The proposed new European Union-wide windfall tax on energy producers’ profits could net the Irish Government a tidy sum from the Corrib gasfield off the coast of Mayo.
Details of the proposed tax were released this week. It is envisaged that a 33 per cent levy will apply to excess profits more than 20 per cent above a company’s average profits for the last three years.
It has yet to be decided if the levy will apply for six months or 12 months. It is also unclear which financial period will be impacted — presumably it will apply to 2022 profits, as they are the next set of figures to be reported by producers.
If the model proposed in Europe is applied to all profits generated from the Corrib field for the full 12 months of 2022, the windfall levy collected by the Government could be anywhere between €200 million and €300 million.
There is no one set of accounts that lays out all profits generated from Corrib, which is owned by three separate companies — Canadian group Vermilion Energy currently owns 20 per cent; another Canadian investor, Nephin Energy, owns 43.5 per cent; while Norwegian group Equinor owns 36.5 per cent (its tranche is to be transferred to Vermilion at the end of 2022).
Vermilion recently published figures suggesting it netted 148.5 million Canadian dollars (€112.5 million) after operating expenses in the first six months of 2022 from its one-fifth stake. Since then, its profits would have escalated further in line with rampaging gas prices. A conservative estimate would be profits of between C$300 million (€225 million) and C$375 million (€282 million) for all of 2022.
Its average profit for the last three years was C$106.1 million, and so the taxable base 20 per cent above this starts at C$127.32 million (€95.77). Any excess profits above this would be levied at 33 per cent, suggesting Vermilion could be in line to pay between €42 million to €61 million to the Government on the windfall levy, if it is applied for all of 2022.
Assuming its equity partners who own the other 80 per cent make similar profits, that suggests about €200 million to €300 million might become due. There would be no shortage of options for the State to spend it.
