“One billion barrels of oil found off the Irish coast.” That was the headline that greeted readers of the Belfast Telegraph last week. And it must have sent a ripple of excitement through the country. After all the misery that Ireland has gone through in the last few years, the must have thought that Ireland had hit the jackpot.
Well, I wrote about this exciting story in Penny Sleuth on 25 October: Ireland’s 1.6 billion-barrel oil awakening? And it does look like this Irish oil story is bursting to life. For example, the share price of Petrel Resources (PET) leapt from 6p to 27p last Monday – with over twenty-six million shares traded on the day.
But frankly, the headline writer of the Belfast Telegraph should be thankful that he cannot be convicted of misleading the market. Because if ever there was a case of over-egging the pudding, this was it.
Let me explain in today’s Penny Sleuth what is really happening over in Ireland.
Porcupine Basin holds ‘promising geology’
What Petrel Resources actually said was that its examination of two prospects in the Porcupine Basin out in the deep and rough waters of the Atlantic margin to the west of Ireland had found promising geology. In particular, it had identified ‘reservoir sands’, in which oil could have been formed by the degeneration of organic matter over thousands of years. And it believes it may have found geological structures with impervious walls and ceilings through which oil cannot flow, and thus act as traps.
These are basic requirements for any oil play, but two factors really caught the eye. The first was that Petrel reckons one prospect is big enough to have “one billion barrel potential” – that is where that headline came from!
The second is that there are other prospects at different stratigraphic levels. Essentially these are on top of one another like layers on a cake. The obvious advantage of this is that they can all be penetrated by the drilling of a single well, which cuts overall drilling costs and boosts the chance of success.
They need a partner to share the costs
But drilling of Petrel’s prospect is still some way off. It still has much work to do. It needs to employ the dark arts of petrographic analysis and acoustic inversion to better assess rock characteristics. It also wants to do further interpretation of the 2D and 3D seismic data that has been gathered in past years.
In short, it is still at quite an early stage, and the likely next step will see Petrel bring in a partner to help bear the cost of more 3D seismic surveying and, eventually, a drilling campaign.
Around Ireland, oil has been found in the Celtic Sea, to the south, and last week Fastnet Oil & Gas (FAST) added to its interests here. But the bigger prospects probably lie out to the west on the Atlantic margin. Conditions for drilling here are not easy, which means that it will be expensive, but experts are now drawing geological analogies with established oil provinces elsewhere.
John Sullivan, for example, technical director of Providence Resources (PVR) says that recent successful discoveries in West Africa and South America “have highlighted the enormous potential of the Lower Cretaceous deepwater clastic (a rock strata composed of fragments of older rocks)” and he believes that “this significant play may well extend into the North Atlantic Conjugate Margin and, more particularly, into the southern Porcupine Basin”.
Irish eyes will be watching closely
Last week, Providence said that its 80% owned prospect in the Porcupine Basin, Drombeg, could hold 872 million barrels of recoverable oil and said that the prospect had “created much interest amongst deepwater exploration operators”.
Also involved here are San Leon Energy (SLE) and Europa Oil & Gas (EOG). The former has a small interest in a prospect in the North Porcupine Basin, the significance of which will be diluted by the proposed merger with Aurelian Oil & Gas (AUL). But Europa has recently given a positive report on its Mullen and Kiernan prospects in the South Porcupine Basin, with reprocessing of seismic data indicating that the former could hold up to one billion barrels.
So, with such large prospects and with the possibility that a new deep water oil province could be on the verge of discovery, Irish eyes will now be firmly on the Dunquin prospect, which lies in the South Porcupine Basin 60 kms from Providence’s Drombeg.
The operator here, with a 27.5% stake, is ExxonMobil, while ENI has 27.5%, Repsol 25%, privately-owned Sosina Exploration has 8%, and Providence Resources has the other 16%. Here seismic data interpretation “has revealed the presence of two giant deep water exploration targets, further supported by seabed gravity cores recovered over the area, which contain anomalous traces of hydrocarbons”.
The best estimate of recoverable resources is 1.7 billion barrels of oil and would be a major find. Drilling is expected in the first quarter of next year. I will be keeping a close eye on developments in Ireland in the weeks ahead.