IRELAND'S PROSPECTS GROW BRIGHTER AS INDUSTRY PROBES OFFSHORE FRONTIERS

Ireland has lagged the U.K. in attempts to spawn an oil and gas industry like that of its neighbor.

Ireland's discoveries are few, and only two fields are on production. The country has until recently had a reputation for lacking prospects.

Recognition in the early 1990s that Ireland's taxes were too high and other newly opened regions of the world were far more attractive to explorationists caused Dublin to rethink its tax rules.

Passage of legislation in 1992 improved Ireland's attraction in terms of oil and gas taxes. As a result, the industry began to take note, although its expectations of discoveries were not raised as a result.

However, recent developments in exploration and development technology and new thoughts on Ireland's geology have made operators prick up their ears once more.

From an oil and gas industry backwater a few years ago, Ireland has changed into a region where operators are beginning to explore once again with an air of guarded optimism.

ONSHORE EXPLORATION

Keith Robinson, senior petroleum exploration specialist in Ireland's Department of Transport, Energy & Communications, traces the origins of Ireland's exploration to 1959-60.

The starting point was a decision by a group of Irish-Americans to "do something for Ireland." That led to an exploration contract under which the country's sole producer, Marathon Petroleum Ireland Ltd., still operates.

In 1959, Ambassador Irish Oil won 20 year exploration rights to the entire Irish onshore and offshore territory.

Conoco Inc. and Marathon Oil Co. farmed into this license in 1961, then drilled six onshore wells in 1962 and 1963.

Two logged gas shows, and the rest were dry. Doura discovery, largest of the gas strikes, flowed only 30 Mcfd of gas.

Robinson said under the terms of the exploration license, one fourth of the acreage had to be surrendered to government every 5 years.

Conoco pulled out of the license in 1964, and Ambassador followed in 1966, leaving Marathon with sole Irish exploration rights.

In 1965, a fourth of the onshore acreage was relinquished as required. Robinson said "the companies didn't want to surrender the offshore acreage because they didn't know what was there."

During 1965-69, Marathon negotiated with the energy department over its rights to offshore territory, encouraged by the success of southern U.K. North Sea exploration.

There was a flurry of onshore interest in the 1980s, when Aran Energy plc, Dublin, drilled two wildcats, both dry. Tullow Oil plc, Dublin, drilled a well in the Lienster coal field in search of gas but found nothing.

"There has been no interest in drilling onshore since then," Robinson said, "and there is no interest now."

OFFSHORE EXPLORATION

Marathon began offshore exploration in 1969, undertaking a seismic survey of the Celtic Sea basin off Southeast Ireland.

Marathon spudded Ireland's first offshore well in May 1970 on Block 48/25 in the central part of the North Celtic Sea graben. The company's second well on the block discovered Kinsale Head gas field in November 1971.

Exxon Corp. drilled industry's first oil discovery off Ireland in 1974 with its 48/24-1 wildcat in the Celtic Sea. This was the Seven Heads prospect.

The noncommercial Seven Heads strike flowed 780 b/d of oil and 10 MMcfd of gas.

Exploration continued in the Celtic Sea throughout the mid-1970s, with a number of wells drilled by Exxon and Marathon. There were no large discoveries.

The North Celtic Sea graben was the prime target for Irish exploration efforts, with 72 wells drilled there to mid-1994, along with three more in the South Celtic Sea graben.

Other drilling has taken place, mainly in the Porcupine basin and Erris and Slyne troughs off Southwest and Northwest Ireland and in the Fastnet basin to the south.

Industry has drilled 25 wells in the Porcupine basin, two wells in the Erris trough and one in the Slyne, and II in the Fastnet basin.

WHAT'S BEEN FOUND

Drilling in the Celtic Sea has yielded four gas discoveries and three oil finds. Gas discoveries are the producing Kinsale Head field, BP's Block 48/18 prospect drilled in 1985, the 57/9 prospect, and the producing Ballycotton field.

The area's three oil finds are Seven Heads on Block 48/24, Helvick on Block 49/9, and the Block 50/6 prospect.

Robinson said the Helvick discovery, in 350 ft of water, flowed as much as 10,000 b/d of oil. "It looked good but hasn't lived up to expectations." A. 1994 study estimated Helvick reserves at 20 million bbl of oil.

"Because relatively few wells in the basin have gone to the Jurassic," said the Wood Mackenzie consulting firm, Edinburgh, "it is possible that some small oil finds may continue to be made. The main potential in the North Celtic Sea graben is for gas. Prospects for new discoveries in Kinsale Head-type lower Cretaceous plays are good."

Wood Mackenzie said a relatively new play lies in Triassic zones along the eastern margin of the North Celtic Sea basin, in Blocks 50/16 and 50/17.

However, the 50/12-3 wildcat, drilled in 1993, was a dry hole, failing to find target sands.

Phillips Petroleum Co. U.K. Ltd. drilled a noncommercial discovery in Porcupine basin Block 35/8 in 1978. Other wells in this basin by the company were dry holes.

A BP Exploration Operating Co. Ltd. wildcat in Porcupine basin Block 26/29 in 1982 yielded the Connemara oil discovery in 350 in of water.

Robinson said Connemara holds an estimated 200 million bbl of oil to be in place, but BP said in 1982 recoverable volumes were expected to be low.

"Today, Connemara looks different than it did then," Robinson said. "'Technology has caught up in the meantime. Water depth in the Porcupine basin is deeper than 300 in, but floating production, storage, and offloading and other new technology has persuaded people they can develop fields in water this deep."

BP dropped the Connemara license, and Aran took over. Aran this year won outright a block and a partial block surrounding Connemara.

Aran said, "Connemara is the only proven oil accumulation of potentially commercial scale in the area, with proved and probable reserves estimated at 20-50 million bbl."

Aran last year told a geological conference in Dublin recent North Sea experience with floating production systems would form the basis of a development study.

"As floating production systems become more widespread in Europe," Aran said, "the potential for cost efficient production from Connemara will become very real.

"Whether this, together with the new benign Irish tax regime, will be sufficient to bridge the 'marginality' gap created by medium term oil price predictions remains to be seen. It is considered, however, that development of Connemara field will only be a matter of time."

PRODUCTION

Marathon produces from two fields on Blocks 48/20, 48/25, and 49/16 off Southeast Ireland. Kinsale Head gas field yields about 245 MMcfd, while Ballycotton satellite field produces about 15 MMcfd.

Marathon found Kinsale Head field in 1971 with the 48/25-2 wildcat drilled by the Glomar North Sea semisubmersible in 93 m of water.

Development began in 1975 by means of two conventional steel platforms linked by a 24 in. pipeline. A 24 in. gas export line runs from Kinsale Head A platform to Inch terminal along the coast southeast of Cork City, Ireland.

Kinsale Head A and B platforms, installed in 1977, each can produce 200 MMcfd of gas. Production from Kinsale Head began in August 1978.

Ballycotton is a March 1989 discovery by Marathon with the 48/20-2 well drilled by the Western Pacesetter IV semisubmersible rig in 87 rn of water.

The small size of Ballycotton and prolific flow rates on test persuaded Marathon to develop the field as a single well, subsea satellite of Kinsale Head B platform.

The Ballycotton wellhead is linked to the mother platform by an 8 mile, 10 in. pipeline and a control umbilical. Ballycotton production began in July 1991.

Gas from the fields, totaling 1.13 tcf to the end of 1994, goes to state utility Bord Gais Eireann. Original reserves amounted to 1.5 tcf. Production is expected to continue into the next century.

"Kinsale Head and its Ballycotton satellite are Ireland's sole source of gas," Robinson said. "In the last few months, the Interconnector pipeline from Scotland has assumed great significance. It brings security of supply to Ireland, because in a couple of years Kinsale Head production will be in decline. We have a short period to 2000 to find more gas. Otherwise, we will be reliant on gas from Scotland."

The 294 km, 24 in. gas pipeline from Moffat, Scotland, to Loughshinny, north of Dublin, started up in early 1994. It is designed to transport as much as 290 MMcfd of gas at first, with further compression plant able to boost capacity to 650 MMcfd.

The pipeline is operated by Bord Gais Eireann, but British Gas plc was greatly involved in its development.

Wood Mackenzie said, "No significant gas imports are expected to be required for the Irish market until 1996, but they could reach 200 MMcfd by the early part of the next century".

How Industry's Irish Activity has Varied chart (57515 bytes)

TURNING POINT

"There was a marked falloff in exploration drilling after 1986, following a peak in 1978," Robinson said. "The low price of oil was one reason, but the industry's view of Ireland's oil prospectivity was another. Now we are seeing a pickup in exploration activity since introduction of new licensing terms in 1992."

In the early 1970s, Robinson said, there was huge interest from companies in exploring off Ireland. That was because of rising oil prices and similarities to the North Sea, which recently had been revealed to hold a number of giant oil and gas fields.

"Companies offered us all sorts of well obligations to win licenses, which we certainly could not get now," Robinson said.

Under the laws of 1975, the Irish government was able to take a 50% interest in all commercial developments. Tax on production was set at a standard 40%.

"The problem was that first round wells didn't result in commercial discoveries" Robinson said. "So Ireland's licensing terms began to appear quite harsh."

Legislation in 1992 ended the state participation requirements and cut taxes to 25%. This gave Ireland the world's lowest government take from oil and gas projects.

The 1992 law contained a 100% tax allowance for development costs, operating expenses, and exploration spending (OGJ, May 4, 1992, p. 50).

Ireland is also now light on requirements to drill. Licenses issued in the frontier licensing round in March 1994 carried no drilling obligations, while seven Porcupine basin licenses issued March 1995 carried a total requirement of only two commitment wells.

Exploration licenses now cover an initial 1 year period in which studies can be made, after which a drilling license can be taken up. Licenses with marginal discoveries can be held in lease undertakings for 8 years to allow new technologies and higher oil prices to make development viable.

New licensing terms were announced shortly after new tax regulations, in November 1992. Besides lease extensions to permit detailed study of discoveries, deepwater license periods were extend to 12 years from 9 (OGJ, Nov. 23, 1992, p. 35).

The Helvick and Connemara discoveries are currently held in lease undertakings by Dublin's Arcon Resources plc and Aran, respectively.

Arcon told the Dublin geological conference a number of development options for Helvick are possible: "To date, one feasibility study has been undertaken incorporating a subsea completion, a CALM buoy, and a combined production/shuttle tanker. The tanker would process and store produced crude, then make periodic trips to unload at the Whitegate refinery in Cork Harbor, a distance of 44 miles."

RECENT LICENSING

In 1992, the Irish energy department began to promote interest in the Erris and Slyne troughs northwest of Ireland, said to be underexplored Mesozoic sedimentary basins, as a prelude to an exploration licensing round.

Water depths in Erris and Slyne area, which includes a section of the Rockall trough, range from 200 m to 2,000 m. Three wells have been drilled in the area. One showed oil, while another showed gas with hints of oil (OGJ, Sept. 14, 1992, p. 92).

In March 1994, the Irish government awarded licenses for 28 blocks in the Erris and Slyne troughs to five groups made up of these companies: Enterprise Oil plc of London; operator Enterprise and Santa Fe Minerals (Ireland) Ltd.; operator Kerr-McGee Oil Corp., Aran, and Monument Resources plc, London; operator Statoil U.K. Ltd., Union Texas Petroleum Ltd., and Murphy Oil Corp. unit Rimrock Offshore Ltd.; and operator Texaco Britain Ltd. and Repsol Exploration (U.K.) Ltd. (OGJ, Mar. 28, 1994, p. 28).

Chevron U.K. Ltd. disclosed early this year it was taking options on three exploration licenses on Blocks 56/14, 15, and 19 off Southeast Ireland. The company cited encouraging results from a 2D seismic survey of the blocks in 1994 (OGJ, Feb. 27, Newsletter).

Dublin announced Mar. 15 award of eight exploration licenses covering 32 blocks in the Porcupine basin under a frontier licensing round opened in January 1994. The licenses require a total of 7,700 line km of seismic data to be acquired by the end of 1997.

Porcupine is a large sedimentary basin 100-250 km west of Ireland, with water depths increasing from 300 m in the north to 2,000 m in the south.

Porcupine basin licenses went to groups made up of Aran; operator BHP Petroleum (Exploration) Inc., Santa Fe Minerals, and British-Borneo Petroleum Syndicate plc; operator Chevron and Aran; operator Marathon, Occidental of Ireland Inc., and Phillips; Occidental; operator Statoil (U.K.) Ltd., Fina Petroleum Development Ltd., Conoco, Union Texas Petroleum Ltd., and Seafield Resources plc; and operator Total Oil Marine plc and DSM Exploration Ireland BV (OGJ, Mar. 27, p. 26).

The energy department in March said further Porcupine basin licenses will not be offered for a time, although companies can continue to apply for acreage in other offshore areas under Ireland's open door policy.

Robinson said the energy department intends this year to make an announcement about future licensing in the Porcupine basin.

OPTIMISM

New licensing terms have reawakened oil companies' interest in exploration off Ireland, Robinson said. Lower taxes alone do not explain the amount of interest shown, he argues: "Companies are seeing greater prospectivity off Ireland because of a number of factors."

Recent discoveries off the U.K. sector in formations that may carry over into Ireland, along with new thoughts about tried plays, have sparked new hope among oil companies.

The development by BHP Petroleum Ltd. of four oil and gas discoveries in the Liverpool Bay area of the U.K. Irish Sea has made explorationists review their ideas about Ireland.

The Douglas, Hamilton, North Hamilton, and Lennox discoveries in Liverpool Bay were in Triassic sands, little explored off Ireland.

At the geological conference in Dublin in April 1994, BHP geologists said Douglas is the nearest oil field to Ireland currently under development.

They said a band of oil source rocks probably runs from England's East Midlands area, where there are small producing onshore oil fields, across the Irish Sea and Irish Midlands and out through the Shannon basin.

Marathon's optimism got a boost last year from a gas strike in St. George's Channel off Wales, in U.K. Block 103/1, which lies next to acreage it holds in the Irish sector.

Marathon's 103/1-1 wildcat flowed 21 MMcfd of gas and 120 b/d of liquids from 125 ft of Jurassic pay (see map, OGJ, Nov. 7, 1994, p. 35).

Marathon cites six reasons for continuing exploration off Ireland: the region's significant untested exploration potential, attractive fiscal terms, its existing infrastructure and facilities, its large acreage inventory, its considerable in-house technical expertise, and its large well and seismic database.

In February, Union Texas Petroleum Ltd. took a farmout on a number of Celtic Sea blocks operated by Marathon (OGJ, Feb. 13, p. 24).

"Companies have realized it is a good idea to look along the flanks of plays off Southeast Ireland," Robinson said.

"Also, only 25 wells have been drilled in the Porcupine basin, which is nothing compared with the North Sea's Viking graben.

"Explorationists had viewed the Porcupine basin as a North Sea lookalike, but now they are viewing the Porcupine Tertiary as an important play concept."

Robinson said the edge of the Rockall Trough, which lies north of the Porcupine basin, is part of structure that continues west of U.K.'s Shetland Islands, Britain's exploration hot spot, and on to mid-Norway.

EXPLORATION PLANS

A 1991 agreement with Dublin commits Marathon to drill seven wildcats in the following 5 years. Marathon said three unsuccessful wells have been drilled to date in the Kinsale Head field vicinity-one in 1992 and two in 1993.

Marathon has focused on three offshore areas since 1993: satellite prospects in the Kinsale Head field area, prospects in the St. George's Channel basin, and the Porcupine basin, where Marathon has been prompted to pursue exploration by recent advancements in deepwater technology.

Marathon has chartered the Kantan IV semisubmersible rig, known until recently as Western Pacesetter, to drill two and possibly three wells off Ireland this summer and drill an appraisal well in Dragon field, as it has named its Block 103/1 U.K. discovery.

Drilling of the first Irish well was to begin in mid-May on the Block 41/30-1 Arklow prospect in the St. George's Channel basin. Location is 9 miles southeast of the Wexford coast and 15 miles northwest of the Dragon discovery.

"If the 41/30-1 well is successful, several other structures in the area will become targets," Marathon said.

A second Arklow well is planned for 1995, but its exact location has yet to be determined. At least one well each is to be drilled in 1996 and 1997.

Marathon plans to conduct geophysical surveys in the Porcupine basin in 1995 and 1996.

Chevron will drill a well this year on one of its three Quadrant 56 blocks in the Celtic Sea, but location has not been decided. However, it will test Triassic oil prospects underlying Cretaceous and Jurassic structures earlier probed by Gulf.

Chevron will conduct an aeromagnetic survey of the Porcupine basin this summer as operator for 15 companies that won acreage there this year. This will be followed by a seismic survey, again operated by Chevron for Porcupine basin license holders, to take place next year. Chevron will drill in the basin by the end of 1997 if results of the surveys are promising.

Chevron says Porcupine basin geology is similar to that in the Jeanne d'Arc basin off Newfoundland, where the company is involved in development of Hibernia field.

A Chevron newsletter said success of fields in shallow Tertiary sands, such as Chevron's U.K. North Sea Alba field and BP's West of Shetland discoveries, made Tertiary zones the objectives in the Porcupine basin.

Phillips Petroleum Co. U.K. Ltd. is a partner in the seven Porcupine basin blocks awarded to a group led by Marathon this year.

A Phillips spokesman said the group identified four large prospects named Galway, Tralee, Kenmore, and Bantry in the license areas.

"These are giant prospects in 500-1,000 in of water," the spokesman said. "Our Irish blocks have very significant growth potential."

Typical of these prospects is a Block 35/30 Cretaceous/Jurassic structure about 16,000 ft deep, which is 12 miles wide at its widest point.

Phillips believes the Porcupine basin is gas prone. The spokesman said interest in exploring the region has been held back by lack of a gas market in Ireland and lack of deepwater production technology.

Last year the gas pipeline from north of Dublin to Southwest Scotland ,opened, providing access to secure gas supplies from Britain.

The Phillips spokesman said this also could provide an export route to continental Europe via Britain for major new gas projects off Ireland.

Also, development under way West of Shetland shows that deepwater production technologies have become a reality.

"Drilling plans for these prospects are to be decided next year," said the Phillips spokesman. "We need more seismic data first. Because the prospects are so large, we will be carrying out 2D seismic surveys over a wide area."

Aran recently completed a seismic survey of its Celtic Sea acreage and is processing the data. The company plans an extended test of its Connemara discovery in 1996.

Aran also is involved in acquisition of seismic data in the Erris and Slyne troughs by two license groups led by Kerr-McGee and Texaco. The Gecko Row seismic vessel started operations May 25.

Conoco's Dan Bendig, leader of the company's Atlantic Margin operating unit, recently said of the Porcupine basin, "All the elements are there for a hydrocarbon play, although it is too early to say just how significant it is going to be. But it is undoubtedly promising."

Conoco's U.K. operating company is working closely with Houston and Norway to identify prospective acreage in an arc spreading from the Barents Sea to the southern tip of Ireland.

Copyright 1995 Oil & Gas Journal. All Rights Reserved.