The State’s role in offshore E&P

An overview of the role of the Department of Communications, Energy and Natural Resources, and how it enables exploration and production in offshore Ireland.

The Department of Communications, Energy and Natural Resources (DCENR) develops and implements policies with the aim of maximising the benefits of exploration for, and production (E&P) of, indigenous oil and gas resources to Ireland. The department’s key objectives are as follows:

• maximise the area of continental shelf under Irish jurisdiction by establishing and delineating an undisputed outer limit of the continental shelf;

• license industry to conduct exploration and production under terms which balance the interests of the State and of industry (while ensuring that E&P is effective and efficient, operations are carried out in accordance with best practice and there is effective liaison with the E&P industry);

• maximise opportunities for Irish business and institutions to service the needs of E&P in Ireland;

• providing stimuli for medium-term and long-term exploration efforts in Ireland by securing Irish E&P industry assistance towards building up the local E&P-related infrastructure, and working with the Irish E&P industry to carry out research and joint industry research and data-gathering.

In pursuing these strategies, the department seeks to contribute to Ireland’s security of energy supply whilst also maximising the financial return to the State from its natural resources. It is responsible for promoting opportunities for industry to invest in oil and gas E&P in Ireland and regulating that activity through its licensing terms and conditions.

DCENR actively promotes Ireland as an attractive location for international investment, building on the outputs of applied research projects and focused interpretative reports, together with the release of basic geological, geophysical and well data to the industry. Promotion involves identifying areas with potential, preparing interpretative reports and encouraging companies to acquire new data in such areas, and releasing data to the industry.

The department’s role in regulation and monitoring of the exploration and development of oil and gas in onshore and offshore Ireland involves the allocation of acreage to exploration companies under various types of licences and agreeing appropriate work programmes and the promotion of acreage, either through open access or by a round system.

The regulatory approach focuses first and foremost on ensuring that exploration is effective and timely. This involves agreeing appropriate work programmes with operators and monitoring the delivery of those work programmes to ensure that they are carried out in full, in accordance with best industry practice and by taking account of the interests of the operator and the State.

When monitoring projects, the department ensures that activities are carried out in accordance with good oilfield practice, and conducted safely and with due regard to their impact on the environment and other land and sea users.

In order to promote and assist effective petroleum exploration, DCENR makes a range of technical information relating to the Irish offshore available to exploration companies, as soon as the confidentiality period has expired. The information consists of well and seismic data and technical studies. In addition, access to samples (such as cuttings, cores and fluids) may be arranged.

Licensing

The Minister for Communications, Energy and Natural Resources can issue a range of authorisations under the Petroleum and Other Minerals Development Act 1960.

A petroleum prospecting licence is a non-exclusive licence giving the holder the right to search for petroleum in any part of the Irish offshore which is not subject of a petroleum exploration licence, reserved area licence or petroleum lease granted to another party.

A licensing option is also a non-exclusive licence giving the holder the first right, exercisable at any time during the period of the option, to an exploration licence over all or part of the area covered by the option.

Three categories of exploration licence are available:

• standard exploration licence for water depths up to 200m;

• deepwater exploration licence for water depths exceeding 200m;

• frontier exploration licence for areas so specified by the Minister.

For standard explorations licences, the holder is obliged to carry out a work programme which must include the drilling of a least one exploration well in the first phase. For a deepwater exploration licence, the holder must commit to at least one exploration well in order to proceed to the second phase.

For a frontier exploration licence, the holder must commit to at least one exploration well in the second phase of the licence. The area of an exploration licence is expressed in terms of blocks and/or part-blocks of the Williams grid i.e. a map of numbered quadrants of the offshore region, measuring one degree of latitude by one degree of longitude. Each quadrant is divided into 30 numbered blocks.

When a discovery is made in a licensed area – and the licensee is not in a position to declare the discovery as commercial during the period of the licence but expects to be able to do so in the foreseeable future – the licensee may apply for a lease undertaking. This is an undertaking by the Minister, subject to certain conditions, to grant a petroleum lease at a stated future date. The holder of a lease undertaking is required to hold a petroleum prospecting licence which will govern activities under the lease undertaking.

When a commercial discovery has been established, it is the duty of the authorisation holder to notify the Minister and apply for a petroleum lease with a view to its development. A petroleum lease holder may then apply for a reserved area licence covering an area adjacent to or surrounding the leased area – this may include areas covered by a petroleum prospecting licence but not any other authorisation.

2015 round

The Minister of State for Natural Resources, Fergus O’Dowd TD, announced the details of the 2015 Atlantic Margin oil and gas exploration licensing round on 18 June. The round will close in September 2015 and will include all of Ireland’s major Atlantic basins: Porcupine, Goban Spur, Slyne, Erris, Donegal and Rockall. The form of concession on offer will be a two-year licensing option.

The formal launch of the round follows conclusion of the Government’s review of Ireland’s fiscal terms for oil and gas undertaken by UK oil and gas experts Wood Mackenzie. “The conclusion of the fiscal terms review allied with the announcement of the detail of 2015 round provides industry with the certainty necessary to invest in exploration offshore Ireland,” the Minister stated.

The maximum number of blocks that can be applied for in each region is:

• four in the Donegal, Erris and Slyne basins (due to their smaller size);

• six in the Porcupine and Goban Spur basins; and

• ten in the Rockall basin region.

Where holders of licensing options wish to move forward to seek an exploration licence, the licence on offer will be a frontier exploration licence of a 15-year duration, with a first phase of three years, and three subsequent phases of four years each.

Data from the regional seismic survey will be made available to the industry for the 2015 licensing round (and also the research community) and the confidentiality period for all new non-proprietary seismic surveys in the entire Irish offshore area is to be extended to 10 years. This brings Ireland into line with other north western European jurisdictions.

“Whilst growth in exploration activity increases the chance of commercial discoveries being made, it brings no guarantees,” the Minister said. “What we are witnessing in our offshore is positive and there is a clear forward momentum. Our ultimate aim is to ensure that the true potential of our indigenous oil and gas resources will be realised for the benefit of our people.”