Barryroe Offshore Energy, the driving force behind a major oil and gas prospect that was blocked by Minister for the Environment Eamon Ryan last week, was approached with a merger solution before the decision, which could allow it to take part in a large claim against the State, according to sources.
Lansdowne Oil & Gas, which has a 20 per cent interest in Barryroe’s key project off the Cork coast, signalled on Monday it plans to pursue the Republic for at least $100 million (€93.2 million) in compensation following Mr Ryan’s decision not to grant a permit to progress work on the field.
As a UK-based company, Lansdowne has recourse to arbitration in this case under an international Energy Charter Treaty (ECT) that protects foreign investments in 53 countries, including Ireland. This option is not open to Barryroe as a domestic company.
Lansdowne pitched a merger to Barryroe, by way of a stock-based reverse takeover that would see combined group domiciled in the UK, earlier this year as a route for its larger partner to be part of a potential bigger ECT claim in the event the project was killed by Mr Ryan, sources said.
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The proposal has not progressed. However, it is still seen as a potential option that is open until Lansdowne issues formal notification of an intention to pursue arbitration.
Barryroe, the lead on the project with an 80 per cent stake, is weighing options, understood to also include a potential judicial review through the High Court to try to quash the Minister’s decision.
Representatives for Barryroe and Lansdowne declined to comment.
Lansdowne, which has invested $20 million in the Barryroe project to date, estimates the net present value of its interest in the first development phase at $104 million. That is based on estimates of 278 million barrels of oil in place in an initial reservoir and an oil price of $68 a barrel in 2027.
The field also contains gas that supporters of the project say could make a major contribution to the State’s energy mix during the transition to a net zero carbon economy.
Mr Ryan’s decision to pull the plug on the Barryroe project last Friday came more than two years after the company applied for a permit to progress the project, including the drilling of an appraisal well.
The Minister’s department raised concerns last October about the ability of Barryroe to finance the next stage. This led to the company securing a €40 million funding backstop from businessman Larry Goodman’s Vevan Unlimited company, which owns about 16 per cent of the company, last November to cover all of the expected costs of the phase. Other large shareholders subsequently agreed to participate in the backstop.
However, the Department of the Environment told Barryroe last Friday that the Minister’s decision was based on the applicant not meeting “investment cover criterion” in guidelines for offshore oil and gas exploration applications. The guidelines, issued in 2019, say licence applicants should have net tangible assets of 3½ times the cost of planned work.
That suggests that the applicants need net tangible assets of €140 million – a multiple of their existing position.
It is likely Lansdowne will base an ECT case on the fact that it invested in the Barryroe licence well before the latest guidelines. That 2019 document also makes clear that the guidelines are not legally binding and that the department may depart from them “at its absolute discretion”.
By contrast, State guidelines issued early last year on offshore renewable energy projects state that applicants for so-called maritime area consents only need to hold cash to cover their financial commitments in relation to such early-stage permits.