Drilling down into Taoiseach’s oil exploration pledge

Leo Varadkar’s pledge in New York on Monday to phase out oil exploration deserves closer inspection. For a start, gas exploration, which involves similar drilling techniques, is continuing for now, and that’s the one that’s actually delivered commercial returns in Kinsale and Corrib.

Second, the Department of Communications, Climate Action and Environment confirmed that existing licences will remain valid. So no changes for the holders of those licences.

Third, and perhaps most importantly, this announcement solely relates to the “Atlantic closed area” – about 80 per cent of our waters – and not the more popular Celtic and Irish sea, where Tony O’Reilly jnr’s Providence Resources is among those currently evaluating a number of prospects.

Commercial return

It should be remembered that many, many millions of euro have been sunk into oil exploration off the coast of Ireland over the past 40-odd years, without ever delivering a commercial return for the explorers.

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When a company searches for a hyrdrocarbon, it hopes for oil and makes do with gas. And even though the climate change advisory council suggests that natural gas is an important transition fuel while the world adjusts to an emission-free future, it’s hard to see why any investor would start searching for the cheaper of the two fuels and, upon finding it, leave the oil buried beneath it.

Whatever ultimately happens in the policy sphere, it’s rare that anyone finds anything worth extracting in the waters around Ireland. Varadkar is essentially focusing on an oil exploration industry here that barely exists.

Providence’s recent cash flow woes at the Barryroe field with its Chinese backers are evidence of the difficulties facing companies drilling for oil off the Irish coast. Varadkar’s pledge made for a good headline but looks less impressive when you drill down into the details.