First Irish oil ‘years away’

Commercial oil production from offshore Irish licences will not become a reality until at least 2023, one leading player has said.

British explorer Europa Oil and Gas has a number of licences and prospects off the west coast and is in line for more when the second phase of options from the recent Atlantic Margin Licensing Round are awarded next month.

Chief executive Hugh Mackay said yesterday that while oil prices will likely stabilise, the current low price environment should not matter for Ireland as local licences will not be producing until the next decade, and 2023 at the earliest.

Europa is currently progressing with plans to farm-out majority stakes in its existing Irish licences to prospective partners who, in return, will cover development costs. Mr Mackay said that around 50 major and mid-cap explorers have passed through Europa’s Irish ‘data room’ and around 12 are understood to be seriously interested. While progress is being made, no deal is likely until the second half of the year at the earliest. That would push drilling at Europa’s Irish licences out to 2018, although the company hasn’t totally written off 2017 as a start time.

“By May [when the next tranche of licence awards are made] the frontrunners will have been through the data room and should be in a position to start making some decisions,” Mr Mackay said regarding Europa’s farm-out prospects.

He noted that competition is high and other licence holders are also seeking farm-outs, but said Ireland is very attractive to investors.

“In a $60-$80 per barrel oil price environment Ireland would be one of the few deepwater jurisdictions where it would be economically feasible to have a development,” he said.

Rig costs have halved in the past 12 months and Mr Mackay said that it will not be until around 2020 before any player has to take a $5bn capital expenditure punt on big production drilling here. Mr Mackay also said more consolidation in the market could be seen when firms’ full Irish acreages are known later this year.

Europa yesterday also issued interim results, for the six months to the end of January. Its first half pre-tax/post impairment losses fell from £1.4m (€1.7m) to £600,000 and the company was awarded three new UK onshore licences in the period. The company’s cash balance, at its halfway point, amounted to £1.8m.