Offshore gas and oil drilling is set to increase

OFFSHORE Ireland will see higher drilling activity and should be considered in the context of overall European gas supply and demand.

This is according to a study on offshore Ireland conducted by Davy stockbrokers which said high oil and gas prices, improved deep water technology and a safe political environment mean that higher drilling activity can be expected in Irish waters.

Davy says most of this activity will be undertaken by non-national companies, including some of the world’s largest oil and gas firms. However a number of local players such asIsland Oil & Gas, Providence Resources and Lansdowne Oil & Gas offer ways for investors to participate, it said.

In its analysis Davy said the desire for alternative European gas supplies should include all options, including areas where Ireland may have been overlooked in the past.

It said deep water development technology has improved and continues to do so, providing more opportunities.

“Notwithstanding recent changes, the fiscal regime offshore Ireland is still attractive. Ireland offers a stable political and legal framework,” Davy analysts said in the report.

Early indications are that gas could be present in substantial quantities offshore Ireland, especially the western margin and the Celtic Sea is likely to deliver a number of small to medium-sized accumulations of oil and gas says Davy.

“Returns are likely to be lower than for a large-scale discovery off the west coast, but current pricing will allow development to proceed. Despite its location at the western margin of Europe and adjacent to a major oil and gas province (Britain), it is universally agreed Ireland is still relatively under-explored, said Davy. Some 4,000 wells have been drilled in the British sector compared to around 160 offshore Ireland.

The stock broking firm said the potential for offshore Ireland, in the context of higher oil and gas prices, has not gone unnoticed.

Initial expectations were that up to six wells would be drilled offshore in 2008 but this is unlikely to be achieved with several wells deferred until 2009.

“The combination of improved oil and gas prices has led to a reassessment of the petroleum potential by a number of larger companies. As a result, up to four wells may be drilled in 2008 offshore Ireland and possibly up to six in 2009,” the study says.