Hopes rise as exploration companies step up their activities off Irish coast
Despite mixed results in the past, exploration groups are once again planning to dip their toes into Irish waters
Oil and gas giant Exxon Mobil is due to begin exploratory drilling in the Porcupine Basin off the Republic’s southwest coast early in 2013.
The group will be one of the first “majors” to drill seriously in the State’s territorial waters since Shell began work on the Corrib gas field in the 1990s.
Exxon owns 27.5 per cent of the Dunquin prospect in the southern part of the basin. Its partners include two other big players – Italian group Eni and Spanish operator Repsol – along with local player Providence, which has a series of licences dotted around Ireland’s coast.
It is too early to say whether the company will find anything, but Exxon has exercised its option to take out an exploration licence for the area in block 44, whose nearest point is about 130km off the southwest coast.
So, on the basis of the information it has, it at least believes it is worth drilling.
Exxon bought 80 per cent of the licence in 2006 from Providence, whose shareholders include Anthony O’Reilly’s Fitzwilton investment vehicle. At that time, it was estimated that Dunquin could hold up to 25 trillion cubic feet of gas and four billion barrels of oil.
Its owners are a long way from confirming that and, given that four decades of drilling in the Republic’s waters have so far yielded just two commercial finds – the Kinsale and Corrib fields, both natural gas – you would have to be cautious about what block 44 actually contains.
Drilling costs are likely to be in the region of €80 million a well. Exxon’s scale – net profits were $41 billion in 2011 – means it will not be the end of the world if block 44 were to disappoint.
On the other hand, positive results, particularly those giving an indication that early estimates of what it contains were accurate, would mark a reasonable gain for the company.
One organisation that will be watching closely is Providence. It still has 16 per cent of Dunquin. On top of that, it has the broadest spread of interests in licences offshore Ireland of any company, so it is likely to benefit on several fronts if the news from Exxon is good.
Providence generated more column inches than any other player in 2012. This was largely down to its Barryroe field in the Celtic Sea off the south coast. Like a lot of properties in that area, drilling in the 1980s indicated that it held hydrocarbons, but prevailing prices and other factors meant it was not considered worth pursuing at that time.
Barryroe sits in block 48, directly south of the Cork coast. It is closer to shore than Dunquin and in considerably shallower water.
In its last update, issued in October, Providence said it believed it could recover 280 million barrels of oil from there.
As an added bonus, Barryroe also holds commercial quantities of natural gas and it is located conveniently close to an existing pipeline that connects the mainland with the Kinsale field.
Providence owns 80 per cent of Barryroe with Lansdowne Oil and Gas holding the remaining 20 per cent. The reality is that it will have to bring in a partner or partners to develop the field. Chief executive Tony O’Reilly jnr said earlier this year that a number of likely suitors had already approached the company.
Once it gets down to brass tacks, it will be a question of just how much it is willing to give to a partner and how much that partner is willing to pay.