Government to get €500m a year in tax from oil find
IRELAND could be in line for an oil-driven bonanza after Providence Resources said an oil field off the Cork coast is up to four times bigger than previously estimated.
In March, the company said it had found around 373 million barrels of oil at the Barryroe prospect near the Kinsale gas field, but yesterday Providence said it now believed there was between one billion and 1.6 billion barrels "in place".
That puts Barryroe on a par with the North Sea fields in terms of size and would allow Providence to extract at least 160 million barrels from the site by current estimates. At that scale, the state could be looking at a tax-take of some €500m a year over the life of the field.
It will be at least three years before oil starts to flow from Barryroe, however.
Providence chief executive Tony O'Reilly Jr did not put a timetable on when production would begin, adding his firm was now looking to bring in a partner. Providence currently controls 80pc of Barryroe -- an unusually high proportion by industry standards.
"Putting out this new oil-in-place figure is really the starting point for future discussions," he said.
"There are a number of steps we have to go through, starting with confirming how many barrels are recoverable from Barryroe," he added.
"We are moving aggressively to develop the site. It will cost a lot to do it and now we will work on the development plan for the field and talk to appropriate industry partners to bring in the finance."
Industry sources indicated the company was targeting one of the major oil firms for investment.
Energy minister Pat Rabbite also was positive on the announcement but warned it would be some time before it would be clear how commercial the find would be.
"The find is likely to attract more interest in drilling and exploration off our shoreline which is very welcome," he said.
Barryroe is some 50km off the south coast. While oil was discovered there in the 1970s, at the time it was deemed not commercially viable. Since Providence took up the licence, samples had suggested the oil was waxy, which is difficult to transport, but further testing has shown the quality to be almost as good as North Sea Brent crude.
The discovery is likely to draw parallels with the problems Shell has faced with its Corrib gas field but Mr O'Reilly emphasised the oil was likely to be refined offshore, negating the need for a massive refining plant to be built in Cork.
Providence is floated on both the Dublin and London stock exchanges.
Davy Stockbrokers' Job Langbroek said the revised estimate was a "very important step in the commercialisation of the prospect".
"The news copperfastens our 'outperform' rating for the stock. The impact on valuations is marked. Based on the former 59-million-barrel recoverable number, the valuation was £14.05 for the group. A recoverable reserve of 121 million barrels, at a field output of 50,000 barrels per day, is worth £9.54 per share -- pushing the group valuation to £17.45," he said.
Providence rose as much as 6pc during the day but fell back in late trading to close at €8.42 for a gain of 0.8pc. The stock is up nearly 200pc in the past year.