it's not broken, why change it, I think that's what the minister's saying,' Fastnet Oil & Gas chairman Cathal Friel, seeking a partner for his firm's Irish licences, told Reuters.
Ireland's favourable tax regime for oil companies has also attracted ExxonMobil, the largest non-government controlled oil company in the world by market value, which is drilling a well off the west coast.
When announcing the review, Energy Minister Pat Rabbitte said only just over 150 wells have been drilled to date in Irish waters, compared to almost 10 times that in rich Norway.
Asked about the tax rate, which opposition parties demanded be increased to between 40 and 80 percent, he told state broadcaster RTE on Wednesday: 'I don't want to prejudge it. But it seems to me that we are not very much out of line.'
Ireland's pro-business tax structures have helped it attract big employers like Google and IBM, offsetting the worst of its financial crisis, but its low corporate tax rate of 12.5 percent has drawn criticism elsewhere in Europe.
Tony O'Reilly, chief executive of Providence Resources which is hoping to develop the Barryroe field, said the oil tax review would help to end any uncertainty arising from discussions about the rate.
Rabbitte has said any adjustment would not be retrospective.
Geologists say the biggest oil fields are likely to be found off Ireland's Atlantic coast, where wells can cost around $100 million due to the deep water and harsh conditions.
Two well-known explorers, Britain's Cairn Energy and U.S. company Kosmos have taken stakes in licences in the Atlantic recently and the minnows reliant on others' financial muscle said the bigger firms could easily be scared away.
'The terms, where they are, you need them, otherwise it could be very difficult to have an economic development west of Ireland,' said Hugh Mackay, chief executive of Europa Oil & Gas , which signed a deal with Kosmos last month.
(Additional reporting by Conor Humphries; editing by Padraic Halpin, John Stonestreet) Keywords: IRELAND OIL/
(email@example.com)(+353 1 500 1504)(Reuters Messaging: firstname.lastname@example.org)
Copyright Thomson Reuters 2013. All rights reserved.
The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.