Ramco to put €184m into Cork gas field

Scottish group Ramco and its partners will invest €184 million to bring natural gas to the Irish market next year from the Seven Heads field off Co Cork

The ambitious project will see the introduction of a field one-third the size of the Kinsale reservoir, now very near the end of its lifespan, that will provide gas for 15 years.

It means Ramco is likely to overtake Enterprise Energy in the Irish market because its Corrib field project is stalled in the planning process. Enterprise, now controlled by Shell, was seen previously as the company most likely to enter the Irish gas supply business.

Ramco's entry to the market means the group will compete with Bord Gáis, the State company that is building a second interconnector with Scotland to compensate for the depletion of the Kinsale field and meet rising demand for gas.

Ramco declared the Seven Heads project "commercial" yesterday and disclosed a series of transactions that gave it a dominant interest in the consortium developing the project.

Gas from the field, which is 47 kilometres from the nearest land at Kinsale Head, will be brought ashore via a new 34-kilometre pipeline to the Marathon Petroleum Kinsale platform. From there, it will enter the national network using existing pipelines and Marathon's existing onshore processing plant.

The development marks a swift breakthrough into the Irish market by Ramco, which said it wanted to develop a "substantial strategic presence" in the industry.

The group acquired licences to explore the Seven Heads reservoir in 1999 and leased it last year. Esso discovered the field about 20 years ago.

Ramco executive chairman Mr Steve Remp said: "This is quite a good project. Many million of dollars have been spent exploring offshore Ireland with nothing to show but heartache.

"We are very pleased to have negotiated access to Marathon's Kinsale Head facilities, as this both reduces the capital cost of the Seven Heads project and accelerates first production because construction and approval times can be significantly reduced."

Mr Remp accepted that the production target of next year was ambitious but said it could be met "with a fair wind".

The plan of development will be submitted soon for the approval of the Minister for Communications, Natural Resources and Marine, Mr Ahern.

The deals disclosed yesterday also increase Ramco's interest in the Galley Head field, near Seven Heads, which is under exploration. The company will purchase a 26 per cent share of the Seven Heads project controlled by Duke Energy for €7.67 million on completion. A further €3.07 million payment is dependent on production targets.

In addition, Ramco said it had acquired for £3 million sterling (€4.68 million) Northern Exploration Ltd, which holds 4 per cent of Seven Heads and 6.4 per cent of Galley Head.

A 1 per cent partner, Sunningdale Oils (Ireland), yielded a very small minority interest in Galley Head in return for a commitment by Ramco to meet its share of the capital and operating costs required to commence gas production. Sunningdale will hold 1 per cent of Seven Heads after this transaction.

The remaining 12.5 per cent in the reservoir is held by Island Petroleum Developments.

Mr Remp said Ramco's share of the €184 million development cost was €158 million. The "bulk" of this would be funded in cash from its profit on the sale of an interest in Azerbaijan. Its share of the Galley Head field would rise to 77 per cent following the transactions disclosed yesterday.

Duke Energy said it was selling its interest in the project because it wished to concentrate on its core business in the "mid-wholesale" market.

Stating that the company was still "very interested" in the Irish market, the chief executive of its European operation, Mr Peter Wilt, said the company would participate in the marketing of gas from the plant.