Luck of the Irish

The Eirik Raude semisubmersible was used to drill ExxonMobil’s 2013 Dunquin well.

With the entry of major operators, could the time finally be ripe for the Irish Offshore? Elaine Maslin reports.

It’s been a long time coming for the underexplored Irish Offshore. There’s a huge amount of acreage to be explored and yet it has always been just a step behind becoming a flourishing petroleum province.

The time could now be ripe the basin to finally mature. Earlier this year, Northern Ireland’s Department of Communications, Energy and Natural Resources (DCENR) revealed the results of its 2015 Atlantic Margin licensing round. Some 28 licenses were issued to 17 companies in two tranches, following 43 applications (see table).

What is significant is that, unlike previous rounds, which have been dominated by smaller players, this round has a string of majors involved, including ExxonMobil, Statoil, Eni and BP, alongside Woodside and Nexen with the Porcupine Basin, 200km west of Ireland, attracting the lion’s share of the interest (80% of the applications according to Edison research).

The area has become a focus of attention, most recently as a result of Statoil’s 300-500 MMbbl Bay du Nord discovery in the analogous Flemish Pass Basin offshore Canada. The result of this well helped drive a bumper last license round for Newfoundland, with the most ever committed spending. Notably, Nexen, BP, Statoil and ExxonMobil are all operators or partners in winning bids for that round.

On announcing its 2015 Atlantic Margin round awards options, Erling Vågnes, Statoil’s senior vice president Exploration Northern Hemisphere, said Statoil would be applying exploration knowledge and experience it had gained on the conjugate margin offshore Newfoundland to the Irish Offshore.

The increased interest is also a result of earlier work by the independents who have been busy in past rounds, including carrying out 3D seismic acquisition in 2013, as well as work on West Africa, which is also seen to have analogues to the Irish offshore.

Dr. Heather Forgan, senior research analyst, Continental Europe and Mediterranean upstream Europe research team, says just on the numbers alone it’s a successful round. The inclusion of the majors makes it more so.

“If you look at the raw numbers, the 2015 round has been a success for the Irish Offshore upstream sector. This is the largest number of license options awarded in a license round to date,” Forgan says. “The fact it attracted interest from majors and large international oil companies in particular – Statoil, Eni and ExxonMobil - picking up large acreage in the Porcupine Basin, is a good signal. Having these companies as direct bidders is a different direction, compared to previous licenses rounds in 2010-11, when licenses tended to be taken by small companies.”

The fact that this is a frontier play in hot acreage is also significant. “Most of the Atlantic margin is frontier,” Forgan says. “If you look at other areas of the Atlantic margin, Africa, Canada, Greenland, which are analogous to the Irish Atlantic, there have been some big discoveries, so it is not a surprise players are interest in the Atlantic margin offshore Ireland.”

Table: 2015 Irish Atlantic Margins Round

The form of concession on offer is a two-year licensing option, which can be converted into an exploration license. Statoil, which has a stake in the producing Corrib gas field, was awarded operatorship of four licensing options, with partner ExxonMobil, and is a partner in two others, operated by ExxonMobil. Together, all six cover 7700sq km in the Porcupine Basin in 1100-3150m water depth. Its work program commitments are limited to 2D and 3D seismic surveys during 2016-2017.

Small-cap player Providence was awarded license option 16/27 covering 1324sq km in the Porcupine Basin in about 1300m water depth, north of the Dunquin North well, drilled by ExxonMobil in 2013 but water wet. Europa, Petrel, AzEire and others have also released details of their awards and a full report on what acreage all the companies have been awarded and commitments was due to be published by DCENR by the end of July.

Porcupine Basin

The Porcupine Basin covers 60,000sq km, according to Edison, which says 31 well shave been drilled since 1977 and only once since 2001 – ExxonMobil’s Dunquin. Across the whole Irish Atlantic Margin area, only five commercial discoveries have been made, Forgan says.

Edison notes that, until relatively recently, seismic data has been limited to 2D, giving operators scant insight into the subsurface. It’s also worth remembering that the operating environment is harsh, especially the winter months, and most blocks in this round are in deep water, says Forgan, so it’s been a hard place to operate in the past.

Three discoveries have been made in the North Porcupine Basin: Burren (1978), Connemara (1979) and Spanish Point (1981), according to Edison. Just one well has been drilled in the southern Porcupine Basin, Dunquin, by ExxonMobil in 2013 in 1500m water depth. It produced water but they drilled down and produced oil shows in carbonate reservoirs, Forgan says. “Although it produced water and could be seen as a poor result, it showed there is a working hydrocarbon system in the basin. You could call it a positive result.” It was also oil, not gas, as many thought it might be in the southern basin, according to Edison.

“When there was excitement around Dunquin, it was very different oil price environment,” Forgan says. “Now companies are cutting global capex by about 30%, with a good amount of that in the exploration space. What is particularly interesting about the 2015 Irish round, and what has attracted interest, is the nature of the licenses. It is a two-year license option with minimum license commitment being basic geological and geoscience studies. After that, companies can go for a frontier exploration license, which includes an initial three-year term to do internal studies, at the end of which you get a choice to apply to move to another phase to drill. So, it’s a five-year window to decide to drill. This means firms can take advantage of lower costs for desktop studies or seismic but hold off the more costly drilling until up to 2021.”

Furthermore, changes to the fiscal regime have been made. “The caliber of major companies reflects the changes the Irish government has made,” Forgan says. The financial regime was changed, resulting in a tax increase from around 40% to 55%. While it was an increase, the move was seen to give operators stability and is still seen as being competitive compared to similar areas and regimes around the world.

Some have already started acquiring new seismic. Statoil, Providence and Woodside were due to be shooting seismic over the summer months.

But, the ongoing work isn’t limited to the 2015 round. In June, Woodside started a 2400sq km 3D full fold data program on Frontier Exploration Licenses 3/14 and 5/14 in the Porcupine Basin. It wants more detail on the Granuaile, prospect in the east Porcupine basin, and the Breanann prospect, in the north Porcupine basin, using PGS’ Ramform Vanguard. 

The next well to watch is also part of a previous licensing round. It will be Cairn Energy’s delayed Spanish Point appraisal well and is expected not before 2017, Forgan says. Cairn estimates Spanish Point to contain up to 337 MMboe contingent and prospective resources.

Providence resources is working up its Druid and Drombeg prospects, in the southern Porcupine Basin, which have had estimated mean prospective resources figures as high as 3.18 billion bbl for Druid and 1.91 billion for Drombeg offered, according to Edison. Providence thinks both could be targeted with one well at a cost of $85 million, compared to the $200 million cost on Dunquin, thanks to today’s far lower rig rates, Edison says. Providence was due to shoot seismic over its Newgrange prospect in the southern Porcupine Basin this summer. It has a P50 recoverable resource estimate of 1.12 billion boe, Edison says.

With a new fiscal regime in place and the ground work laid, could it be time for the Irish offshore to have its day? “They have spent a few years getting their house in order, bringing projects on stream, like Corrib,” Forgan says. “There is growing excitement around the world looking at the Atlantic Margin and it will be great for Ireland to have a slice of that. The proof is absolutely going to be in the pudding.”

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