THERE is still huge interest in exploring Irish waters for oil and gas despite a very slim success rate, new research has found.
Industry expects to plough $1.5bn (€1.1bn) into the sector over the next three years despite the fact that only four commercial finds have ever been discovered, according to a survey of 56 oil and gas companies by PwC.
Four-fifths said they were optimistic about the level of petroleum still to be discovered, particularly in the Porcupine Basin area, a massive region of the west coast that is relatively underexplored in comparison the Irish Sea.
"The level of optimism is the standout finding," said Ronan MacNioclais, a partner at PwC's oil and gas practice.
"It's very surprising – there has only been four commercial finds in Irish waters and they have all been gas rather than oil."
A jump in the number of small exploration companies active in Irish waters had boosted international interest, he said.
"A large number of small companies, like Providence and Europa Oil, won licences in the last round.
"They've done the legwork and are marketing their finds to majors, reigniting interest around the world."
Three major mining companies, Kosmos, Cairn and Woodside, have all signed deals on Irish assets in the last two years.
But uncertainty about the tax regime applied to exploration and mining activities is a key risk, Mr MacNioclais said, highlighting fears about an update to the fiscal terms due for release this week.
The government hired energy experts Wood MacKenzie to help formulate it.
"Oil and gas exploration is an inherently risky business. It's like a roulette wheel. Changing the tax rates just adds to the risk – what industry wants is certainty.
"The review has been motivated by public pressure, not by industry," he added.
"It has come at a cost already. The opening date for the 2014 round of licensing for oil and gas fields has already been missed because of delays in reviewing the fiscal regime. That's another six months lost."
Delays at the Corrib gas field have also damaged international interest in exploring Irish waters, the research found.
Shell's progress in making the field commercially viable is more than a decade overdue, hindered by resistance from the local community and construction issues, though work is now almost completed the company is due to begin pumping gas next year.
The high-profile Shell to Sea campaign alleges that the proximity of a raw natural gas pipeline is a risk to local residents.
"Based on the results of this survey, there can be no doubt that the events at Corrib have caused considerable damage to Ireland's reputation as a location for investment," PwC said.