Hunt for $1 trillion worth of Irish oil to beginThe largest concerted oil and gas drilling campaign ever carried out off the coast of Ireland will begin this summer in search of reserves which, a government study has suggested, could be worth as much as $1 trillion at current prices.
A combination of higher oil and gas prices, hugely improved survey and drilling techniques and the introduction in Britain of a North Sea oil tax has renewed interest in Ireland as an exploration site for domestic and foreign investors.
The prospect of commercial finds have been described by industry watchers as the brightest for decades.
Irish company Providence Resources is one of several Irish companies who are leading the exploration. It has just secured a rig for its well programme in the Celtic Sea off the south coast, while Lansdowne Oil and Gas have begun to use sophisticated 3D survey equipment to pinpoint potential commercial fields.
Providence will shortly begin its drilling in the Celtic Sea’s Barryroe field which forms part of an ambitious $500 million project that will see it sink 10 wells in two years.
Lansdowne Oil and Gas, one of Providence’s partners in Barryroe, is also targeting fields in the Celtic Sea, hoping to extract 118 million barrels of oil or gas from the Amergin, Rosscarbery and Middleton licence areas.
The primary objective of Providence’s 2011 drilling programme is to further study the Barryroe field, which is believed to hold at least 60 million barrels of oil. Barryroe lies directly below the Seven Heads gas field and has been successfully tested at flow rates of between 1,300 and 1,600 barrels of oil per day from three appraisal wells. Improved extraction procedures are expected to push that to 1,800 barrels a day, making it a commercially viable enterprise.
Providence operates Barryroe in partnership with San Leon Energy and Lansdowne and has hired the semi-submersible rig, the GSF Arctic III, for a minimum 54-day period with options to extend.
According to Davy Stockbrokers, the acquisition of the rig is significant. "This announcement is hugely important for the group," said a Davy spokesperson. "The acquisition of a rig - and the certainty of a drilling programme in 2011 - is an important part of the new strategy being pursued. In our opinion, the change in Providence’s strategy to become a multi-well explorer is a very positive development."
While improving technology is making a huge difference, the tax introduced in Britain is prompting exploration companies to reconsider Ireland where taxes on oil and gas are lower. Aimed at profiteering major oil companies, the tax has been hitting the small and mid-size explorers. Some of the larger operators are also rethinking their capital expenditure plans, among them Statoil, which has put its British North Sea investment on hold.
Exploration -
- The Irish offshore is largely under-explored, with 3% of the area under licence.
- Only 125 exploration wells have been drilled, against 1,000 exploration wells in the Norwegian sector and 2,000 in British offshore.
- The Irish offshore fiscal terms were reviewed by Indecon in a report to former minister Eamon Ryan three years ago. Indecon said the tax level of 25% was broadly appropriate to the level of risk in offshore Ireland, but recommended 35% in the event of very profitable fields. The minister raised this to 40%.
- Major discoveries in offshore Ireland would have an effect on the markets’ view of Ireland’s economic prospects, lowering the cost of borrowing and easing immediate financial pressures.
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