Providence says oil find off Cork is commercial

SHARES IN Providence Resources, the exploration company headed by Tony O’Reilly jnr, soared by 12 per cent yesterday to €5.76 after the company announced the discovery of the first commercially viable oil flow rate in Ireland.

The Barryroe site, which Providence was testing, is located 50km of the south coast of Cork and covers an area of 300sq km. The oil was discovered at a depth of about 100 metres in the sea bed.

While oil had been discovered in the region by other companies as far back as the 1970s, this is the first time that a commercially viable level of oil has been found.

The first phase of Providence’s well testing programme in the Barryroe basin discovered flow rates of 3,514 bopd (barrels of oil per day) – double the target of 1,800 bopd that had been considered a commercial threshold.

The quality of the oil was also better than expected, the company said. Tests on gas flow are also being carried out in the area.

Providence has an 80 per cent stake in Barryroe, with Lansdowne Oil & Gas holding the balance, although it is likely to take on development partners as it develops the site.

Sir Anthony O’Reilly owns a 20 per cent stake in the company.

Providence has been building licence interests in six offshore basins around the Irish coast, including the controversial Dalkey Island basin, over the last 10 years.

In December 2010, Providence announced that it was embarking on a major multi-well programme involving all six, which was funded in part by a share placing last year.

Mr O’Reilly told The Irish Times that the discovery would significantly enhance Ireland’s reputation as a location for oil and gas exploration.

Pointing out that the O’Reilly family’s investment in Irish oil exploration stretched back more than 30 years, he said the find was a major boost for the company.

“A development like this at any one of the projects is a game changer for a company like Providence,” he said.

He said changes in technology and the implication of higher oil prices on margins had made Providence’s project feasible.

Some analysts speculated yesterday that explorers currently operating in the North Sea would be interested in partnership, particularly in light of Ireland’s favourable tax terms for exploration.

“The North Sea is well picked-over, while Ireland is not explored at all,” Mr O’Reilly said.

The company already has partnerships with international players such as ExxonMobil, its partner at the Dunquin field off the coast of Kerry.

Providence “still had some hoops to jump through” before oil could be brought onshore, Mr O’Reilly added, a process which could take two to three years.

He said the company was still committed to continuing work on its other five main off-shore projects in Ireland.

Almost 700 individual submissions and 4,100 petitions have been made in relation to Providence’s plans to drill for oil and gas off Dalkey Island in Co Dublin. Most submissions call for a public inquiry into Providence’s application for a foreshore licence.

Asked whether he expected similar opposition towards the Barryroe discovery, Mr O’Reilly said that there was a number of differences between the Dalkey and Barryroe projects.

The Dalkey exploration is within 12 nautical miles of the coast and therefore needs a foreshore licence, while, unlike Barryroe, the project was still at exploration stage.

Founded in 1997, Providence Resources has its roots in Atlantic Resources plc, which was founded in 1981 by Sir Anthony O’Reilly.

As well as its interests in off-shore sites in Ireland, Providence also has onshore interests in Britain.