Ireland’s oil and gas potential

Minister of State for Communications, Energy and Natural Resources Fergus O’Dowd welcomes the renewed interest in Irish oil and gas potential and explains his rationale for the new licensing terms for exploration and production.

Oil and gas exploration activity levels in the Irish offshore have ebbed and flowed in recent decades. An initial surge of exploration activity in the 1970s, on the heels of the Kinsale gas field discovery, has been followed by a period of retrenchment.

Encouragingly, the last twelve months have seen a step change in interest and activity in respect of Ireland’s oil and gas potential. Both the number of licences in existence and the technical and financial strength of the companies involved in those licences are key indicators of progress. Today, Ireland has the highest number of exploration authorisations in place since exploration began in our offshore more than four decades ago. Added to that, the stock of existing companies in the Irish offshore and the entry of a number of large independent oil companies in 2013 demonstrates that the industry has significant operational capacity.

Another indicator of progress is drilling activity levels which have been regrettably low over the past decade. That is set to change over the next two to five years, as drilling commitments now in place are delivered, and as new drilling commitments are entered into following on from decisions made by companies currently investing in seismic acquisition.

All of this demonstrates that exploration in the Irish offshore is moving in the right direction. However whilst growth in exploration activity increases the chance of commercial discoveries being made, it brings no guarantees.

The Government’s underlying objective in respect of oil and gas exploration is to ensure that the State’s natural resources are managed in a way that will maximise the benefits accruing to the people of Ireland.

In working to meet this objective, the State’s strategy is that industry rather than the Exchequer is best placed to assume the high exploration investment cost and high financial risks associated with offshore exploration. It is important then that the State provides suitable opportunities and the right environment to encourage industry to take the risk associated with investing in exploration.

In the last three years, the Government has initiated a number of measures aimed at making Ireland a more attractive location for exploration investment. These measures include positive initiatives relating to licensing, data acquisition and the safety regulatory regime.

One such measure was the 2011 Atlantic Margin licensing round which resulted in a number of significant-sized exploration companies entering the Irish offshore with an immediate impact in terms of exploration activity. The follow-on 2015 Atlantic Margin licensing round was formally launched in June, and I am optimistic that industry will recognise the opportunity and respond positively.

The largest ever 2D regional seismic survey undertaken in the Irish offshore has just been completed. This survey was a joint venture involving my department and the Italian company Eni. The new survey data, which will become available later this year, should aid our understanding in identifying areas of prospectivity for oil and gas offshore Ireland and will be of particular interest to government, industry and researchers.

In 2013, under the Irish Presidency of the EU, a new Offshore Safety Directive was finalised and in December Ireland’s new safety regime went operational.

Under that regime, the Commission for Energy Regulation has introduced and is operating a modern, safety case-based safety regime that applies to all oil and gas exploration activities in the Irish offshore.

These are just some of the measures being taken by the Government to help ensure that Ireland is an attractive location for mobile international exploration investment to locate. These measures are aimed at ensuring that recent momentum is built upon.

A key issue for potential investors is the extent to which the regulatory framework can be relied upon, particularly as regards the potential retrospective impact of any changes to licensing terms.

In that regard, it should be noted that both the May 2012 report of the Joint Oireachtas Committee on Communications, Natural Resources and Agriculture on offshore oil and gas exploration and the recent review of Ireland’s fiscal terms by international consultants Wood Mackenzie recommended that no retrospective changes be made to licensing terms in respect of existing licences, a position with which the Government fully concurs.

What we are witnessing in our offshore is positive and there is a clear forward momentum. The Government’s intention is that momentum should be maintained.

Given the renewed interest in our offshore, the arrival of a new publication dedicated to oil and gas is timely and welcome.

The Energy Ireland oil and gas magazine will undoubtedly be a valuable resource for anyone with an interest in developments in the sector and I wish it every success into the future.