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Page added on May 17, 2014
Oil exploration carries ‘real risk’ in ‘hostile’ Irish waters
Ireland’s oil potential may “hold some intrigue” but exploration carries “real risk”, according to a BP executive.
While many believe waters off Ireland could prove lucrative, Bernard Looney, chief operating officer in production at the energy giant, said the sheer size, depth and hostility of some of the areas makes it “exceptionally challenging”.
During a discussion about whether Ireland’s oil and gas potential is over-hyped or under-sold, Mr Looney said it is “a question of whether the rewards justify the risks”.
In preparation for the event at the Irish Embassy in London, he said he had a discussion with one of BP’s exploration directors about the “three principal basins” – the North Celtic Sea, the Porcupine basin and the Rockall Trough.
“And just taking one of them – the Rockall Trough – it is one of the largest, unexplored basins in the planet. It is larger than the island of Ireland alone. These are no small facts.
“But it’s not easy. It’s remote,” he said.
Mr Looney, addressing around 100 people at the debate organised by the London Irish Business Society, said: “The Rockall Trough is up to 400km offshore. It’s in water that’s up to 1500m and it’s hostile.
“In February 2000 a research vessel encountered the largest wave ever recorded by scientific instruments in the open ocean, with an individual wave that measured 95 feet or 29 meters. And to top it all, if you’ll excuse the pun, it is overlaid with basalt… which makes it exceptionally challenging.
“But that’s what we do. That’s what companies like BP do. This is the sort of area where we find we can be distinctive.”
He added: “It’s simply a question of whether the rewards justify the risks, and the reality is that given the track record in Ireland, Irish exploration does carry real risk.
“In the end we can debate Ireland’s potential until the cows come home but ultimately it can only be determined by putting holes in the ground. Whether BP drills those holes or not remains to be seen.”
But Tony O’Reilly, CEO at Providence Resources, the Irish-based upstream oil and gas company active in the exploration and development of hydrocarbon assets, said Ireland’s oil potential is simply “under-explored”.
He said: “Is it over-hyped – and some people accuse me of being a little bit of a hype merchant – or is it undersold? I would just simply say it’s under-explored. That’s the key message. There have not been enough wells drilled.”
He added: “Look at Aberdeen and you realise what a phenomenally successful area it is now, and 45 years ago it was a fishing village. Why can’t we have that in Ireland?”
BP left Ireland in 1989 after spending $120m on about 17 explorations, leaving “a whole lot wiser but with rather less money”, Mr Looney said.
He added: “The reality is that there is much more competition today for the investment dollar. Inevitably when we face choices of where we spend our exploration budget, we’re drawn to conversations about above the ground factors and below the ground factors.”
Mr Looney said that “consistency, stability and predictability” are the things BP look for when making investments.
“And on the latter, the below the ground, what’s down there, there’s no doubt that Ireland does hold some intrigue,” he added.
Referring to The BP Energy Outlook, Mr Looney said the world is set to demand “more and more energy” in the future.
“We forecast the demand for energy will grow by 1.5% per year between now and 2035, and when you do the math, that in aggregate, amounts to about 40%, or the equivalent of adding another China and another United States combined to the world by 2035,” he said.
“The bottom line is that the world will continue to demand more and more energy into the future.”
Mr Looney said that “by 2035 a full four fifths, or 81% to be precise, of the world’s energy will be supplied by oil, gas and coal”.
He added: “And that’s down only 5% from today’s numbers. And for the first time since the Industrial Revolution no single fuel will be dominant. In fact, oil, gas and coal will each converge on having 27% share at that point in time.”
Mr Looney said the issue is not about the quantity of resource that is out there.
“It’s about accessibility, and quite frankly, affordability. Future reserves are sitting in deeper, hotter, higher pressure and more hostile surroundings,” he said.
5 Comments on "Oil exploration carries ‘real risk’ in ‘hostile’ Irish waters"
GregT on Sat, 17th May 2014 10:00 am
Well at least they didn’t say the usual ‘potential “X” millions of barrels.’
Plantagenet on Sat, 17th May 2014 10:44 am
Once the price of oil takes another jump up, the Irish oil prospects will become even more interesting
Northwest Resident on Sat, 17th May 2014 10:49 am
“Once the price of oil takes another jump up, the Irish oil prospects will become even more interesting.”
The high price of oil has already destroyed economies. To compensate, world governments have printed trillion$ and inflated assets, while driving down demand by sucking the money out of the normal people’s pockets and putting it into the bank accounts of the already super wealthy. Another significant price hike would just increase the pain and drive global economies even further toward their final collapse. At that point, sure, Irish oil prospects would become even more interesting, I suppose.
Northwest Resident on Sat, 17th May 2014 10:53 am
Plantagenet — You used to post on this site very infrequently. Then, about the time that one of our regular posters named Nony disappeared from the posting boards, you started picking up the slack, posting frequently, making statements and arguments and expressing points of view that are amazingly similar to those that Nony used to post. You guys aren’t related, are you? Not that there would be anything wrong with that — just curious…
rockman on Sat, 17th May 2014 12:27 pm
Some interest details. Makes you wonder with such a lucrative trade why more their resources haven’t been developed. Perhaps they aren’t there in the volumes questimated. That’s one reason you cut royalties: to make in uneconomic viable.
And how much exploration has been done with this “give away” to the oil patch? “The mega-find that has been sought in parts of Atlantic acreage to the west of Ireland remains elusive. Cahill estimates that the commercial success rate for exploratory wells in Ireland is about one in 25, compared to around one in five in Norway. While around 200 wells have been drilled in Ireland over recent decades, only two relatively small commercial discoveries have been made—the Kinsale Head and Corrib gas fields—holding about 2.5 Tcf of gas reserves between them.”
Sounds to me with such a poor track record they should be happy with what they’ve found so far. Had royalty burden been more typical those small discoveries might not have been made. Between the seismic and drilling costs for all those dry holes it sounds like the oil patch has registered a net loss on the offshore Ireland efforts.
Hot off the presses this week: Ireland has watched for years as neighbours in the UK and Norway reaped the benefits of staggering oil strikes in the North Sea.This week, efforts to emulate that success here stepped up a gear when the Government granted licences to 12 companies from four countries to search for hydrocarbons off the west coast.
And now the complaint from 2012:
“The Gas & Oil Robbery: The €420,000,000,000+ Ireland is giving away
Vast quantities of gas and oil have been discovered under Irish waters in the Atlantic Ocean over the past 15 years. The Government’s figures put the value of these reserves at €420 billion (€420,000,000,000), but this is a very conservative estimate. The real figure is likely to be much higher, especially as the global price of oil and gas rises.
So what will the Government be spending these new-found riches on? The answer is: Nothing. This wealth will be leaving Ireland, thanks to a deal made between the corrupt Haughey government and multinational oil companies. Minister Ray Burke (later jailed for corruption) changed the law in 1987, reducing the State’s share in our offshore oil and gas from 50% to zero and abolishing royalties. In 1992, Minister Bertie Ahern reduced the tax rate for the profits made from the sale of these resources from 50% to 25%.
According to respected economist Colm Rapple, the amount of tax paid will be very low and will not be paid until many years into the operation of a gas or oil field, because the deal allows the companies to write off 100% of costs (even the anticipated cost of shutting down the operation!) before they declare the profits to be taxed (see http://www.colmrapple.com). In major oil/gas producing countries, the state takes an average (median) of 68% of the value of gas and oil.
While people in Ireland are suffering in a recession, being told to tighten their belts, to grin and bear the painful cuts to health, education and their dole, the pension levy, the giant oil companies of the world are preparing to remove Ireland’s valuable natural resources and divvy up the billions of euro of profits between their shareholders.
So the next time you hear a politician defending the Corrib Gas fiasco by mentioning the “national interest”, remember that Corrib actually represents a net loss to the Irish exchequer of tens of billions of euro.
One of the arguments you sometimes hear in defence of the Great Oil and Gas Giveaway has to do with “security of supply” – the idea that Ireland will be left without gas if the pipeline from Russia is cut off, and so we need to make it attractive for companies to bring gas ashore here. However, according to Bord Gais, “Ireland’s imported natural gas supplies are sourced from the North Sea. The possibility of gas supplies to Ireland from these sources being restricted is very remote.”
(See http://www.bordgais.ie/corporate)
And crucially, Ireland’s licensing law gives us no security of supply, because it allows the companies to export our gas rather than sell it to the Irish market.”
It sounds like geology is a bigger threat to Irish supply security than the royalty structure.