One successful oil discovery in Ireland’s offshore Porcupine basin could supply all of Ireland’s oil demand, if not more, according to exploration minnow Petrel Resources.
The Dublin-based firm is hoping to take part in drilling in the basin in 2016-17 after securing Australia’s Woodside Petroeum as a partner on the acreage last year, and converting its exploration licenses to Frontier Exploration Licenses, now operated by Woodside, earlier this year.
ExxonMobil’s 2013 Dunquin well, drilled using the Eirik Raude semisubmersible drilling rig (pictured), found tantilising evidence of a productive oil system in the southern Porcupine basin, but the reservoir was water bearing. Read more: Dunquin disappoints but Irish hunt continues
John Teeling, Petrel’s chairman, said: "The importance of a successful oil discovery offshore Ireland cannot be exaggerated. One oil discovery in the Porcupine is likely to be big enough to supply all of Ireland's oil demand, if not more. Ireland currently imports all of its 132,000 bbl/d consumption and 95% of its gas needs. Apart from security of supply, the fiscal implications are immense.”
Last week, Ireland’s government opened its latest Irish Atlantic Round. The new round, which will close September 2015, will cover all of Ireland’s major Atlantic basins: Porcupine, Goban Spur, Slyne, Erris, Donegal and Rockall.
New proposed fiscal terms were also announced. The proposed terms follow a review of the Irish oil and gas tax regime by analysts Wood Mackenzie. Recommendations by the firm were supported by Ireland’s Minister for Communications, Energy and Natural Resources, Pat Rabbitte.
Read more: Irish Atlantic Round launched following fiscal review
Teeling also commented on the difficulties facing junior oil companies. “This is a tough time to be a junior oil explorer. Despite improvements in the world economy, a high oil price and a rising stock market, junior explorers remain out of favour with investors. Your company was very active in the period under review but failed to persuade investors of the value created,” he said.
“The wave of investor interest in the Irish offshore which occurred in 2013 has declined significantly in recent times due to a number of factors, some of which are temporary. The Dunquin drilling by ExxonMobil in the South Porcupine Basin in 2013, while finding traces of hydrocarbons was seen by the market as a failure. The fact that this was a wildcat well in an area remote from most other offshore Porcupine blocks was ignored by the market. Secondly it was expected that Cairn would drill the Spanish Point block in the Porcupine Basin in 2014. Due to rig problems, this is not likely. Again, the market took this in a very negative way. The Spanish Point well is an important milestone for explorers in the Porcupine Basin as previous drilling in the early 1980s provided good oil flows. New technology and far higher oil prices make this an attractive target. Petrel has interests close to Spanish Point so we are disappointed by the delay.
“The third factor has no relevance to the Porcupine Basin in the Atlantic but investors and analysts have not understood this point. Failure by the relevant partners to farm out the Barryroe discovery in the Celtic Sea off the South coast of Ireland has adversely affected attitudes toward offshore Irish exploration in general. It is frustrating to make repeated protestations, which are not accepted, that there is no relationship between Celtic Sea geology and that of the Porcupine Basin in the Atlantic. Drilling success will change this but we will have to wait until 2015 before drilling commences.
“Additionally, ongoing potential problems with the development of the Corrib field offshore Mayo continue to reflect poorly on the attitudes of some Irish people toward hydrocarbon development. Due to continued agitation from a small minority the development is delayed by a decade and has tripled in capital cost. The Irish government has failed to take decisive action on the issue. Attitudes towards investment are important factors in board room decisions. If investors are not welcome they will go elsewhere.
“Finally, there is concern that the Irish Government is changing the fiscal regime for explorers. Given that there has never been a commercial oil discovery in 44 years of exploration offshore Ireland this may be counterproductive. Oil and gas explorers can invest their scarce funds in over 200 countries in the world. Many countries have better geology than Ireland. Most of them have far lower exploration costs than those in the wild Atlantic ocean (the Dunquin Well cost $200 million). Despite 158 wells Ireland has yet to find any commercial oil discovery. Previous onerous fiscal terms, in the 1970s, and exploration failure, resulted in little exploration in the Porcupine for a generation. It is unfortunate that the government has decided to increase taxes and increase uncertainty before any drilling and before the next licensing round. Royalties and higher taxes reduce the potential rate of return so will reduce the number of wells to be drilled. Of more concern is the uncertainty introduced. There is now a question mark over all Irish hydrocarbon exploration despite the statement of no retrospective changes to existing licenses. Successful explorers will need a Development License. Certainty is now gone. It is incumbent on the State to offset the weak geology and difficult environment with attractive terms. The Porcupine needs to be drilled.”
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