Island Oil and Gas signs rig contract for three wells off the Irish coast

THE drilling of three oil wells off Irish shores will commence next year.

Island Oil and Gas will sign a rig contract with Norwegian company Petrolia.

It is anticipated that the rig will drill in prospects already identified in Donegal and the Celtic Sea.

The AIM-listed Island Oil and Gas company has contracted a semi-submersible drilling unit from the Petrolia Drilling company for work on the three-well drilling programme.

John Craven CEO of Petroceltic said: "This is a very positive development for Petroceltic and is an important component in our planned drilling campaign for Ireland, Algeria, Italy and Tunisia in the coming months."

Davy stockbrokers said yesterday that with this contract, Island Oil and Gas has demonstrated its commitment to meeting its operational targets and its ability to manage supplies in what is a tight market for rigs.

Targets for next year's drilling programme include the Inishbeg prospect offshore Donegal and the Old Head of Kinsale structure in the Celtic Sea. An exploration well on Inishbeg will evaluate the potential of the reservoir sandstones that are gas-bearing in the Corrib discovery, according to Davy.

They also said, on the Old Head of Kinsale, Island and its partners will explore for Greensand reservoirs which are similar in nature to those that contain at least 80% of proven gas reserves in the Kinsale gas field.

The stockbrokers said Island has a 31% equity interest in the Donegal licence and a 50% interest in the Celtic Sea licence.

It is anticipated that Island's first well will commence drilling, subject to regulatory approval, on or about 1 April next year.

According to Petrolia, the rig contract could provide for a 75-day drilling programme at which stage it will be worth an estimated $11.2 million.

Island's share of these costs will be determined by the duration of drilling activity and the prospects it selects to drill next year, say Davy. They add that in any case, Island is financially comfortable with estimated cash balances of some £9 million. Petroceltic is a joint venture partner and operator with Island Oil and Gas.