Providence Resources chief executive Alan Linn says he would not have taken the helm at the Irish oil and gas exploration company this year if it had not been for one thing: the Barryroe oilfield.
Linn was surprised at the quality and potential of the hydrocarbon reservoir, 50km from Cork in the Celtic Sea, when he first looked at if after Providence chairman Pat Plunkett approached him about the job. "I think it's world class," he says. "A lot of the fields that are being developed now are getting smaller and smaller, but the numbers that this field has are quite remarkable for something that has not been developed."
Providence owns 80 per cent of Barryroe; Landsdowne Oil and Gas the other 20. The field could yield 350 million barrels of high-quality oil, with the potential to fetch a $2 to $3 premium a-barrel to Brent, the European benchmark for crude. Linn argues that it is almost “too good to be burned” and could instead be sold to a growing number of refineries that provide feedstock for chemicals used to make plastics, acrylics and range of other materials we need for everyday life.
The field is in what Linn calls absolutely conventional territory, a short distance from the south coast in 100m (330ft) of water. In contrast, many reservoirs now being developed tend to be much further below the surface and a longer distance from land. This makes Barryroe cheaper and less risky to develop.
Linn, an experienced oil and gas industry executive, who trained as a reservoir engineer with ExxonMobil, found something not previously disclosed that helped pique his interest. “I went into a lot of detail and realised there was a very significant amount of gas that was not accounted for, that gives you another risk mitigation tool because you have got both,” he says.
Gas is an important fuel as it is used to generate about 60 per cent of Irish electricity needs. We have one home-grown source, the Corrib Field, which could run out in the mid-2030s, but we also import about one-third of our requirements. A second source could reduce the need for this.
So Barryroe could theoretically provide the 120,000 barrels of oil a day that the Republic consumes, and some of the gas that it needs to generate about 60 per cent of its electricity. The potential of what he saw prompted Linn, who had been chief executive of Third Energy Onshore in the UK until December 2019, to join Providence in January. “If it had not been there I would not have joined,” he says. “It’s something that’s quite special really.”
Despite its credentials, Barryroe has had a few false dawns. A deal with Chinese player Apac to develop the field, known as a farm-out in industry parlance, fell through last year when that company failed to provide Providence with an agreed up-front cash payment.
This left the Irish business at a crossroads, forcing it to cut back operations and abandon other exploration. Providence came close to other deals before Apac. Another fell through in late 2014 as world oil prices collapsed.
What about further exploration?
So why has the field not been developed, particularly given its existence, close to the old Kinsale gas field, was identified a long time ago, while its commercial reserves were quantified in 2013?
“The issue that Providence had was commercial as opposed to technical,” says Linn. He points out that as well as developing Barryroe, the company also wanted to continue exploring around the Irish coast. One area where it was active was the Atlantic margin, basically a deep-water trough to the west of the country, which was thought to have huge potential but whose conditions and environment made it particularly risky.
Providence recruited high-profile partners, including oil major Exxon, to work on these exploration projects, but all this required cash. "Had they invested that in Barryroe they could have just gone on and developed it," says Linn. "But they chose to concentrate on high-impact but very high-risk exploration activities and the results did not meet expectations."
All the while Barryroe sat there without getting the investment needed to develop it, he explains. Linn acknowledges he is speaking with the benefit of hindsight and from the perspective of a time when shareholders are more cautious about the exploration they will finance.
Nevertheless, under his leadership, Providence will focus on Barryroe. “We’ve got what we consider to be a good deal for our investors,” he says. This is a new farm-out agreement that the company is negotiating with Norwegian group Spot-on Energy, which last May invested $3.3 million (€2.8 million) in the Irish company. Providence announced yesterday that warrants worth £9,999.99 (€11,108), which were linked to its May fundraising, have been exercised.
A group of mostly household names is joining the development consortium. These companies will be responsible for the nuts and bolts of recovering the reservoir's oil and gas, along with providing the rigs and equipment to do this. They include multinationals Schlumberger, Maersk Drilling, Keppel FELS, Aibel and AGR.
The deal allows the participants to share in Barryroe’s proceeds, but negotiating it will take some months. “Plus or minus a month, I am still very much of the view that we are on track. I would be confident that we would have something done by the end of the year,” says Linn. “Ideally, what I would like to do is to sit down in a room for two weeks and hammer everything out.”
However, he concedes that this is not possible.
Potential to find reserves
One thing likely to help the talks is that the signs are that Barryroe could hold more oil than the amount already established. Linn explains that the geological structure of the field and the area around it indicate that further exploration could find more reserves.
Even without this, he argues that Barryroe is a big opportunity for the Republic, particularly Cork. The old Kinsale gas field sits on top of Providence’s asset, which means there is already a pipeline there to bring this fuel ashore.
Cork Harbour is home to two gas-fired electricity generators, which Barryroe could supply. Linn says these could be fitted with carbon-capture technology, which traps the carbon dioxide emitted by burning. The greenhouse gas could then be transported back to the now depleted Kinsale field, which he maintains could hold 330 million tonnes of carbon.
Linn maintains that we should be taking this approach if we are to become carbon neutral by 2050. He points out that we will continue to need oil and gas for the energy they provide. The latter will be particularly important in providing stability to the electricity network as it takes on more renewable generators.
He also believes the Government was wrong to limit fossil-fuel exploration in the Republic last year, as it effectively shut out the industry’s big players. These businesses are also investing heavily in renewables, carbon capture and storage, and other technology designed to tackle climate change.
“We lost an opportunity because some of the companies that could help us move to a carbon neutral environment just aren’t here,” he says.