* Two tests will be key to determining industry interest
* Majors now looking at offshore Ireland
* One large find could make Ireland self-sufficient in oil
By Lorraine Turner and Conor Humphries
DUBLIN, Feb 27 Ireland's prospects for cashing
in on its offshore oil and gas reserves will become clear in
2013 as a series of tests determine whether a recent flurry of
interest can be converted into commercial production.
Hopes that oil production will provide revenue for a
debt-laden government and a path towards energy independence
picked up last year after Irish explorer Providence Resources
reported the first commercially viable oil-flow rate at
its first drilling target, Barryroe.
Providence will announce in the coming months whether the
field will be the first in Ireland to be declared commercial.
Companies will also drill two deep wells, which are expected to
give the clearest indication yet of how large the resources
might be on its large Atlantic shelf.
The results of this exploration will determine whether oil
companies are likely to take options on fields off the west
coast when a government deadline approaches in October, which is
crucial to maintaining the momentum of the industry.
"This year ... will determine whether the potential is there
and the level of future industry interest in Irish offshore"
said Fergus Cahill, chairman of the Irish Offshore Operators'
"In the top-end scenario we'd hope to see a markedly
increased level of activity," he said. "If the results are
disappointing, momentum could be lost. We would just stagger
along as we have been for the past 10 or 15 years."
Analysts estimate the Barryroe field at full production
could provide the government with up to 500 million euros ($653
million) a year in revenue, equivalent to the tax increases
planned next year under Ireland's austerity programme.
Unlike Cyprus, Ireland is not pinning its hopes on
petrodollars to reduce its debt mountain. It would take a number
of large wells to put a dent in its national debt of around 200
billion euros, 120 percent of its annual economic output.
The output from one large field, however, could cover
Ireland's oil consumption, which BP estimates at 143,000 barrels
per day, said Pat Shannon, a professor of petroleum geology at
University College Dublin.
That would take a chunk out of Ireland's 5 billion euros of
annual net imports of oil, gas and related products and improve
its balance of payments. The country imports 95 percent of its
gas and has some of the highest electricity prices in Europe.
Barryroe could be onstream by 2017, assuming a partner is
found to help finance its development and the field is declared
commercial with an estimated productive life of 25 years.
ON THE RADAR
The first test of Ireland's prospects will be the drilling
of a deepwater well at the Dunquin prospect this year, a less
explored block off the west coast which is creating a buzz in
the industry due to its unusual geological structure.
Exxon Mobil will be the operator in a consortium
that includes Italian oil major Eni, Spain's Repsol
, Providence and Sosina Exploration Ltd.
"The majors are, (now looking at Ireland), judging by who
we're getting," Europa Oil & Gas Chief Executive Hugh
Mackay said in an interview last week, noting interest from
household names and echoing similar statements from Providence.
The second significant result will be from an appraisal well
at the Spanish Point Gas Condensate discovery, to be operated by
privately held British oil company Chrysaor, with Providence and
Sosina holding stakes in the project.
The Irish government estimates that what it calls the Irish
Atlantic Margin, which includes Dunquin and Spanish Point, has
unproven potential oil and gas reserves of 10 billion barrels of
"We believe that offshore Ireland is emerging as an
exploration hotspot for oil and gas companies," analysts at
Oriel Securities said in a note last month.
But Ireland has attracted similar interest in previous
decades and so far has little to show for it.
Nearly two decades after the discovery of gas at Corrib, the
ill-fated site is still not on stream, and operator Shell
recently said it would not start up before 2014.
Corrib has been beset by protests and delays as locals have
objected that a planned pipeline to bring gas from the offshore
field to a terminal on the mainland posed risks to safety and
the environment. Project costs have soared from 1 billion euros
to 3 billion, cancelling out any possible tax revenue.
Corrib's troubles and the fact Ireland does not yet have a
major commercial oil field have prompted the government to take
a cautious approach on its tax rate on oil and gas to entice
explorers. The current taxes include a 25 percent corporation
tax and a resource rent tax of zero to 15 percent of profits.
"If we had a Norway-style find, I would be minded to
recommend to the minister for finance that he change the tax
structure," Energy Minister Pat Rabbite said in an interview
late last year, referring to Norway's upper tax bracket of 78
"Whether it's commercially extractable, we're not yet
satisfied about that. There is more work to be done (but) it