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Page added on April 23, 2012

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Long Irish efforts pay off in an oil find

Production

It’s been a long time coming, but oil has flowed out of an Irish well. Platts’ Ireland correspondent Kieran Moran has the story in this week’s Oilgram News column, At the Wellhead.

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It has taken over forty years and 156 exploration and appraisal wells, but last month a well drilled offshore Ireland finally produced commercial quantities of oil giving a long-awaited boost to hydrocarbon exploration in Ireland.

While there have been numerous hydrocarbon shows in Irish waters, commercial finds have remained frustratingly elusive. Ireland has just three producing fields — all gas — with a fourth, the beleaguered Corrib gas field due on stream in 2015.

It is appropriate that Ireland’s first potentially significant oil field should be licensed to Dublin- and London-listed junior Providence Resources.

The company was founded in 1997 but traces its beginnings back to 1981 when a predecessor company Atlantic Resources was founded by Sir Anthony O’Reilly, the father of current CEO Tony O’Reilly Jr.

The company is almost exclusively focused on Ireland and holds exploration licenses and licensing options covering substantial acreage around Ireland’s entire coastline.

In a recent interview with O’Reilly and John O’Sullivan, Providence’s technical director, there was considerable confidence that recent well results from the Barryroe field will materially change not only Providence but the potential for oil and gas exploration in Ireland’s offshore.

Well results and data analysis have de-risked the prospect and the entire Celtic Sea, and they are confident there is considerable upside with recoverable oil and field production rates well above pre-drill estimates.

The Barryroe well was spudded in the North Celtic Sea Basin in November last year targeting oil bearing basal Wealden sandstone. Lying 50 km of Ireland’s south coast, appraisal well 48/24-10z hit a 24 feet thick net pay interval and when tested in March the well flowed at a stabilized rate of 3,514 b/d.

The flow rate came in well above the 1,800 b/d threshold that the company said was necessary to deem the well commercial, and also confirmed the oil is light with a gravity of 42 API and a wax content of 20%.

The well also tested 2,930 Mcf/d of gas.

There were some technical constraints with the well, and Providence believes the flow rates could be much higher. “The full potential for well 48/24-10z is closer to 20,000 b/d from just one well,” O’Sullivan said.

Further test results released March 23 were also encouraging. Testing a secondary interval lying above the primary oil bearing sands in well 48/24-10z, the company hit a 17 feet net gas column which achieved flow rates of 7,000 Mcf/d of gas.

Further analysis of the pressure data showed the flow rates from the primary and secondary reservoirs could reach 17,000 Mcf/d of gas and 3,350 b/d of oil — or a total of 6,183 boe/d.

The analysis shows that running a full flow test without the complications of the associated liquids would increase the “gas flows out to 23,000 Mcf/d,” O’Sullivan said.

Barryroe lies just 3 km from installed gas pipeline infrastructure, which opens the possibility of a standalone gas well to “monetize the gas field,” O’Reilly said.

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An analysis of the full field will take six to nine months, but they hope to have it completed by the end of 2012, O’Reilly said. The original target date for full field production within three years remains in place. Peak production rates of 20,000 b/d across the entire Barryroe field is built into the production model, but data and well analysis suggest that this a very conservative target.

Providence is operator and currently holds an 80% interest in the license. The company is actively seeking partners to farm down its equity stake.

O’Reilly said there has been interest from potential partners, “but no final decision has been taken on the final equity stake but it is likely to move closer to 40%.”

Barryroe is just the first of a multi-well program planned between 2011 and 2013. The campaign is the largest ever offshore Ireland and Providence will invest “between $100 million and $120 million” with the final amount depending on farm-out agreements and options.

Ireland’s licensing terms are generous by international standards, applying a 25% corporate tax rate with full write-off of exploration and development cost. In 2007, a profit resource rent tax for highly profitable discoveries was introduced. The tax operates on a graded basis of profitability and in effect means the tax take on very profitable hydrocarbon finds could increase from 25% to a maximum 40%.

Ireland also has an infrastructure, particularly a gas network and gas interconnections to the UK, while oil prices “above $40/b make Ireland a viable investment proposition,” O’Reilly said.

The first success at Barryroe can release the true value of the field itself but it will also “be a key test for the rest of the Celtic Sea.” It “can be a catalyst to reawaken interest in Ireland,” O’Reilly said.

Platts



3 Comments on "Long Irish efforts pay off in an oil find"

  1. BillT on Tue, 24th Apr 2012 6:53 am 

    Will the Empire be invading Ireland to install ‘democracy’? Or will Ireland leave the EU and get back on it’s feet by selling the EU oil? If it stays, the IMF and ECB will take it.

  2. Arthur on Tue, 24th Apr 2012 8:11 am 

    20,000 b/d is peanuts. Holland imports 1 million b/d. Scaling that to Ireland, until recently a nation with the highest gdp per capita, I would estimate daily oil consumption on 350,000 b/day.

  3. BillT on Tue, 24th Apr 2012 3:41 pm 

    20,000+ barrels per day at $40 tax each is not chump change for a country that is struggling to stay alive. That could be a $1M per day income in a country of 5 million people. And being light sweet crude, it will have no problem finding buyers locally. And Ireland used about 160,000 barrels per day in 2011. That is like the Us finding 2 million barrels per day of new light sweet crude, not that that will ever happen.

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