Ramco sells Kinsale stake worth €640m

US energy firm Ramco has sold the entire output from its majority stake in the Seven Heads gas field off Kinsale to the German-owned group Innogy.

The seven-year deal is worth more than €640 million to Ramco at forward prices for next year, when gas from the field is brought ashore.

According to Ramco, the field has the potential, over 16 years, to supply up to 10 per cent of the Irish market, which is highly dependent on imports due to the depletion of the Kinsale field.

The deal is something of a setback for Bord Gáis, which had discussed purchasing the gas. When Ramco's executive chairman, Mr Steve Remp, was asked whether Innogy offered a better price, he said the group had offered a "better deal".

Bord Gáis is importing more than 85 per cent of its supplies and it agreed last year to purchase 60 per cent of the supplies from the Corrib project, before its suspension.

Seven Heads is 35kms from the Kinsale field and is 86 per cent owned by Ramco. It was discovered in 1973 by Esso, but abandoned because Esso had been searching for oil. Ramco said technology developed in the past five years enabled it to confirm the existence of a commercial gas field 35kms long and 19kms in width.

The Scottish-based firm will use Marathon Petroleum's offshore plant at the Kinsale field to bring the gas ashore, via an existing pipeline, to an existing onshore processing centre at Inch, Co Cork. This is likely to protect about 40 jobs at Marathon's onshore and offshore operations, which had been expected to shut down as the Kinsale field dries up.

Ramco received a petroleum lease from the Government on Wednesday, paving the way to bring only the second indigenous supply of gas into the market.

A third supply, from a Shell-owned project at the Corrib field off Co Mayo, is on hold due to planning objections.

The minority owners of the field are the independent operators Island Petroleum and Sunningdale Oils (Ireland).

In accordance with a regime designed to encourage energy exploration in Irish waters, Ramco and its partners will pay no royalties to the State for the gas. "If you want an industry and you need to develop it then the terms have to be attractive," said Ramco's executive chairman, Mr Steve Remp.

The company's plans are very ambitious, with a very short lead-in time to "first gas" late next year from the beginning of sub-sea drilling work next spring.

Based on current forward prices for gas next year, maximum supplies from the field would be worth slightly more than €250,000 per day.

Because gas prices fluctuate, such a sum would rise or fall depending on market conditions.

The company said the cost of its programme was reduced because a "negative" taxation decision in Britain had led to a downturn in North Sea exploration and reduced the cost of plant and pipes.

Innogy, owned by the German utility giant RWE, said it planned to sell the gas to industrial users, who are not obliged to deal with Bord Gáis. A spokesman said it had already begun talks with potential customers, including power station operators.