London, 21 September (Argus) — Ireland is trying to win the attentions of the oil and gas industry as it senses improved prospects for offshore production.

Unlike nearby Norway and the UK, Ireland produces no oil, reflecting strained relations with the industry in the past, the greater water depths off its Atlantic coast, and high winds and stormy seas that have generally prevented drilling from mid-October to the end of March. The Department of Communications, Energy and Natural Resources estimates drilling costs in deepwater areas west of Ireland at over €100mn/well ($130mn/well). About one exploration or appraisal well has been drilled each year recently.

But interest is growing, encouraged by Irish independent Providence Resources' recent announcements about its Barryroe field, located in just 100m of water in the Celtic Sea, south of the country. The company estimated in July that the field had 1bn bl of oil in place based on new drilling and seismic data, but now says a further 780mn bl is likely to be present. ExxonMobil plans to start exploration drilling at the Dunquin gas and condensate prospect, 200km off the southwest coast in water depths of over 1,500m, in the first quarter of 2013.

To the west of Ireland, UK independent Chrysaor plans to start appraisal drilling at the Spanish Point gas and condensate discovery, in 400m of water in the Porcupine basin, in the third quarter of next year, subject to rig availability.

The industry has not been encouraged by Shell's experience with the Corrib gas field, which it began developing in 2004 and which sparked opposition from local communities and environmental groups. But Shell reiterated its commitment in February, saying it and its partners will invest a further €800mn over three years to initiate Corrib production.

Gas has dominated recent exploration activity, raising questions about prospects for the northwest European gas market and export infrastructure that might be needed. But Chrysaor points out the proximity of its Spanish Point prospect to the Burren and Connemara oil discoveries made by Phillips Petroleum and BP, respectively, in the 1970s. West of Ireland “there has been so little drilling and such little work done in the province that there is plenty of oil potential”, Chrysaor chief executive Phil Kirk says.

Government policies reflect increased eagerness. The latest licensing round, last year, covered the entire Irish Atlantic margin and provided two-year licensing “options”, with no obligation to drill, resulting in 13 options being offered, although no majors applied. Some Irish politicians have called for the tax take to rise. But the current regime implies a total tax take of 40pc for the most profitable projects and provides exemptions for exploration costs. “Ireland's focus should be on how to encourage an increase in the level of exploration investment, and exploration drilling in particular,” communications, energy and natural resources minister Patrick Rabbitte says.

For more intelligent and thought-provoking opinion and analysis, request a free trial of Petroleum Argus.

Send comments to feedback@argusmedia.com
nc/wj 3.1

If you would like to review other ArgusMedia.com content options, request more information about Argus' energy news, data and analysis services.

Copyright © 2012 Argus Media Ltd - www.ArgusMedia.com - All rights reserved.