Chances of oil or gas find here just 1 in 32
DESPITE the attention it attracts, offshore drilling in Ireland is an industry in its infancy.
Oil and gas exploration in this country has been nowhere near as successful as other sectors such as technology and pharmaceuticals at attracting foreign investment.
There have only been four profitable discoveries to date and all four were gas: Kinsale (1971); Ballycotton (1989); Seven Heads (1973); and Corrib (1996). Energy Minister Pat Rabbitte has said there could be up to 50 billion barrels of oil around Ireland, but this has yet to materialise into a profitable venture.
PricewaterhouseCoopers has calculated the probability of making a commercial discovery in Ireland is low (one in 32) per round of exploration, compared with neighbours the UK (one in six) and Norway (one in seven).
If a company is interested in drilling a well in Ireland, it must begin by seeking a license from the State.
In the last round of licensing in 2011 for an area off the west coast, the Atlantic Margin, applicants only applied for 6pc of what was on offer. If a site's prospects look good, the company must then drill an exploration well.
This brings oil or gas to the surface. Smaller companies who hold licences will often "farm-out" at this point – bringing in a larger, wealthier partner, who has the money to finance the exploration.
The average cost of drilling a single exploratory well is about €100m. It is common in Ireland for global players to "piggyback" in this way.
At this point the appraisal process can begin, allowing the parties to determine whether the well is commercially viable.
If all goes well – and it rarely does – the site can be prepared for full-blown commercial production.
Historically, Ireland has not provided a good return on investment for exploration companies. An estimated €5bn has been spent on exploration, while only €1.8bn has been generated in income.
The outlook for returns has improved in recent years, with an increase in discoveries. Between 2002 and 2012, 17 wells were drilled and five discoveries were made. Still, none have yet been declared capable of returning a profit.
Two of the five were "rediscoveries" from the '70s and '80s. Barryroe, off the south coast, and Dunquin, off Kinsale, are some of the most promising. ExxonMobil, along with partners including Irish-listed company Providence Resources, is currently drilling in Dunquin.
An announcement on whether the site is commercially viable is expected in September/ October.