Make or break time for Irish exploration

THERE is an opinion that Ireland is missing its real opportunity to be a meaningful part of the international oil and gas exploration industry.

Amidst all the hope, hype, near misses, and false dawns of drilling activity around the country’s coastline in the past few years there has been an overlooked ignorance, on the part of third-level institutions, to embrace advanced engineering subjects that can build knowledge in such areas as enhanced oil recovery (EOR) and reservoir engineering that could, ultimately, lead to a new generation of highly technical Irish start-up firms that can make a real impact in the sector on a global basis.

In essence, Ireland could strive to be an international leader in the area of energy knowledge and technical engineering expertise, but needs to put more building blocks in place.

“A good example of what Ireland could be is The Netherlands. It doesn’t have much of an oil industry to speak of, but is very strong in the area of small technical companies who are doing world-class work behind the scenes,” according to Jeremy Gilbert, president of the Irish branch of the Society of Petroleum Engineers, a global not-for-profit body aimed at disseminating technical knowledge on the industry and training professionals.

EOR — also referred to as improved oil recovery or tertiary recovery — is basically a generic catch-all term for techniques that increase the amount of crude oil that can be extracted from an oil field. Depending on methods used, the use of such knowledge and expertise can boost resource extraction rates by an extra 30%-60%, according to some sources, rather than the 20%-40% average using primary and secondary recovery techniques.

The job of a reservoir engineer is crucial in field development planning, as they consult firms on the most cost-effective and environmentally correct ways of maximising hydrocarbon recovery. This area of engineering applies scientific principles to the drainage problems arising during the development and production of oil and gas reservoirs so as to obtain a high economic recovery.

Mr Gilbert feels Ireland’s universities need to do more to promote education in such areas. He also feels a large number of Irish petroleum engineers working abroad would be interested in returning home to work, if more firms had such a technical base here as the likes of Tullow Oil do.

“I’m appalled at the lack of knowledge regarding Ireland’s exploration prospects, amongst leaders in public life. There seems to be a feeling that we can just drill more wells in order to make the country more money; but it’s just not that simple.”

Mr Gilbert doesn’t hold out too much hope for Ireland’s waters becoming another British North Sea or Norwegian Continental Shelf. On the prospects of the Irish offshore becoming a real hotbed of activity in the coming years, he reckons the picture is “not totally bleak”, but he is not overly optimistic, either.

The main problem for Ireland, according to Mr Gilbert, is a natural one. The geology around the coast, he notes, isn’t uniformly distributed.

Therefore, many finds will always tend to be generally small in scale, rather than huge.

Furthermore, the distance between these small accumulations can be sizeable, driving up exploration, development, and operational costs. Oil or gas at smaller finds may also be more difficult to extract; again calling for more wells to be drilled at increased costs.

Still, as much as 60% of oil discovered around the world is from proven fields, with 2014 being the first year in half a century where the industry failed to unearth an entirely untapped field.

“There are still better places to go. Maybe 50 years down the line, when many of the bigger areas are beginning to dry up Ireland will be more attractive.”

However, Mr Gilbert isn’t overly critical of the Government’s new tax regime for explorers in Irish waters, calling it “timely and sensible”; moreso because it can give companies more clarity and security that the tax take from their potential finds will not change over the often long time period leading up to a discovery.

In the summer, the Government finally published its altered tax framework for Ireland’s burgeoning exploration sector — with the top rate of tax on profits made from any future oil find (the charges won’t be back-dated to include previous finds) in Irish waters going from 40% to 55% and a 5% royalty revenue also going to the State for each year of a producing field’s lifespan.

“The industry hates change because the exploration and development period surrounding a project is so long. Companies need stability, up front, and a tax regime that’s fair,” according to Mr Gilbert.

With 2015 set to see an overdue return to drilling activity in Ireland’s coastal waters and the first licensing round in four years, he thinks Ireland’s offshore dream is close to make or break time.


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