Don't write off Ireland as a target for oil giants, says Tullow boss
Ireland will re-emerge as a target for major international oil companies hunting for new reserves, the chief executive of Tullow Oil, Aidan Heavey, has predicted.
"Ireland will have large oil finds in the future," Mr Heavey told the Irish Independent. "The problem today is that there are not a lot of companies exploring."
"There's very little capital in the industry, or appetite for risk," the oil boss said.
Ireland witnessed a flurry of oil and gas exploration activity in recent years as commodity prices rose. The price of oil was over a $100 a barrel a year ago, making deep-water exploration off Ireland a viable commercial proposition.
But the results of drilling have been lacklustre. Coupled with a slump in oil and gas prices, and reined in capital expenditure, Ireland has dropped off the radar for many oil firms.
However, Mr Heavey said he's confident that oil majors will eventually return to Irish waters as commodity prices rise and stabilise once more, and they seek to replace reserves that are being depleted.
"What you will see is that super major oil companies will eventually look for long term replacement of reserves," he said.
"They're more likely to be the companies that will go in and take a long term view of new frontier areas or high risk areas."
Tullow Oil has "reset" its own business to deal with the current oil price environment, according to Mr Heavey, and is stripping $500m in costs from the business over the next three years.
The company has also made its operations in Africa its main focus. Last week, Tullow announced that its revenue fell 35pc to $820m in the first half of the year, and pre-tax losses narrowed to $10m from $29m. Its net loss was $68m -better than analysts expected.
The price of a barrel of Brent crude is currently just over $50 a barrel - half the price it was a year ago. Mr Heavey expects oil prices to rise and stabilise at around $75 a barrel later this year.
Much of Ireland's offshore oil and gas exploration has been undertaken in deep waters. Only two commercial finds - Kinsale and Corrib - have been made in the past 45 years, despite €3bn being spent on exploration here.
"There's no doubt that deep water areas and complicated wells do not work in this oil environment," said Mr Heavey. "It's uneconomic. So you will need a much more stable and higher oil price environment for deep water to work."
A report published last week by PWC on Ireland's oil and gas exploration sector found that over €1.5bn is expected to be invested the sector here over the next two years, but that just 18pc of respondents PWC's survey rated the outlook for the industry here as favourable.