IRISH OIL & GAS SURVEY: Many oil firms struggling to develop Irish assets

Geoff Percival

More than a third of oil and gas exploration companies active in Irish waters are finding it difficult to source partners to develop their licences here.

Launching PwC’s Irish 2018 Oil and Gas survey are from left Tony O’Reilly, CEO, Providence Resources and Ronan MacNioclais, Partner, PwC Oiland Gas Practice. Pic: Maxwell Photography Dublin
Launching PwC’s Irish 2018 Oil and Gas survey are from left Tony O’Reilly, CEO, Providence Resources and Ronan MacNioclais, Partner, PwC Oiland Gas Practice. Pic: Maxwell Photography Dublin

As much as 38% of explorers are experiencing difficulty in finding farm-in partners for their Irish assets, according to PwC’s latest annual Irish oil and gas industry survey. The figure is up from just 10% last year, but the rise also illustrates the overall increase in the number of companies actively seeking to develop Irish offshore assets.

Overall, nearly two-thirds — or 63% — of companies, both those already here and those with an interest in what Irish waters may offer, rate the outlook for Ireland’s oil and gas sector in the coming two years as “favourable”. While that figure is impressive, it is down from 74% this time last year.

And challenges remain. Around 12% — albeit down from over 40% last year —still see access to funding as being a key hurdle to working in Irish waters. Ireland’s still immature reputation as a trusted and recognised exploration location and the higher risk and cost (partly due to deeper waters) linked to exploring in Irish waters were also cited.

IRISH OIL & GAS SURVEY: Many oil firms struggling to develop Irish assets

Total investment levels in Irish exploration are estimated to be around €500m over the next two years. But teething problems with the Government’s new regulatory framework is a concern for nearly half the companies surveyed.

As many as 80% of surveyed firms said they expect oil prices to increase in the next two years, with most saying a price range of $50-$70 per barrel is needed to support a sustainable offshore industry in Ireland. Over a quarter of companies plan to continue with Irish exploration activities based on current oil prices.

“The stabilisation and improvement in oil and gas prices in recent times has had a positive impact on the Irish oil and gas industry,” according to PwC’s oil and gas partner Ronan MacNioclais.

“Over half [of companies surveyed] reported a high level of optimism in relation to the level of petroleum they believe has yet to be discovered in Ireland in spite of the lack of historic commercial discoveries here.

“Technological advances have assisted in de-risking Ireland as a location for oil and gas exploration. The Government has also done a good job in terms of marketing Ireland internationally as a favourable oil and gas territory and some of the majors in the industry now have licences in Irish waters. They are bringing new approaches and new ways of thinking to the industry,” he said.

Chinese-backed explorer Nexen is due to drill off the south-west coast next year, while Providence Resources — and its newly found Chinese development partners — will start a multi-well drilling round at the Barryroe field in the Celtic Sea. British explorer Europa Oil and Gas is eyeing drilling activity in 2020 in both the Porcupine Basin, off the south-west coast, as well as further north near the Corrib field, and is bullish about its chances of being a major contributor to Irish gas requirements in the coming years.

IRISH OIL & GAS SURVEY: Many oil firms struggling to develop Irish assets

Asked what measures the Government could take to help the industry, 72% opted for further streamlining of regulation, while more than half suggested better promotion of the benefits of exploration to the wider society.

On the latter, nearly 90% of those surveyed said People Before Profit’s Petroleum and Other Minerals Development (Amendment) bill - currently winding its way through the Oireachtas - could pose “significant damage” to the sector and “enormous threats” to Ireland’s energy security and supply, with “potentially devastating economic consequences” should it succeed.

However, the survey was conducted before junior minister Seán Canney last week said policy has not changed, the Government remains committed to exploration in the Irish offshore, and the bill would do nothing to reduce Ireland’s greenhouse gas emissions or lower the country’s reliance on imported energy.

Ireland, together with other global economies, will need to continue to place a heavy reliance on oil and gas for many years to come until consistent supplies of alternative sources of energy reach acceptable levels

- said Mr MacNioclais.

The PwC survey also showed that while Ireland is still regarded as a high risk location for exploration activities, there remains a strong appetite for new licences. Companies selected the Porcupine Basin, the Slyne Basin, close to the Corrib field; offshore Donegal; and the north Celtic Sea as preferred locations for future Government-led Irish offshore licensing rounds.

Meanwhile, a separate report - carried out by KPMG on behalf of wind energy promotional body NOW Ireland - has claimed that up to 1,000 megawatts of offshore wind resources in the Irish Sea is deliverable in the immediate future, with additional potential of up to 3,000 megawatts.

The report said that Ireland remains the only EU member state with a significant Atlantic Ocean coastline not to be developing offshore wind resources.

Ireland is looking to generate 40% of its electricity from renewable sources by 2020, with that target rising to 55% by 2030.

“We are an island nation with extensive territorial waters. We see other countries in northern Europe revitalising coastal communities through investment in offshore wind. It’s time for Ireland to take this opportunity; clear and early signals will allow projects to come forward, and will enable the Irish supply chain to maximise benefit from this game-changing technology,” said NOW Ireland chairman Paddy Teahon.

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