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Emerald Isle hope for a new oil rush

Tracy Boles - Sunday Express

TONY O’Reilly, son of the Irish billionaire of the same name, wants to start an oil rush that turns Ireland into the next Aberdeen. He may soon get his wish.

Next month, his company, Providence Resources, starts drilling off the coast of the Emerald Isle as part of a $500 million-plus (£309 million) programme.

It could turn out to be the first of many companies to do so. Dublin is on the verge of awarding a new round of exploration licences for a vast swathe of the Atlantic off the west coast of Ireland. Up for grabs are 996 full blocks and 58 part blocks of sea, covering an area of about 252,500sq m.

There are thought to have been 15 applications, including ones from an industry major, North Sea players and independent oil companies. Applicants could find out if they have been successful as early as this week.

Potential resources could top 10 billion barrels of oil, say experts. However, those resources are not proven yet.

“We have to get the drill bit turning,” says O’Reilly. “It’s like winning the Lottery: you have to buy a ticket.”

Providence, which is 20 per cent owned by the O’Reilly family and listed in Dublin and London, plans to drill up to 10 wells on six sites by 2013. Partners include America’s ExxonMobil.

The oil minnow will explore in the Celtic Sea off the south east coast, Dublin, Northern Ireland and in deep water off Ireland’s west coast.

Improved infrastructure, high oil prices and enhanced technology will allow Providence to look again at prospects previously regarded as not commercially viable.

“The Arab Spring has highlighted energy security and has meant that Ireland is currying favour,” says O’Reilly. “It is an old district looked at through a new lens.”

The first test for the explorer will come when it re-enters Barryroe, a Seventies’ oil discovery in the Celtic Sea. Providence, which produces 900 barrels a day from a profitable onshore field in the Weald Basin in West Sussex, also hopes to strike lucky near a small island off Dalkey, Co Dublin, the upmarket home to celebrities such as U2’s Bono.

The Dalkey prospect will be drilled in conjunction with Malaysia’s Petronas. It is similar in profile to Britain’s oil-rich Morecambe Bay off the Lancashire coast.

The prospect that has attracted the most interest is Dunquin, off the west coast, in which ExxonMobil and Italy’s Eni hold 80 per cent.

Industry sources believe there could be 80 trillion cubic feet of gas in the field and analysts say this would make it worth up to $25 billion (£15.5 billion). There could also be oil in the field.

The newest Providence prospect is Rathlin, off the coast of Northern Ireland. O’Reilly says: “We hope to be able to have Ireland’s first commercial oil development at Barryroe and more exploration prospects. It’s all about the number of wells as it is a numbers game.

“In Ireland, there have been 160 drilled, while there have been 10,000 drilled in the UK. Success drives more investment, leading to more discoveries.”

A number of disappointing wells led to an exodus of most of the big names in the Eighties.

Providence and its predecessor companies have spent hundreds of millions of dollars on exploration without a commercially viable find.

However, it could just take one lucky hit. One major field, Kinsale, now owned by Marathon, produces 7 per cent of Ireland’s gas.

Providence Resources is named after Providence, the capital of Rhode Island, where O’Reilly attended Brown University.

It started life in 1997 when it was spun out of the family’s zinc mining company, Arcon. However, his father’s oil exploration efforts date from 1981.

O’Reilly junior says: “It has not been a quick race but a long march.

“Now the time is right. The next couple of years will be exciting for shareholders.”

Analysts believe the company, with a market capitalisation of E110 million (£97 million), is undervalued.

Providence’s Irish house broker Davy, says: “On our suite of assumptions and risking, the risked value for Providence is 919p per share and the full unrisked value per share is 4,778p.

“The risked value is some four times the current market price while the unrisked value is some 20 times the current market price.”

However, it’s not only shareholders who would benefit from a big find.

It would also help revive the Celtic Tiger by bringing inward investment and hefty tax revenues into the debt-laden country.

The emergence of a thriving oil province off the coast of Ireland could also lure operators away from the North Sea, where they have been hit with a new windfall tax.

O’Reilly says: “If you get it right it’s a major win for everybody. The drill bit will start doing the talking.”

Posted Date: 
4 September 2011