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Oil discovery could attract big business

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By Conor Keane, Business Editor

Wednesday, March 14, 2012

Ireland is set to become a major focus of large international companies looking for oil, if the initial test flows from Providence Resources appraisal oil well — 50km off the Cork coast — prove to be commercial.

The Irish Examiner has learned that initial test oil flows at the well in the Barryroe licensing block, broke the 1,800 barrels of oil per day (bopd) barrier set by the exploration company as being "commercial", but a longer test period will be required to determine if this rate of flow can be maintained.

If Providence Resources and its 20% partner, Lansdowne Oil and Gas, become the first to make a commercial find in Irish waters, then it will trigger a significant reappraisal of Ireland as a potential oil provence.

Major oil companies will be tempted to invest in significant exploration projects in Irish waters. Ireland is an attractive exploration investment location in the current geo-political environment, with Ireland’s stable political climate and location on the west of Europe making it all the more enticing.

The Irish Examiner understands that flows of 2,000 bopd or gas equivalent to make commercial sense have been achieved in the initial period of the test on the appraisal well, and if this is maintained, then the first oil from could arrive on-shore by 2014.

This is the fifth time oil has been hit during explorations of the Barryroe licensing block, but the other wells fell below the 1,800 bopd commercialisation target and were drilled in the 1970s and 1990s by Esso and Marathon. Independent analysis suggests that the Barryroe prospect contains a 59m barrel resource of light but waxy crude oil.

Three wells were drilled in the 1970s by Esso and a further well was drilled by Marathon in the early 1990s and all four wells encountered hydrocarbons.

Three of the four wells were successfully flow tested at rates of between 1,300 and 1,600 bopd.

In briefing documents supplied earlier this year by Providence, the company explained why the finds have not been exploited:

"The past development of Barryroe was hindered by technical, financial and fiscal factors in the 1970s through the early 1990s. Notably, the relatively high wax content was a cost issue for any development, especially in the context of sub-$40 oil prices.

"Advances in technological handling of this type of crude, allied to a higher sustainable crude price, mean that it is now an economically attractive commercial proposition. The latest state-of-the-art 3D seismic has also allowed the partners to better image the reservoir sands," Providence said.

The Barryroe well is the first well in Providence’s multi-well, multi-year drilling programme offshore Ireland. "Providence and its partners are investing upwards of $500m on the drilling of a number of exploration prospects and appraisal projects over six distinct basins offshore Ireland over the next two years. Planned future wells include Dalkey Island, Dragon, Spanish Point, Dunquin and Rathlin," the company said on Feb 9.

In briefing documents released by Providence when it disclosed it had located oil, the company outlined what they regard as the implications of a commercial well for Ireland.

"There’s a great deal in it for Ireland," it said. "Providence and its partner are aiming to prove commercial flow rates from Barryroe, thereby declaring Ireland’s first oil field. With commercial success, the benefits for Ireland include more foreign direct investment, and with no state support or subsidies, and with a tax take double that of other industries [the tax rate for natural resources is 25%]".