Monday 11 December 2017

Price slump and Corrib delays hit investment in oil and gas sector

Michael Cogley

Michael Cogley

Investment in Irish oil and gas projects is tipped to shrink in the next two years, as the sector deals with rock bottom prices, new research has shown.

Around €1bn was invested into Irish schemes last year; however that figure is set to contract to €300m, according to the PwC Irish Oil and Gas Survey.

Just 28pc of the Irish industry sees the overall outlook as "favourable", it shows.

PwC's oil and gas partner Ronan MacNioclais said the sustained fall in prices has had a dramatic impact on the sector here.

"Ireland is viewed internationally as a high-risk location for investment in oil and gas exploration, due to the lack of historic commercial discoveries.

"At times of low oil and gas prices, investors will invest in high-return low-risk locations, which unfortunately we are not," he said.

In October, low oil prices caused Longford-based Cameron, a maker of flow equipment for the oil industry, to shut with 170 jobs lost.

Read more: Corrib production ahead of schedule as final well opens

The vast majority of Irish firms surveyed by PwC see a correlation between the weak prices and their ability to raise capital. Despite the weak market, 83pc of leaders in the area remain optimistic about the level of petroleum reserves yet to be discovered in Ireland.

The cull of investment will reduce the likelihood of making commercial discoveries, however.

Mr MacNioclais urged the Government to take "positive steps" to make it easier for the industry to attract investment.

"It is clear that steps need to be taken to approve the regulatory and planning processes to fast-track developments, as these are causing companies difficulties and impacting on Ireland's reputation internationally," he said.

Long delays in developing the Corrib field are a major point of concern. Production there started in December 2015, after a series of delays saw costs quadruple.

Read more: Millions roll in for Corrib Gas as production set to ramp up

Partners in the project, including Vermilion Energy, ended up spending €3.6bn on the scheme - way above the initially envisaged €800m.

The long-running controversies and delays at Corrib have meant difficulty for a number of participants when trying to secure international partners, according to the survey.

Despite the challenges facing the industry, there was still significant interest in the 2015 licensing round, with half of all respondents participating in the bids.

In numbers

€300m - Investment in Irish oil and gas in next two years (down from €1bn in 2015)

3 years - When decline of oil prices is tipped to end

$50 - Average oil price per barrel, down from $147 in 2008

83pc - Of respondents are optimistic on the level of petroleum yet to be discovered in Ireland

65pc - Expect Brexit to have low impact on business

€3.6bn - The spend on Corrib Gas field

Irish Independent

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