AIM-listed Europa Oil & Gas has been awarded a 15-year exploration licence for its flagship Inishkea prospect.
The site lies immediately to the north-west of the Corrib gas field, which in 2017 was capable of producing 66pc of Ireland's gas demand.
Europa believes the Inishkea prospect could produce as much as 1.5 trillion cubic feet of gas, and has a one-in-three chance of success.
The next steps for the licence include a site survey in preparation for drilling an exploration well, subject to funding and regulatory consent. An application to obtain a site survey is in progress.
If a discovery were to be made there, management believe it could potentially be commercialised quickly, given its close proximity to the Corrib field and nearby infrastructure.
The group had received an offer from a major oil company on a farm-in, however owing to the length of time it has taken to complete the agreement, Europa has continued to market the licences to other potential partners.
Europa CEO Hugh Mackay said: "The conversion of LO 16/20 into a 15-year FEL is an important milestone, as it allows our flagship Inishkea gas project to be drilled, once funding and relevant regulatory permissions have been secured."
Shares rose more than 7pc in London.