Off Irish shores - the recent oil licencing round in Atlantic Ireland
There is a shortage of prime exploration acreage around the world. Knowledgeable companies are now willing to take another look at basins that had previously been overlooked, and are wondering whether new technologies might increase success rates and reduce development costs. However, all firms, especially those in the countries bordering the Atlantic, such as Ireland, Trinidad and Tobago, Northwest and West Africa, face competition from the countries and the basin with the most opportunities and experience in offering leases terms – the USA and the Gulf of Mexico.
In October 2007 the US Department of the Interior’s Minerals Management Service stated that, ‘A Federal sale of offshore oil and natural gas leases in the central Gulf of Mexico attracted nearly US$3bln in high bids today, the second highest total of high bids in US leasing history. The sale underscores the Gulf’s continuing importance as a vital source of domestic energy production for the nation. The Oil and Gas Lease Sale 205 received a total of 1,428 bids on 723 tracts. The sum of all bids received, losing as well as winning bids, was US$5.2bln. There were 84 companies participating’. This was the best sale since the 1980s.
But there are other exploration provinces that oil companies might consider, such as Atlantic Ireland and the Porcupine Basin, which were the subject of a licencing round in December 2007. Only six companies sought licences, ExxonMobil, and smaller firms Providence Resources, Island Oil and Gas, Sosina Exploration, Supernova Ireland Resources BV and Challenger Minerals. Other large players, Shell, Chevron, Total, British Petroleum (BP) and deep-water specialists StatoilHydro, showed no interest. The reasons for this may be found in events over the past 18 months.
The story of the Irish coast
Credit must be given to the Irish Petroleum Affairs Division (PAD) for an innovative approach to telling the geological history of the Irish Offshore, especially the Atlantic margin. At the Paris, France, meeting of the American Association of Petroleum Geologists (AAPG) in 2006, it seemed that the PAD had listened to the industry and executed precisely what was required to make the Irish offshore attractive to exploration managers:
• There was a coherent and revealing geological history for the Atlantic margin that enabled new entrants to quickly introduce themselves to the acreage and its potential.
• The main risks to successful exploration were tackled head-on and the opportunities to mitigate them explained.
The Atlantic Basins of Ireland (see image) are an under-explored frontier petroleum province with proven working hydro-carbon systems. A new evaluation of the area focuses on a major revision of the tectonic and deposition systems evolution. Atlantic reconstruction shows the juxtaposition of the Porcupine and Rockall basins with the Orphan Basin of Eastern Canada, and sheds new light on depositional environments and sediment transport directions. The possibility of regional world class upper and lower Jurassic source rocks are highlighted. There are potential reservoir distribution at four stratigraphic levels, controlling the play systems of Permo-Triassic (proven by the Corrib and Dooish discoveries), middle Jurassic shelf sands (proven in the Connemara discovery), lower Cretaceous syn-rift shelf and basinal sands shed from Southern Ireland and Flemish Cap, and tertiary shelf and slope sands.
Source rock modelling, lead evaluation and an analogue basin review show a multi-billion supply of untapped potential, with the structural style allowing for the presence of giant un-drilled structures. In addition, a review of seismic technology demonstrated that, in the northwest of Ireland, where relatively shallow basaltic sheets represent a severe challenge to conventional seismic imaging, new technologies – especially in super-long-offset acquisition – could image structures beneath basalts for more or less the first time (a typical East-West 2D seismic line is shown in the graphic).
Unfortunately, recent events are not as promising, such as in the announcement of the Porcupine Basin licence round. According to oil consultants Hannon Westwood, in Glasgow, UK, 160 prospects to drill are contained within the acreage on offer in Ireland’s latest Porcupine licensing round. Developed before the round, using data from Ireland’s PAD, the GM Matrix Ireland database contains technical descriptions of prospects, resource information and figures on each prospect both in the Porcupine Basin and other Atlantic margin areas of offshore Ireland.
This by Hannon Westwood study predicts that the Porcupine alone contains more prospects than the whole of the Angolan Deep Water province where just over 50 deposits have been drilled in the last 10 years. Any company with a significant exploration team will have regarded this assertion as amusing. The intention cannot have been to attract small companies who are thinly staffed and whose technical and financial ability would be stretched in Atlantic Ireland.$
At the time of the Porcupine licencing round the Irish Government had clearly decided that it was a hotspot for oil. Energy Minister Eamon Ryan of the Green Party entered a coalition government and said Ireland’s waters would be fully explored and that the Exchequer should benefit from successful finds. ‘The change in the tax regime announced in August 2007 will apply to Porcupine basin finds,’ said Ryan. ‘Therefore, profitable fields will pay up to 40% in taxation to the Exchequer. That is a top rate increase of 15% for the oil and gas companies involved.’
It may be true that companies are keen to find new, oily hydrocarbon provinces, but they are not willing to accept poor terms before the new ideas, concepts and plays have been tested with the drill-bit, as was proved by the Trinidad ultra-deep-water licencing round in 2007 which attracted just one bid. Trinidad is a major producing hydrocarbon centre with the potential for world class source rock. The lesson must be, ‘do not start counting the barrels until they have been discovered’.
Returning to Atlantic Ireland, development engineering in hostile, relatively deep waters will be a challenge. This may be offset by benign reservoirs but the most useful analogue is not encouraging. In the 1980s, BP made a significant discovery in offshore southwest Ireland with supposedly around 220 million barrels of oil in place, but this was relinquished because of difficult reservoir conditions. The discovery was subsequently acquired by Aran Energy, Ireland, and named Connemara. Then Norway’s Statoil acquired Aran Energy in 1995 and quickly announced floating production, storage and offloading-based development of Connemara. The company invested significant capital into appraisal only to find that nothing had changed with the reservoir. Connemara is now operated by Island Oil & Gas, Dublin, Ireland.
Better reservoirs may be found elsewhere in the Basin, but the technology is close to the edge of what can be developed today. The Porcupine Basin is a good example of current challenges. The geologists have been there before, but with some imaginative thinking, they may invent a persuasive, new history about the regional geology. However, at a development level, the reservoirs could be complex and the deep water and hostile environment presents significant engineering problems.
Dr David Bamford, non-executive director of Paras Limited, Isle of Wight, UK, and Tullow Oil, London, UK. Email: Bamford_NewEyes@hotmail.co.uk.